Latest figures show that nearly 60% of personal bankruptcies in the construction industry were involved in a business, with those in retail businesses comprising around 50% in their sector. Business bankruptcies totalled around 40% of all bankruptcies. Fortnightly bankruptcy and personal insolvency statistics | Australian Financial Security Authority (afsa.gov.au)
Persons operating their own businesses as sole traders or employers comprise up to 60 % of all small businesses in Australia, and a collapse of their business can lead to their personal bankruptcy, which lasts for at least 3 years. Companies comprise up to 40% of small businesses but while there is limited liability, there is often personal liability through guarantees, tax liabilities, and personal debts incurred. The so-called small business insolvency reforms of the Treasurer deal only with the company, not the debts of the individual directors or owners.
Pending insolvency law reform, still?
As to those personal debts and bankruptcy, that law is handled by the Assistant Attorney-General, who in January 2021 sought submissions on law reform in the context of the impact of the coronavirus, including on unincorporated businesses such as sole traders and partnerships, those individuals being subject to the prospect of personal bankruptcy. There has been no government response since.
No doubt the trends are being monitored for the A/Attorney by the bankruptcy regulator, AFSA, fortnightly. It has usefully started to issue ‘business related personal insolvency statistics’ which include those people who have operated their business in their own name as a sole trader, including as a contractor, sub-contractor or similar, or been involved in a partnership. Those statistics also include those who have been a director/secretary or held a management role in a company in business; for example, the company might have been ’saved’ but the individuals behind it went bankrupt.
Overall, the number of new bankruptcies rose from 228 between 18 October and 31 October to 254 between 1 November and 14 November. Over the same period, debt agreements and personal insolvency agreements rose from 134 to 175. Nearly all bankruptcies were voluntary.
But AFSA does not deal in companies, so it refers people to ASIC for information on company liquidations and administrations, including those dealt with under the Treasurer’s new small business insolvency laws. Insolvency statistics | ASIC – Australian Securities and Investments Commission.