ASIC Corporate Insolvency Update - Issue 34

Issue 34, December 2024

Updated restructuring plan template is now available

An updated restructuring plan template is now available for download.

Following the release of Report 756 Review of small business restructuring process (REP 756), we held several small group insight sessions with registered liquidators (RLs). On 28 November 2024, we published an updated restructuring plan template based on feedback from:

• RLs and their staff
• the Australian Restructuring Insolvency & Turnaround Association, and
• the Australian Taxation Office.

We considered the feedback received and incorporated that feedback where possible.

As the previous version of the template has been removed and replaced with the updated version on ASIC’s website, we ask that RLs make every effort to adopt the updated template.

We subsequently received further feedback on this updated template and on 5 December 2024 released a revised version.

The template has been updated to:

• simplify the language
• re-order questions to better reflect the flow of property available under the restructuring plan
• provide for free text
• include guidance and examples, and
• include headings with an updated layout.

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External administration status on the Company Register – important consideration for companies entering restructuring

We understand that directors of companies under restructuring may encounter difficulties with trade suppliers, financiers and credit rating agencies when negotiating supply and trade terms or obtaining finance. We understand that this is because a company’s status is changed to ‘external administration’ (EXAD) on the Company Register on appointment of a restructuring practitioner for the company.

In our FAQs on restructuring and the restructuring plan, we say:

• Restructuring and restructuring plans are types of ‘external administration’ under the Corporations Act 2001.
• ASIC must note on the Company Register that the company has appointed a restructuring practitioner and the company has entered ‘external administration’. This information will be publicly available.
• When a company enters a restructuring plan, ASIC notes on the Company Register that the company status has reverted to ‘registered’. This information will be publicly available.

If directors are considering continuing to trade once they enter the small business restructuring process, engaging with their ongoing suppliers and financiers may help manage issues impacting the companies’ ability to trade.

Restructuring practitioners can refer directors to our FAQs on restructuring and the restructuring plan.

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ASIC’s power to wind up abandoned companies and the Abandoned Company Liquidator Panel

Statistics on abandoned companies wound up by ASIC

We appoint liquidators from the Abandoned Company Liquidator Panel to facilitate access to the Fair Entitlements Guarantee Scheme for employees who would otherwise be ineligible to apply for assistance. The liquidator receives a fixed grant from the Assetless Administration (AA) Fund.

Since our last media release reporting abandoned company liquidator appointments to 30 June 2021, we have made the following liquidator appointments:

Financial Year	No. of abandoned company liquidator appointments	No. of employees	Employee entitlements
2021–2022	7	18	$353,483
2022–2023	6	13	$506,086
2023–2024	9	29	$528,531
2024–2025 (to 30 November 2024)	3	11	$140,039
Total	25	71	$1,528,139

Since the program’s inception in 2013, we have appointed liquidators to 167 abandoned companies owing at least 556 employees $9.7 million in employee entitlements.

The appointment of liquidators also allows investigation into the reasons why the companies failed, including potential illegal phoenix activity, and may assist the recovery of any voidable or unreasonable director-related transactions.

For information on wind-up activities, please see Companies wound up by ASIC on the ASIC website.

Abandoned Company Liquidator Panel refresh

The existing Abandoned Company Liquidator Panel will expire on 5 July 2025. We aim to publicise the new grant opportunity on Grant Connect in early January 2025 calling for applications to be a member of the new panel. We aim to appoint 65 members to the new panel. 

Under the existing panel, we wound up 60 abandoned companies over 6 years (2018–19 to 2023–24) and appointed 33 RLs from the panel of 43 RLs. Due to the low number of appointments and their geographical locations, not all panel members were appointed to an abandoned company. We will provide all registered liquidators with updates and notification of the publication of the new grant opportunity by direct email.

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Assetless Administration Fund application streams and tips on making successful applications

There are three types of grant opportunities for RLs under the AA Fund – namely ‘Director Banning’, ‘Matters other than Director Banning’ and ‘Asset Recovery’.

If an RL is eligible to apply for funding but is unsure of the type of application that they should apply for (particularly when there are numerous allegations, potential subjects and related EXADs), we recommend choosing ‘Matters other than Director Banning’. This stream allows for greater flexibility in the construction of the funding agreement as well as the investigations or funded activities to be undertaken.

Eligible RLs should apply for funding as early as possible, to ensure the best chance of success and maximise the chance of achieving the best outcomes possible for a funded activity. For example, the earlier an application is made:

• relating to asset recovery, the greater the likelihood funding will be granted to help the applicant with recoveries, and
• involving misconduct being reported to ASIC, the less likely it is that the alleged misconduct will become aged and fall into the ‘no likely regulatory impact’ or ‘unlikely regulatory impact’ category of the assessment criteria.

Where you wish for the matter to be considered as more than one application type, please make this very clear in the application by including a commentary. For example, if you would like an Asset Recovery application or a Director Banning application to also be considered as Matters other than Director Banning, please make this clear in the commentary.

In addition to the respective grant opportunity guidelines, we encourage RLs to refer to the user guides on the Assetless Administration Fund page of the ASIC website when making their applications.

RLs can send questions about these three grant opportunities and potential applications to AAF@asic.gov.au. This email address should not be used for questions specifically relating to existing applications – please submit those questions through the ASIC Regulatory Portal.  

