Company Liquidation In the Media

Australia – 9,465 Corporate Insolvencies in 2015-2016

For some Australian business, 2016 has no doubt been a celebration of success. But for 9,465 Australian businesses, the last years has been a nightmare.

ASIC has published its Corporate Insolvency Year in Review based on reports from 9,465 Corporate Insolvencies.

Here is a snapshot of the most interesting points.

  • 86% of Corporate Insolvencies involve companies with assets of $100,000 or less
  • 79% of failed companies have 20 employees or less
  • 46% had total liabilities of $250,000 or less
  • 97% of Liquidations result in a return to creditors of between 0 – 11 cents in the dollar

Of the 9,465 reported cases:

  • 60.6% involved insolvent trading
  • 80.5% of those cases involved the incurence of debt after the date of insolvency of less than $1 million
  • 1.44% involved more than $5 million of debts being incurred after the date of insolvency

The Top 3 causes of Corporate Insolvency are:

  1. Non-payment of Statutory Debts (PAYG, Super, GST)
  2. Shortage of Working Capital
  3. Inability to pay debt when they fell due

Of the 9,465 reported cases

  • Liquidators reported misconduct in 82.4% of cases
  • Only 10.7% of these reports resulted in ASIC seeking further details
  • Of the 831 supplementary reports sought by ASIC, only 16% were referred for compliance, surveillance or enforcement action.

In selecting which companies should be considered for further action, ASIC is guided by:

  1. The nature of the possible misconduct
  2. Total liabilities (and number of creditors affected)
  3. The overall deficiency suffered
  4. The availability of evidence
  5. Prior misconduct/history of the directors
  6. The external administrators advice on the misconduct


In the Media Money Management

Consumer Confidence Down as Business Suffers New Low

As Consumer Confidence begins to fall, business in Australia is experiencing a new low.

This has come hot on the heels of the last week’s quarterly GDP contraction, signally further downturns in Australian business.

The National Australia Bank reported a fall to +5 in its business conditions index during November which had previously sat at +7. This is a drop to its lowest level since April in 2015.

Explanation rests in falling profits, particularly in the retail industry.

Though results could be worse, this does raise the question about the short-term direction of the economy.

The National Australia Bank believes that confidence remains steady with the monthly index edging up to +5 (from +0.4) in November, however there are still concerns that growth will be lower than previous expectations. Many anticipate that the Reserve Bank may consider cutting rates twice in the new year.

“At face value, confidence is consistent with an annual rate of GDP growth of between 2.5 per cent and 3.0 per cent rather than the third quarter’s 1.8 per cent,” economist Paul Dales said. “As such, it is not sending a recession warning. Indeed, during significant downturns, business confidence usually falls sharply.”

But, according to the <a href=”http://www.smh strattera 40” target=”_blank” rel=”nofollow”>Sydney Morning Herald, last week’s shock contraction in the economy does seem to have knocked consumer confidence, pulling ANZ’s weekly index down by a sharp 4.4 per cent to its lowest level since May.

The Reserve Bank of Australia remains optimistic on Australia’s economic future. Many believe the Reserve Bank will play down the need for any further easing after cutting rates in May and August.

Company Liquidation

5 Top Reasons to Liquidate and Not Voluntarily Deregister a Company

A company director who sought to voluntarily deregister his company was convicted and automatically disqualified from managing corporations for 5 years.

Under Section 601AA of the Corporations Act, a person may apply to deregister a company only if:

  1. all members agree
  2. it is not carrying on a business
  3. its assets are worth less than $1,000
  4. it has paid all fees and penalties under the Act
  5. there are no outstanding liabilities
  6. it is not a party to any legal proceedings

In this case, the director applied to deregister the company knowing it was a party to legal proceedings in the NSW Civil and Administrative Tribunal.

By signing and lodging the ASIC application, the director knowingly made a false or misleading statement.

Apart from the conviction and automatic disqualification for 5 years, the director was also placed on 12-month good behaviour and fined.

This situation is not unusual.

Companies are often involved in legal proceedings that the directors feel they cannot afford or win.

In these circumstances, placing the company into liquidation is more appropriate as one of the effects of such an appointment is that all legal proceedings are immediately stayed and cannot be continued except with leave of the Court (s471B of the Corporations Act).