ASIC’s annual review of corporate insolvencies shows a sizable decline over the 2016-17 financial year, but small to medium corporate insolvencies still dominate the list.
The corporate regulator recently published its yearly review of corporate insolvencies, which was based on statutory reports lodged by external administrators.
ASIC found a “material decline” in reports received during the 2016-17 financial year, down almost 18 per cent. This is largely in line with the overall downward trend of 18.4 per cent in external administration appointments last financial year.
Unsurprisingly, the SME sector dominated external administrators’ reports, with around 84 per cent having assets of $100,000 or less, and 79 per cent having fewer than 20 employees. Approximately 43 per cent had liabilities of $250,000 or less.
According to ASIC, 96 per cent of creditors in this group received between 0 and 11 cents in the dollar, reflecting the asset/liability profile of small to medium-sized corporate insolvencies.
Over the last three years, less than 20 per cent of supplementary reports on average received resulted in ASIC taking further action. ASIC said this was generally due to the lack of sufficient evidence, or because no further action was required.
Practitioners told ASIC they had either commenced or were contemplating initiating recovery actions for insolvent trading for 1,516 reports, compared with 4,878 reports alleging a civil breach for insolvent trading.
In September, federal Finance and Revenue Minister Kelly O'Dwyer outlined moves to relax tough insolvency rules as a means of reducing the number of businesses pushed prematurely into insolvency.