Imagine the positive impact to people’s lives if just half of these 8,425 companies could have been turned around….
- On 12 Dec 2017, ASIC published its annual overview of corporate insolvencies based on statutory reports lodged by external administrators for the 2016–17 financial year.
- The total number of external administrators’ reports lodged in 2016–17 was 8,425.
- Report 558 Insolvency statistics: External administrators’ reports (July 2016 to June 2017) (REP 558) provides information on the nature of corporate insolvencies, supplementing the monthly statistics that ASIC publishes on its website.
In our experience, the Australian business community is heading towards ‘rescue’ culture and this is certainly reflected in ASICs latest statistics.
Key points
- 96% of creditors in the external administration group received between 0–11 cents in the dollar, reflecting the asset/liability profile of
- small to medium size corporate insolvencies.
- There was a material decline in reports received during the 2016–17 financial year (down 17.9%) reflecting the overall downward trend (down 18.4%) in external administration
appointments for 2016–17 - Small to medium size corporate insolvencies dominate external administrators’ reports. Of note, 84% had assets of $100,000 or less and 79% had fewer than 20 employees.
Top 3 nominated causes of failure
- Inadequate cash flow or high cash use (3,626, or 47% of reports)
- Poor strategic management of business (3,542, or 46% of reports)
- Poor financial control including lack of records (2,753, or 35% of reports)
Scope for greater use of Safe Harbours by Directors?
Perhaps the 2016-2017 ‘possible misconduct’ is an indicator that there will be a rise in the use of:
- Safe Harbour for Directors from Insolvent Trading & ‘ipso facto’ in March 2018 (Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017), and
- the Business Judgement Rule (section 180 CA 2001 – care & diligence)
