ASIC’s latest edition of its annual statistics of reports lodged by registered liquidators about Australian corporate insolvency highlights the impact of the COVID-19 pandemic on small businesses.
For the period 1 July 2022 to 30 June 2023, small- to medium-sized corporate insolvencies continued to dominate external administrators’ reports, with 83 per cent of the businesses reporting insolvency had assets of $100,000 or less, 82 per cent had fewer than 20 employees, 32 per cent had liabilities of less than $250,000 and 68 per cent had liabilities of less than $1 million.
On the side of the creditors, the report highlighted that 96 per cent received between 0–11 cents in the dollar, which was interpreted as a reflection of the asset/liability profile of small to medium size corporate insolvencies.
Most of the insolvencies reported were by companies in the construction industry (28 per cent), followed by the accommodation and food services industry (15 per cent).
Meanwhile, registered liquidators reported on average three to four causes of failures for a company in each report. The most commonly reported causes were inadequate cashflow or high cash use (52 per cent of reports), followed by ‘other’ (50 per cent) and trading losses (49 per cent).
ASIC’s further analysis of the ‘other’ causes showed 19 per cent identified the COVID-19 pandemic as a contributing cause.
The state with the highest number of reports for insolvencies was New South Wales (41 per cent), followed by Victoria (27 per cent) and Queensland (18 per cent).
The report also noted that liguidators are working to improve the timeliness in lodging their reports, with 77 per cent now lodged less than six months after appointment, reflecting a longer-term trend.
