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Company Law News October 2012

Small and medium corporations dominate insolvency reports

During the 2011–2012 financial year reports lodged with the Australian Securities and Investments Commission have indicated that small to medium corporations remain the most likely to go insolvent. Most of the companies that went insolvent during the last financial year had assets of $100,000 or less and many had less than 20 employees. The insolvencies mainly occurred in corporations offering business and personal services, construction and retail. Many of the failures of small to medium corporations have been attributed to poor strategic management, high cash use or low cash flow and trading losses. Where there had been misconduct in the operation of the corporation this was most likely to be insolvent trading, breach of director’s duties of care and diligence and failures to keep financial records.

The reports collected by ASIC from external administrators show that small and medium corporations may not be receiving the advice they need to avoid misconduct.

If you are planning on setting up a company to carry on your business and need some advice, or if you are experiencing financial difficulty in your business, please contact the friendly staff at Forum Law and ask about our competitive rates.

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