Introduction to Corporate Finance

what companies do

INSOLVENCY AND

FINANCIAL DISTRESS*

22-1 Insolvency and business failure

22-2 Insolvency processes

22-3 Priority of claims

22-4 Predicting insolvency

GOING FOR BROKE?

The most recent set of annual data on corporate

insolvencies in Australia prepared by the Australian

Securities and Investments Commission (ASIC)

indicates that the number of companies entering

external administration has declined in each of the

fiscal years since 2011–2012, but only from 10,757

to 9177 overall. The state with the most companies

entering external administration over the period

2013–2015 was New South Wales, followed

by Victoria and Queensland. This outcome is

unsurprising, given the business sectors of those

three states are ranked in size in the same order.

The industries with the highest rate of

movement into external administration over

the 2013–2015 period were construction,

accommodation and food services, retail

trade, transport, postal and warehousing, and

manufacturing. This ranking of industries has

remained stable for more than seven years.

The majority category of ‘appointment type’

is creditors’ wind-up, followed by court wind-

up. Voluntary administration was the third-most

frequent category.

Source: ASIC insolvency statistics. http://asic.gov.au/regulatory-resources/

find-a-document/statistics/insolvency-statistics/insolvency-statistics-

series-1a-companies-entering-external-administration-by-industry/.

Accessed 3 October 2015.

• Joseph A Guzinski assisted in preparing this chapter for the US edition. For the Australian edition, the material is drawn extensively from
  documents available from the Australian Securities and Investments commission designed to guide companies, managers, shareholders,
  employees and creditors with respect to issue of external administration, financial distress and insolvency. These are available at the ASIC
  website under the insolvency heading: http://asic.gov.au/regulatory-resources/insolvency/.

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