ASIC makes insolvent trading prevention plea

AUSTRALIAN Securities and Investments Commission chairman Jeffrey Lucy has called on company directors and chief financial officers to actively manage the financial position of their company to prevent insolvent trading.

Mr Lucy said ASIC’s National Insolvency Coordination Unit conducted surveillance visits to 649 companies throughout Australia in 2003-04.

"Of these, 71 companies appointed a voluntary administrator or liquidator following a visit by ASIC," he said.

"ASIC’s involvement contributed to the appointment of external administrators ‘sooner rather than later’ to six listed companies."

Two WA listed companies feature as examples of that, namely Brandrill Limited and Kaefer Technologies.

Mr Lucy said the insolvency program was not about getting ‘heads on sticks’ in terms of insolvency appointments but instead aimed to make directors aware of their company’s financial position and their responsibilities to avoid insolvent trading.

As a result of ASIC’s visits many company directors have sought professional advice about  improving their management reporting, potential refinancing and restructuring options, or advice from insolvency professionals.

With respect to listed companies, for example:

ASIC’s involvement had an impact on a corporate group’s refinancing arrangements, resulting in the protection of unsecured creditors and employees’ entitlements;

One company converted certain related party debt to equity and provided a letter of financial support form a major shareholder;

Another company undertook a complete overhaul of its forecasts after ASIC’s review identified fundamental flaws in the original forecasts; and

Directors of a company who were also major creditors provided letters of deferment of debt.