Restructurings as a Percentage of Company Insolvencies
Dissolve has developed a reliable measure of the ratio of successful corporate restructurings by comparing the number of companies that successfully execute a Deed of Company Arrangement against the number of companies that enter some form of insolvency administration.
A Deed of Company Arrangement, or DOCA, is essentially a deal agreed by a company with its creditors as part of the Voluntary Administration procedure. We found that only 4.1% of companies entering some sort of insolvency administration successfully execute a DOCA. There has been a decline from 14.2% in 1999 to the current level. This reveals a very low success rate in restructuring Australian companies that strike financial difficulties with only 1 in 25 companies entering a formal insolvency administration finding their way through the insolvency legislation and creditor negotiations to agree to a restructuring.
For a director of a company in financial trouble these are very worrying numbers. Before placing a company into voluntary administration or liquidation you should speak to one of experts to check if that is the right solution for you.
Since 1999 there have been over 134,000 companies that have entered some form of insolvency administration. Of those, only 7.2% managed to execute a Deed of Company Arrangement (being a deal agreed with creditors).
At Dissolve we say that the very low percentage of companies entering a Deed of Company Arrangement shows that the Corporate Rescue philosophy built into the Corporations Act is not being properly used. Many more companies should be achieving successful restructurings.
Click on the following links to find more details and some graphs of relevant statistics:
- Statistics for a summary of all relevant statistics and our comments
- ASIC statistics for an overview and our comments on the ASIC statistics
- Company Insolvencies per Year
- Restructurings as a percentage of Company Insolvencies
- Insolvencies by Industry