Insolvencies soar on faulty tactics - The Age 27-6-08
POOR strategic management, insufficient cash flow and trading losses are among the most common reasons why companies fail, and in most cases, unsecured creditors receive less than 10¢ in the dollar back, statistics from the corporate regulator indicate.
The figures suggest that the vast majority of failed companies have fewer than 200 employees, almost 65% of them have less than five staff members, and that more failures occur in the construction, business services and retail industries.
The Australian Securities and Investments Commission has released statistics tracking company insolvencies over the three years from 2004-05, compiled from reports lodged by company administrators, liquidators and receivers. It is believed the figures account for most of the insolvencies each year.
The Insolvency Practitioners Association welcomed the release of the statistics, saying they would make it easier to point to trends in insolvencies that often reflected wider economic factors.
IPA president Paul Cook said the industry had, in the past, relied on anecdotal evidence when looking for wider trends. "Now we will have a baseline," he said.
The figures show that the number of companies reported as insolvent soared in 2006-07 to 7562, up from 6745 the year before and 6316 in 2004-05.
The most common recorded reasons for company failure were poor strategic management, in 43% of cases, and inadequate cash flow in 40% of cases. In 96% of cases, unsecured creditors were expected to get back 10¢ in the dollar or less.
Almost half of the insolvencies were recorded in NSW, and about a quarter in Victoria.
Australia has had a more recent rise in the number of companies going into administration, a trend insolvency specialists attribute to higher interest rates and scarce credit.
ASIC figures show that 2426 companies went into administration to the end of April this year, up from 2225 at the same time last year.
April was a particularly busy month, with 680 companies going into administration, compared with 498 in April 2007.
