Our data shows that while current company wind-up figures are still low, there has been a spike in company wind-ups over the past 12 months, suggesting a warning sign for businesses who are in the midst of the March-April graveyard months.
The data, sourced from court records, reveals that 3601 businesses issued Notices of Winding Up Applications during the 12-month period of January 2018 to December 2018. This figure has increased from the last period, which reported 3155 wind ups, a historically low number for Australian businesses. In addition, there has been a jump of more than 40 per cent in the number of private applications since 2017, with the 1366 individual applications representing a sharp increase compared to the 932 received last year.
These figures are a very early indication of the corporate sector being in trouble. This is a canary in the coal mine event, however these figures are still low which is promising for the Australian economy, and in particular small businesses.
Small businesses should view this spike as an early warning sign of what may follow, particularly in Victoria where the highest figures year-on-year were reported, with a 61 per cent jump.
The Australian Taxation Office continues to be by far the largest petitioner – with ATO and other government organisations accounting for 62 per cent of all petitions issued. Private wind ups account for 38 per cent of total petitions issued and represent a 47 per cent increase over the 2017 year.
These figures are significant, as they indicate a trend for both the ATO and private creditors to substantially lift liquidation actions. However, these figures are just the tip of the iceberg, as there would be a far larger number of companies which are technically insolvent but which no creditor is prepared to spend the money to wind them up. Costs for winding up, including disbursements, are about $7000 to $8000.
There is a lead time of about six months from the time a debt is in default until the time there is application to wind-up, so I expect this trend to continue, with more wind ups looming.
Roger Mendelson, CEO, Prushka Debt Recovery