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Updates to AA Fund grant opportunity guidelines and template agreements

RLs will be aware that on 1 October 2024, we updated the grant opportunity guidelines (grant guidelines) and the template agreements associated with the following AA Fund grant opportunities:

• ‘Director Banning’
• ‘Matters other than Director Banning’, and
• ‘Asset Recovery’.

The main changes involved updating the forward allocations for the AA Fund and the references within the grant guidelines from the previous Commonwealth Grants Rules and Guidelines 2017 (CGRGs) to the Commonwealth Grants Rules and Principles 2024 (CGRPs). The CGRPs took effect from 1 October 2024. We also amended clauses 8.7 and 8.9 within the ‘Matters other than Director Banning’ and ‘Asset Recovery’ Grant Guidelines relating to the decision-making processes.

In addition to the changes to the grant guidelines, we amended the annexures that accompany them (the template agreements). The changes made relate to clauses throughout the document to ensure consistency. These included insertion of a ‘significant events clause’ at clause 17 of the respective templates. There were also superficial corrections, including formatting and correction of typographical errors made throughout the template agreements.

RLs should review and consider, as they would in the usual course of making an application, the updated grant guidelines and template agreements.

The updated grant guidelines and template agreements are available to download from GrantConnect and the Assetless Administration Fund page on the ASIC website. This webpage contains a number of useful resources, including user guides, for RLs to consider when making applications for AA Fund. RLs and their staff can register on GrantConnect to get automatic notifications when addendums are made to the grant opportunity documentation.

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Asset insurance

We received feedback at stakeholder liaison meetings that, particularly in personal insolvency appointments, it is becoming more difficult to obtain insurance cover over particular assets and property. We are also told that if insurance is available, it might be prohibitively expensive.

These assets might be ‘high-risk’ assets, such as:

• houses or commercial properties in flood or fire prone areas, or
• assets not in the control of the appointee.

We are told that this is more of an issue in personal insolvency, but it may have implications for corporate insolvencies in the future.

We would welcome you advising ASIC if you experience similar issues in obtaining insurance over particular asset types.

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ASIC publishes Series 3 statistical workbooks for 2023–24

We recently published our Series 3 statistical workbooks for the financial year ending 30 June 2024. The workbooks provide a statistical profile of companies that have entered principally into liquidation in Australia, and include details about:

• the industry and state or territory that the company operated in
• the causes of failure
• the amount of available assets
• the number of and amount owed to unsecured creditors
• the number of employees and amount of unpaid entitlements
• the amount of unpaid taxes
• the estimated return to creditors, and
• possible misconduct.

This financial year, ASIC also published the following additional data from the Initial Statutory Report (ISR):

• the existence of shadow directors and advisers
• the intention to conduct a public examination of directors
• the reasons for not reporting insolvent trading (where offence was not reported), and
• new questions added to the possible misconduct section of the ISR to specifically identify creditor defeating dispositions.

To view the Series 3 workbooks, see Insolvency statistics on the ASIC website.

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Common queries from registered liquidators

Below are some common queries we have received from registered liquidators.

I am unable to lodge my Form 505 as the company is in strike-off status. What should I do?

Please complete a paper Form 505 Notification of appointment or cessation of an external administrator and post it to ASIC. Keep a record of your postal tracking number if you wish to follow up the form with ASIC. If deregistration is imminent, please email dereg.deferrals@asic.gov.au to advise of your appointment and to request a stop to the deregistration.

How do I request a new corporate key?

Liquidators or administrators of a company can request a new corporate key by using ASIC’s Online Enquiry form. From the available drop downs, select ‘Company’ and then ‘External Administration’. You must be able to provide all the following information:

• company name
• Australian Company Number (ACN)
• your own name as liquidator or administrator
• the name of the firm you are employed by (where applicable), and
• the registered office address of the company.

If the request is approved, the new corporate key will be delivered to the company’s registered office address. Any previous corporate keys will become invalid.

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Media releases and news articles

NEWS ASIC updates guidance to help directors prevent insolvent trading

24-259MR ASIC disqualifies security industry director for five years

24-244MR ASIC takes action to wind up 95 companies

24-242MR ASIC disqualifies NSW director for five years

NEWS ASIC publishes updated regulatory guidance for registered liquidators

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Insolvency statistics

Our insolvency statistics revealed that 3,633 companies entered external administration for the first time during the first quarter of the 2024–25 financial year, up 45.6% from the 2,495 recorded in the first quarter of 2023–24. The ratio of companies entering external administration for the first quarter of 2024–25 compared to the number registered (0.36%) is slightly up on the first quarter of 2023–24 (0.26%) but well below the prior peaks in the 2011–12 and 2012–13 financial years of 0.56% and 0.53% respectively.

Construction represented the largest number of insolvencies in the first quarter (at 898), while Accommodation and food services represented the largest percentage increase (up 109% from the same quarter of the previous financial year). The top three industries with the largest number of insolvencies were:

• Construction – 898 (up 14.4% from the previous financial year)
• Accommodation and food services – 709 (up 109% from the previous financial year)
• Other Services – 350 (up 74.1% from the previous financial year)

For more information, see the Insolvency statistics on the ASIC website.

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Contacts

Email support and contact details for ASIC team members for each state and territory are available on the Contacts page.