The number of Australian businesses falling into insolvency for the first time has jumped to 967 in February 2024, according to newly released data from the Australian Securities and Investments Commission (ASIC).This is the highest point it has ever hit since 2015 according to ASIC, and is a 74% lift on the prior month.In the last year, the second-highest point was hit in August last year, at 918, and the third-highest in October at 907 insolvencies.First-time insolvencies have also driven the overall number of insolvencies to a monthly high of 1,271 in February. A handful of fashion businesses are included in this data, most recently the second collapse of Tigerlily in four years. Other Australian fashion businesses that fell into administration in the last year were Nique, Kinzu Brands - parent to footwear brand Sol Sana, and Alice McCall in early 2023.Across the 2024 financial year, retail trade insolvencies are the fourth highest so far at 466, behind ‘other services’ at 622, accommodation and food services at 1,008, and construction at 1,851.In a December 2023 media release, ASIC reported that its latest annual statistics regarding Australian corporate insolvency revealed an impact lag from the COVID-19 pandemic on small businesses.From July 1, 2022 to June 30, 2023, small to medium-sized corporate insolvencies continued to dominate external administrators’ reports. Of the reports lodged, 83 per cent had assets of $100,000 or less, 82 per cent had fewer than 20 employees, 32% per cent had liabilities of less than $250,000 and 68% per cent had liabilities of less than $1 million. In this group of creditors, 96 per cent received between 0–11 cents in the dollar, reflecting the asset/liability profile of small to medium-sized corporate insolvencies.The highest number of reports were received for insolvencies in the construction industry (28 per cent), followed by the accommodation and food services industry (15 per cent).“Registered liquidators reported on average three to four causes of failures for a company in each report,” ASIC shared in the release. “The most common reported causes were inadequate cash flow or high cash use (52% of reports), followed by ‘other’ (50% of reports) and trading losses (49% of reports). “ASIC’s further analysis of the ‘other’ causes showed 19% of reports identified the COVID-19 pandemic as a contributing cause.”In the FY23 period, most reports were received for insolvencies in New South Wales (41% per cent), followed by Victoria (27 per cent) and Queensland (18 per cent).Registered liquidators continue to improve the timeliness in lodging their reports, ASIC added, with 77 per cent now lodged less than six months after appointment, reflecting a longer-term trend.
