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COVID-19 Stimulus Takes Toll on Insolvency Appointments

May 21, 2020 | Written by Brad Vincent
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Most people are under the impression that Insolvency Practitioners are currently very excited about the flood of new insolvency appointments.  The reality is far from that.  Preliminary national insolvency appointment data indicates April 2020 will be the lowest month for insolvency appointments in Australia since 2007. The data released so far is trending towards 350 insolvency appointments for the month across the country, which includes Voluntary Liquidations, Voluntary Administrations and Receiverships.

The only lower number of monthly insolvency appointments for an April was way back in April 2000 at 318.  April 2020 is also the lowest single month since January 2007 (pre-GFC) which was 347.  The 350 appointments for April 2020 will represent a 49% drop from March 2020’s 683 and a 43% drop from the April 2019 figure of 615. Now with two weeks data on May totalling just 176, things don’t look like changing soon.

It appears the Government’s move to provide directors with a temporary Safe Harbour from Insolvent Trading, combined with rent relief and the stimulus payments have removed a large part of the motivation for a director to commence an insolvency appointment.

On our end we are still receiving plenty of enquiries but have noticed a decrease in directors willing to take the next step. Lack of funds to make an upfront payment and a general wait and see attitude are the main stated reasons. We further explored the reasons why directors are not appointing in a recent blog over at our sister site Dissolve: https://www.dissolve.com.au/blog/is-your-client-insolvent-liquidate-now-probably-not-or-wait-probably/

UPDATED 2/6/20: The official number was just released as 410 for April 2020. Whilst this is still a 40% drop from the previous month and 33% down from April 2019, it didn’t end up being the record month we expected.

Brad Vincent

Brad Vincent

Brad is the Senior Advisor at Restructuring Works. After over 10 years of being an advisor, Brad has developed an excellent understanding of the legal and practical issues facing a director of an insolvent company – it is rare for a director to throw a new situation at Brad. You will find him understanding and sympathetic, but above all practical. Brad will provide the cool head in a stressful situation.