Queensland company insolvencies in May hit 46 as liquidators fear zombie firms still around

Experts are warning of more collapses due to a number of “zombie firms” still operating, as Queensland recorded another 46 business insolvencies in May. SEE THE FULL LIST

The number of Queensland businesses being liquidated or under administration continues to track well under pre-Covid figures but there are fears of what the true impact of zombie companies on the economy will be.

With stimulus measures still keeping many businesses afloat, liquidators believe there is also an “unofficial” go slow strategy by the Australian Taxation Office.

The number of Queensland companies that had liquidators or administrators appointed during May fell to 46 down from 60 in April and 44 in March.

The list from ASIC data shows the insolvencies came from a mix of small and medium enterprises across farming, construction and hospitality in Brisbane but also from some regional centres.

SM Solvency Accountants partner Brendan Nixon said the low number was well under the historical average.

“Numbers are still showing a downward trajectory which is of concern to me,” he said.

“We are still seeing a steady rate of inquiry but those inquiries are seldom based on pressure from the ATO which is where we used to see inquiry originate after people had received a nasty letter from the ATO.”

In the three months for the June quarter of 2019 in Queensland there were 379 companies that entered into external administration and controller appointments.

For the whole of 2018/19 the figure was 1643.

Fears of a rise in zombie companies.

Mr Nixon said it was a “reasonable assumption” that the ATO was not pursuing businesses as it had in the past.

“Irrespective of what’s causing the ongoing relief the decreasing number of insolvencies are a concern,” he said.

“The benefit of a liquidation is that experts do an investigation into not only a company’s current asset position but also the movement of assets in the past, to identify if whether any movements were unlawful.

“It can also stop illegal phoenix activities where company A closes down and company B opens which is the same business.

“It’s also bad for the good businesses who run the risk of transacting and providing credit with the so called zombie companies that are trading while insolvent and should be put out of business and for some reason or another they are being allowed to stay afloat.”

Hall Chadwick partner Ginette Muller said there appeared to be a “generosity of spirit” by the ATO.

“The word is that while the ATO is sending out notices they are certainly not aggressive in any way shape for form,” she said.

This has been backed up by the last Federal Budget which ensured provisions that would enable small businesses to appeal to the Administrative Appeals Tribunal to “pause or modify” ATO debt recovery actions in any dispute.

Ms Muller said at this stage there did not appear a particular sector under pressure.

“It’s very patchy. I can’t identify any sector,” she said.
“There was a lot of concern about the building industry. It’s very hard to get your home renovated at the moment so it’s not through a lack of work that anyone from that industry goes under.”