ASIC Reports on Corporate Insolvencies 2018–19

ASICASIC - Corporate Insolvencies today published its annual overview of corporate insolvencies for the 2018-2019 financial year.

Report 645 Insolvency statistics: External administrators’ reports (July 2018 to June 2019) (REP 645) provides an overview of the nature of corporate insolvencies, supplementing the monthly insolvency statistics that ASIC publishes on its website, and is compiled from reporting by external administrators.

Some key observations from the report are:

  • Small to medium size corporate insolvencies continue to dominate external administrators’ reports. 85% had assets of $100,000 or less, 76% had fewer than 20 employees and 38% had liabilities of $250,000 or less;
  • 96 per cent of creditors in this group received between 0–11 cents in the dollar, reflecting the asset/liability profile of small to medium size corporate insolvencies;
  • ASIC requested 875 supplementary reports from external administrators where the initial report meets certain thresholds in assessing if further action was warranted(refer annexure 2);
  • Generally, due to a lack of evidence or because ASIC considered no further action was required given the circumstances, over the last three years on average, fewer than 20% of these supplementary reports resulted in further regulatory action;
  • External administrators advised that in nearly 50% of reports where they alleged a civil breach for insolvent trading, they had either commenced or were contemplating initiating recovery actions for insolvent trading. External administrators’ are best placed to assess the available information and determine whether it’s in the best interest of creditors to pursue compensation for insolvent trading from directors.

Registered liquidators continue to improve the timeliness in lodging their reports with ASIC, with 60.5 per cent now lodged within the period of between two months and less than six months after appointment (increased from 54.7% in 2017/18). The improvement reflects a longer-term trend.

Further insights, including information on allegations of director and officer misconduct, are available in the report.