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The typical liquidation as revealed in ASIC statistics

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ASIC has released its annual report summarising External Administrators’ Reports for the year ended June 2012.  So that is a summary of data from the reports liquidators and voluntary administrators must lodge with ASIC giving a profile of the administration.    There is a lot of interesting data in there, so let me save you the time of reading the 55 page report.  In brief, the typical liquidation had no assets, had less than 5 employees, paid no dividend and the directors traded while insolvent.  It’s obviously more complicated than that so I’ve summarised below the more interesting findings.

The Report was published just a few days ago and is based on about 10,000 reports by liquidators and administrators.  Here are the interesting findings:

  • In 62% of cases, the company had less than 5 employees;
  • The most common industry category is “Other” (which aint much help!) but of those where industry is identified the pain is felt in Construction (22%), Retail Trade (10%), Accomodation and Food Services (9%) and Transport (6%);
  • External administrators identified alleged misconduct in 72% of cases – the most common breach identified was Insolvent Trading then Failure to keep books and records;
  • In 41% of cases there were no assets and in 61% of cases there was less than $10,000 of assets (so that includes the no asset cases);
  • In 42% of cases the failed companies had creditors owed less than $250,000;
  • In 78% of cases there was no money owed to employees for wages and leave entitlements BUT in 78% of cases the company had not paid all Superannuation (looks like directors look after employees except for Superannuation);
  • In 85% of cases the ATO is a creditor;
  • In 93% of cases there is no dividend to unsecured Creditors (ouch!) and in only 2.4% of cases is the dividend above 11 cents in the dollar.

So for me, no great surprises there but it is somewhat sobering to see the complete lack of success in achieving satisfactory results from the formal insolvency regime.  Not all the fault of the insolvency practitioer I hasten to add as the data also shows that the majority of companies are well beyond saving by the time a liquidator or administrator is appointed.

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