The Australian Securities and Investments Commission (ASIC) has published a report detailing the period between 2021 and 2025, revealing that 238 retail businesses collapsed during that period, with total liabilities of $3.66 billion and median liabilities of $2.10 million per appointment.
The report has been described as the first detailed public breakdown of how the voluntary administration and deed of company arrangement (DOCA) process is undertaken.
A DOCA is a binding legal agreement established during voluntary administration that outlines how a financially distressed company will restructure its operations to pay debts and maximise its chances of continued trading. ASIC commissioner Kate O’Rourke said the report revealed the many different ways this process can be effectively applied.
"They may allow the company’s business to continue trading, facilitate the sale of the business or assets, or provide a mechanism for creditor claims to be compromised," O'Rourke said.
"This is important because voluntary administration is intended to give an insolvent company, or as much of its business as possible, an opportunity to continue where that is viable, or otherwise to produce a better return for creditors than an immediate winding up."
Smaller collapses across all industries were far less likely to have a DOCA proposal put to creditors and, by extension, were far more likely to end in a creditors' voluntary liquidation.
"Less than one-third of smaller appointments, with liabilities of less than $1 million, resulted in a deed of company arrangement proposal being approved," O'Rourke said.
"Most of these appointments resulted in liquidation with no deed of company arrangement proposal being put to creditors."
Unsurprisingly, the report found that DOCAs that relied on future trading profits typically took longer to complete and were more likely to fail or enter liquidation than those funded by asset sales or third-party contributions.
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