Small businesses continue to experience the aftermath of COVID-19 pandemic
The Australian Securities and Investments Commission (ASIC) has released its latest annual statistics of reports lodged by registered liquidators about Australian corporate insolvency, revealing small businesses are still experiencing the reverberations of the COVID-19 pandemic.
Statistics show small to medium-sized businesses (SME) continue to dominate in the number of reported corporate insolvencies. Of the reports lodged, 83% had assets of $100,000 or less, 82% had fewer than 20 employees, 32% had liabilities of less than $250,000 and 68% had liabilities of less than $1 million. In this group of creditors, 96% received from 0–11 cents in the dollar, which reflects the asset/liability profile of small to medium-sized corporate insolvencies.
The sectors with the highest number of reported insolvencies were construction (28%) and accommodation and food services (15%). Most of the insolvency reports were from New South Wales (49%), Victoria (27%), and Queensland (18%).
The common causes of failure reported by registered liquidators included: inadequate cash flow or high case use (52%), “other” (50%), and trading losses (49%). ASIC analysed further the “other” causes and found 19% of reports indicated COVID-19 pandemic as the contributing cause.
On a separate note, ASIC said in a news release that registered liquidators have been working on improving their timeliness in lodging reports, and now 77% have lodged reports less than six months following an appointment.
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