Commercial Law:
Federal review of insolvency laws timely as insolvency appointments rise
The Parliamentary Joint Committee on Corporations and Financial Services has commenced an inquiry into the “effectiveness of Australia’s corporate insolvency laws in protecting and maximising value for the benefit of all interested parties and the economy”.
The review comes after a decade of almost continuous reviews, consultations and legislative adjustments to the existing legislative framework, and increased desire from the restructuring industry to see more fundamental and considered law reform.
It also comes at a time when economic constraints are driving up the numbers of formal insolvency appointments in Australia (see table below).
The construction sector continues to experience significant distress on the back of the well-published supply constraints, costs of labour and materials, covid-19 delays and continuing interest rate rises which are spooking buyers and making it more difficult for developers to raise construction finance at terms that make projects viable.
The information technology sector has also experienced a change in investor appetite over this period and additional funding rounds continue to be challenging. Valuations are now falling off the 2021 highs in most instances. This has led to extensive layoffs and in some cases formal restructuring appointments within this space.
The energy sector continues to be affected by the war in Ukraine, floods, and the concurrent move away from fossil fuel production toward green energy production – with all of these factors putting upward pressure on prices at both the wholesale and retail levels.
The Australian Securities and Investments Commission (ASIC) data tells us that the number of notifications of companies entering external administration and controller appointments is increasing week-by-week:
| Week | FY 21 | FY22 | Change from same week last year | |
| Starting | Number | Number | Number | % Increase |
| 1-July | 103 | 115 | 12 | 12% |
| 8- July | 82 | 126 | 44 | 54% |
| 15-July | 96 | 73 | -23 | -24% |
| 22-July | 60 | 71 | 11 | 18% |
| 29-July | 60 | 82 | 22 | 37% |
| 5-Aug | 82 | 63 | -19 | -23% |
| 12-Aug | 60 | 98 | 38 | 63% |
| 19-Aug | 65 | 79 | 14 | 22% |
| 26-Aug | 47 | 100 | 53 | 113% |
| 2-Sept | 70 | 67 | -3 | -4% |
| 9-Sept | 80 | 71 | -9 | -11% |
| 16-Sept | 69 | 76 | 7 | 10% |
| 23-Sept | 58 | 52 | -6 | -10% |
| TOTAL | 932 | 1,073 | 141 | 15% |
Source: ASIC Insolvency Statistics – Series IB
As you can see from the table, the percentage change in appointment notifications has been consistently higher in the July to September period in 2022 than was the case in the same period in 2021.
For more information and expert advice, ask to speak to insolvency expert Damian McGrath at Ezra Legal on (08) 8231 6100 or email dmcgrath@ezralegal.com.au
For information on the range of bankruptcy, insolvency and debt recovery related services that we provide at Ezra Legal, head to:
Julian Roffe
Practice Manager
Ezra Legal
