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The typical company insolvency – size, sector, creditors, offences and outcomes

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Let me dramatically overgeneralise. If your company went into liquidation in the year to June 2011 then, most likely, it will have been in the construction game, had fewer than 5 employees, assets of less than $10,000, you will have committed an offence by trading while insolvent, will owe creditors less than $250,000, including the tax man, your liquidator will pay no dividend to unsecured creditors and ASIC will not pursue you for the offences you committed.  Well, actually that’s a description of the most common statistical categories for companies entering liquidation.

ASIC has released its annual summary of External Administrators’ Reports.  The statistics are drawn from the statutory reports that liquidators submit to ASIC.  Liquidators tick-the-boxes on the report and it allows ASIC to cut the statistics in a number of interesting ways.  I’ve set out below some of the more interesting statistics for companies that entered liquidation.

Size:

  • 61%  of cases had less than five employees;
  • Only .3% (yes there is “.” on there) had more than 200 employees, so that’s two or three cases in the year;

Top three industries:

  • Construction 23%;
  • Retail 11%;
  • Accommodation and food service 7.6%;

Creditors:

  • 81% of the time the tax man is a creditor;
  • 44% of the time creditors total less than $250,000;

Offences:

  • In 70% of cases the liquidator will report offences to ASIC;
  • The most common offences are Insolvent Trading (39%) and Failure to Maintain Books and Records (28%);

Outcomes:

  • In 92% of cases there will be no dividend to unsecured creditors;
  • In cases where offences were reported to ASIC, then ASIC will request further investigations in less than 5% of those cases.

So the majority of liquidations are of small companies, the director will have committed minor offences and there will no dividend to unsecured creditors.  It’s for that reason that we created Dissolve – in the circumstances described there is a lot to be said for efficiency in the process and fixed price liquidations.

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