Insolvencies rise 9.2% as banks join ATO in debt crack down

Banks continued to crack down on failed companies during what has been revealed to be the worst year ever for insolvency appointments, according to new figures released by the Australian Securities and Investments Commission.

Although the figures had been hinting at a disappointing year, the new data show corporate insolvencies rose by 9.2% over 2011 to 10,481. That rise compares to 1.7% during 2010, 3.6% in 2009 and 21.2% in 2008.

Dissolve chief executive Cliff Sanderson says the figure is 20% higher than the average of the previous five years, and notes that secured creditors have played much more of a prominent role in the past 12 months.

“The number of secured creditors is at its highest ever. After the global financial crisis, banks went softly, as did the ATO, and there wasn’t an immediate increase in the number of receiverships.”

“But the last couple of years has been higher, and the number of secured creditors is up 5%. Banks are just moving a lot more swiftly than they used to.”

This also comes as the Australian Taxation Office has spent the last 18 months cracking down on insolvent businesses after granting reprieves after the 2008 crisis. As Sanderson notes, the ATO is continuing to be more aggressive.

“They played it cool for awhile, but things have not improved so they’ve decided to keep moving.”

According to the new figures, appointments of receivers and controllers fell in New South Wales, Victoria and Queensland, but the number of appointments in Queensland were still higher than the other two states.

“October and November figures remained relatively high,” ASIC senior executive leader of insolvency practitioners Adrian Brown said in a statement.

“Traditionally, we see a fall in activity in the December quarter due to the holiday period,” Brown said. “The December quarter of 2011 saw a lower total compared to the previous quarter but this was still higher than for the same quarter last year.”

The figures also show a reduction in director-initiated voluntary liquidations.

Sanderson suggests the number of insolvencies isn’t likely to go down by much as the ATO continues to crack down on broke businesses, while companies from industries under pressure such as retail and manufacturing could keep insolvency figures high.

“We know the number of businesses on payment arrangements is dramatically lower than it used to be. It’s about a quarter of what it used to be.”

“It’s the ATO that’s pushing the headline number, but the question is, how far have they got to go?