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Australian company failures on track for 11-year high

By Jessica Penny
2 minute read

The number of company failings is set to exceed 10,000 before July, new data has shown.

Between 1 July 2023 and 31 March 2024, 7,742 companies entered external administration, according to the Australian Securities and Investments Commission’s (ASIC) latest insolvency data.

This was a 36.2 per cent increase on the previous corresponding nine-month period ending on 31 March 2023.

Construction and accommodation and food services industries accounted for the highest number of company failures among these external administrations, with 2,142 and 1,174 failures, respectively, making up nearly 27.7 per cent and 15.2 per cent of the total failures.

“With only one quarter remaining this financial year, it’s expected that the number of companies entering external administration by 30 June 2024 will exceed 10,000, a level not seen since the 2012–13 financial year,” ASIC noted.

However, the corporate regulator revealed that the ratio of companies entering external administration compared to the number of registered companies, which is expected to be in the range of 0.3 per cent to 0.33 per cent for the full year, is still less than the levels seen in 2012–13 (0.53 per cent).

Over the same period, the number of companies registered in Australia increased from just over 2 million to 3.3 million.

Moreover, restructuring (878) and court liquidation appointments (1,593) increased by 294.6 per cent and 218.8 per cent, respectively, when compared to the previous corresponding period.

In December, ASIC revealed the lag of the impact of the COVID-19 pandemic on small businesses in particular, with small to medium size corporate insolvencies continuing to dominate external administrators’ reports.

Of the reports lodged for the period 1 July 2022 to 30 June 2023, 83 per cent had assets of $100,000 or less, 82 per cent had fewer than 20 employees, 32 per cent had liabilities of less than $250,000, and 68 per cent had liabilities of less than $1 million.

Similar to ASIC’s latest figures, the highest number of reports were received for insolvencies in the construction industry, followed by the accommodation and food services industry.

The most common reported causes were inadequate cash flow or high cash use (52 per cent), followed by “other” (50 per cent of reports).

“ASIC’s further analysis of the ‘other’ causes showed 19 per cent of reports identified the COVID-19 pandemic as a contributing cause,” the regulator said.