Why number of Gold Coast companies filing for administration has plummeted

The number of Gold Coast companies filing for administration has plummeted in the past three months. Here’s why.

THE number of Gold Coast companies filing for administration has plummeted in the past three months but don’t expect those numbers to surge immediately after Government protection for insolvent trading ends.

However litigation and liquidation experts, while saying they do not expect a sudden boost in companies falling into administration or liquidation, say much will depend on how banks, creditors and the tax office act.

The Bulletin has compiled insolvency notices for companies listing Gold Coast addresses published since March 24, which is the day after a government-mandated shutdown of industry resulted in the closure of hotels, bars, restaurants, theme parks and other businesses.

The companies in the list run the full gamut of the economy.

The number of companies falling into administration or liquidation dived by 30 per cent due to protections put in place by the Federal Government.

They include:

● A financial services company based in Southport.

● A roadworks company that had major projects including the Logan Enhancement Project.

● A glass processing and manufacturing company at Molendinar.

The number of companies falling into administration or liquidation dived by 30 per cent due to protections put in place by the Federal Government to help businesses navigate through the coronavirus crisis.

The measures announced on March 22 included safe harbour protections for directors from liability for insolvent trading for debts incurred in the ordinary course of business over a six-month period.

The Government also increased the minimum debt forming the basis for a statutory demand from $2000 to $20,000, and the period within which debt must be paid from 21 days to six months.

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Mark Steele, Senior Associate, Marino Law. Picture: supplied.

Mark Steele, who is special counsel at Mermaid Beach-based Marino Law in its litigation division, said the changes to the Corporations Act prevented a number of businesses on the Gold Coast going bust.

“At that time there were a number of companies in dire financial straits. They probably could have, had the regulations not come through, gone into liquidation. They have been presented with this opportunity for the next six months to avail themselves of basically a free pass in terms of safe harbour and insolvent trading,” Mr Steele said.

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However, Mr Steele said he did not believe there would be a surge in companies going into administration or liquidation come September 25.

“When the bandaid gets ripped off what is going to happen? We don’t think we are going see a huge increase come September,” he said.

“We still don’t know what the Federal Government is going to do with JobKeeper. They may phase it out in terms of some industries and leave it there for other industries.”

Mr Steele said if the border is reopened and remaining restrictions lifted, that might provide a significant boost to struggling businesses and enable them to keep going.

However, Mr Steele said once the protections in place ended in September, much would depend on how banks, landlords and trade creditors behaved regarding demands for repayment.

Liquidator Jason Bettles. Photo: Jerad Williams

Liquidator Jason Bettles, of Worrells, said JobKeeper was the key to most businesses, with many focused on keeping cashflow and not as concerned about the end of protections for insolvent trading.

“I think they are more concerned about actually being able to pay the bills. While it is something that sits in the back of their minds, I don’t know if it is the number one priority.”

Mr Bettles said if insolvency protections were ended earlier, in say July, that would not result in a wave of companies going bust.

“I think people are going to keep going and taking the JobKeeper and when it ends then we will sort start to see people say, ‘oh my gosh, do we have the cashflow to do it’.”

He said the approach taken by the Australian Tax Office would be crucial.

“Interestingly the tax office seems to be flagging that they are not going to go hard on debt collection once things return to normal at the end of the year,” he said.

“Obviously they will want people to be paying their tax and start collecting their tax. I think they realise that just because September is here and we are apparently back to normal, people will not suddenly have a tonne of money and be able to pay for things.”