THE Australian Securities and Investments Commission has credited its insolvent trading program with seven Western Australian companies, including Feature Tours, going into voluntary administration.
The program has also led to 44 other companies taking remedial steps, such as recapitalising or restructuring, to head off looming financial problems.
In Perth last week, ASIC’s executive director public and commercial services, Mark Drysdale, said the aim of the program was to focus company directors on the solvency of their business and to make them aware of their responsibilities to avoid insolvent trading.
The program was also designed to prompt companies to take early remedial action if they are under financial pressure.
The insolvent trading program has been running nationally for nine months and has resulted in ASIC reviewing 472 companies, including 78 companies in Western Australia.
Mr Drysdale said the program was highly targeted, based on information from creditors, employees and credit reference agencies.
“We get a lot of intelligence on companies that are trading and might be in financial trouble,” he said.
Mr Drysdale said WA companies that appointed an external administrator after an ASIC surveillance visit included high-profile tourism company Feature Tours, live sheep exporter Rachid Fares Enterprises, Butko Transport and Kwik & Swift Co.
The outcomes for some of these companies were vastly different.
Feature Tours, run by former Tourism Council of WA chairman Manny Papadoulis, went from administration into liquidation and sold its business early this year, with unsecured creditors likely to get nothing.
Mr Papadoulis acknowledged this week he had been ignorant of the voluntary administration process.
“I was ignorant of this area because I never intended to be there,” he said.
“I saw it as the end when in actual fact it can be a solution. I wish they might have come in earlier.”
Mr Papadoulis said administrators should be seen as corporate doctors who could help achieve a turnaround.
In contrast, Butko Transport successfully implemented a restructuring that involved the sale of its long-haul business and a focus on its core brick transport business.
KordaMentha partner Oren Zohar said the Butko directors were once again running the business.
“The key was the directors getting in early and using the voluntary administration process,” he said.
Mr Zohar said ASIC’s intervention was one of the contributing factors to his appointment.
Mr Drysdale agreed that early action, including the possible appointment of an administrator, would maximise the chances of the company surviving.
“In several cases companies that have sought advice and restructured following ASIC’s visit have significantly improved their financial position,” he said.
ASIC commissioner Professor Berna Collier said company directors in the midst of financial woes “often don’t recognise the situation they are in”.
“Its very hard to make that call if you are a director,” she said.
Remedial action may include preparation of proper financial accounts, to help directors assess the true financial position of their company.
“There is always a correlation between poor accounts and a poor financial position,” Professor Collier said.
ASIC has taken court action against two interstate companies under the insolvent trading program, resulting in the appointment of liquidators.
“ASIC will take steps to wind up companies that are trading while insolvent, where directors fail to act,” Mr Drysdale said.
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