WEAKENING economic conditions have led to a record number of companies entering insolvency, according to new research.
The number of companies entering some kind of insolvency administration, such as voluntary administration, receivership or liquidation, had increased to 8898 for the 12 months ending November last year.
This was a 25 per cent increase when compared with the average of the previous five years, when 7124 companies entered some form of administration.
The research was conducted by Restructuring Works, a company that provides advice to ailing businesses.
The company also found that in November, 1011 businesses entered into insolvency, up from 673 the previous November.
The figures were sourced from the Australian Securities and Investments Commission's data and Restructuring Works said the seven months to November 2008 were the worst since ASIC had begun compiling the information (in its current format) in 1999.
The research also showed that the value of Australian banks' new assets impairment charges had risen to $13.3 billion in the year to September 2008, more than triple the $3.7 billion yearly average of the last five years.
"It was generally understood that the number of corporate insolvencies increased significantly in 2008," Restructuring Works spokesman Cliff Sanderson said. "What has not previously been appreciated was that the value of insolvencies has more than tripled and that secured creditors are taking possession of assets far more commonly."
Mr Sanderson also said there needed to be an overhaul of insolvency laws.
The research also looked at the number of companies that were successful in their restructuring attempts, with 5.5 per cent of companies entering into a deed of company arrangement.
In 1999, 14.2 per cent of companies were able to cut a deal with its creditors when in voluntary administration.
High-profile corporate collapses have included ABC Learning, which has still not published its 2008 accounts, and Allco, which is facing a class action.
The Insolvency and Trustee Service Australia released data at the beginning of the year that revealed personal bankruptcies had risen 6 per cent to 6649 in the final quarter of calendar 2008, compared with the same period in 2007.
The number of people entering into personal debt arrangements with their creditors is also on the rise.
However, the number of ailing businesses has been a boon for insolvency practitioners, who have reported an increase in work, as have law firms whose restructuring and insolvency lawyers are in demand from all business sectors.
Litigation funder IMF, which is funding class actions against a number of failed companies, recently saw its stock rise from 88c to $1 after telling the share market it would pay a 5c dividend and a further 10c dividend later this year if it achieved its $20 million profit target.
