Insolvency Alert - New South Wales Has Most of the Insolvency Action, But…

According to statistics recently published by ASIC, New South Wales carries the lion’s share of insolvency appointments up to December 2008 and in the first quarter of 2009. “Insolvency appointments” include Official Liquidation appointments, Creditor’s Voluntary Liquidation appointments and Voluntary Administrations. However the statistics show that the insolvency industry is not in the boom state that everyone thinks it still is relative to the last six months of 2008. Some examples are:

Notices of appointment of official liquidator

The only states to increase their percentages of official liquidator appointments were South Australia and Western Australia (both only going from 2%-3% of the national total).

Some would then say “then all the activity must be in the appointment of voluntary administrators”. As the table below shows, the overall number of appointments in the January-March 09 quarter is larger than the preceding two quarters, but not by much:

Of these appointments, New South Wales had 48% of the total. Interestingly, no State significantly increased its percentage in the March quarter and Queensland in fact dropped from 28% of the total to 20% of the total.

Flowing from the appointment of voluntary administrators is often the appointment of a creditors’ voluntary liquidator. As you will see from the table below, these appointments exceed the number of voluntary administrator appointments, which indicates that debtor companies are now inclined to simply resolve to appoint a liquidator, rather than appoint an administrator in the first instance:

The only State though to significantly increase its share of these total numbers was Western Australia (4% to 8%). Again, New South Wales held the lion’s share of these appointments at 62%. Both Victoria’s and Queensland’s share declined in the March 09 quarter.

One statistic which has accelerated dramatically is the number of applications to appoint a liquidator. Australia-wide the statistics were:

The state split of these was as follows:

What this indicates is that creditors, in particular, NSW creditors, are now pressing harder than they were at the end of last year for the payment of their debts, using the winding up process. That makes sense, as economic times are getting tougher. But, of the 1,066 applications filed 634 resulted in appointments of official liquidators, a little over half. That must mean that the other half were paid or settled in some fashion. And who says that the winding up process is not supposed to be used as a debt collection process? It’s successful if it works 50% of the time, right?

One other trend which is continuing is that the largest volume of applications continued to be the statutory debt collectors, namely the Deputy Commission of Taxation, the Workers’ Compensation Nominal Insurer, and the various Commissioners of State Revenue. These three plaintiffs accounted for more than 50% of the 1,883 applications to wind up companies in the July to December 2008 period. That is a statistic that I do not see changing in the next six months.