Creditors get 11 cents in the dollar

Companies with the highest risk of going broke are in the construction industry, employ fewer than 20 people and have less than $250,000 of assets.

The Australian Securities and Investments Commission yesterday produced a report on company insolvency data collected over the past three years.

The industry with the highest number of insolvencies is construction, accounting for 20 per cent of cases in each of the past three years.

Administrators reported 7562 company insolvencies in 2006/07, 6745 cases in 2005/06 and 6316 cases in 2004/05.

Other industries with a high failure rate are services to business (around 15 per cent), retail trade (13 per cent), property and business services (10 per cent), accommodation, cafes and restaurants (seven per cent) and manufacturing (seven per cent).

Included in the figures for 2006/07 were 23 insurance companies, six credit providers, two deposit taking institutions and two superannuation providers.

Business failure was most often due to poor management, inadequate cashflow, and trading loss.

The good news for creditors is that the great majority of insolvent businesses owe less than  $500,000. The bad news is that there are usually a lot of creditors - around 50 is common.

The dividend estimated to be payable to unsecured creditors was less than 11 cents in the dollar in 95 per cent of cases.