Part 1 of the 2023 edition of R+I In Brief explores restructuring and insolvency developments in Australia in FY22/23.
Overview
Despite the challenges flowing from increasing global inflation and supply chain disruptions, the Australian economy has to date remained resilient and a technical recession has been avoided in 2023. However, after many years of historically low interest rates, the Reserve Bank of Australia raised interest rates rapidly from April 2022 (12 rate rises and counting) as inflation became uncontrollable.
This Part of the 2023 edition of R+I In Brief provides key industry and sector insights relating to the restructuring space over the past year. These hot topics include:
After a sharp rise in May, it came as little surprise to see corporate insolvency figures continue their march upwards. A total of 2,163 registered companies entered an insolvency proceeding in June 2023: the second highest figure since January 2019 and 40% higher than the equivalent for June 2022.
The construction industry trade press frequently writes about administrations in the industry. Whilst the Insolvency Service's figures show that around one construction company went into administration every other day in Q1 2023, significantly higher numbers went quietly into liquidation during the same period.
In vielen Branchen kann die Lieferkette eine Vielzahl von Unternehmen und Jurisdiktionen umfassen. Im derzeitigen Wirtschaftsklima ist es nicht ungewöhnlich, dass einzelne Lieferanten innerhalb dieser Lieferkette in finanzielle Schwierigkeiten geraten oder ein Insolvenzverfahren beantragen.
In many industries, the supply chain can involve multiple suppliers and jurisdictions. In the current economic climate, it is not unusual for a supplier within the supply chain to encounter financial distress or even to enter into formal insolvency proceedings. This can have a significant impact on a company if its business depends on a distressed supplier and an alternative or additional supplier cannot be found (and production cannot be brought in house) or an alternative sourcing is not possible for other reasons, like part/raw material approval process, testing, customs etc.
The economic clouds continue to darken alongside the incessant rainstorms outside, and people are paying closer attention to the forecasts to understand what to do to keep dry.
As interest rates continue to rise, and many commentators describe a challenging economic outlook amid an extending inflationary cycle, one only has to look at the recent company collapses in the construction sector to see the struggle that businesses are facing. Times are, and certainly will be, tough for a large number of people, and there are clearly sectors in distress.
Global political crises, volatile interests, inflation and supply chain issues challenge many companies. In this blog series, VISCHER's restructuring & insolvency team will show how companies can navigate through these challenges. Here you will find answers to the most important questions regarding the duties of a director of a Swiss subsidiary.
1. What is the group dilemma and what interests must a Swiss subsidiary's board safeguard?
The increase in bankruptcy filings that restructuring professionals have been expecting is now arriving. With rising inflation, increased interest rates, tightening credit markets, labor shortages and supply chain disruptions, we are starting to see a dramatic increase in filings. Last week the American Bankruptcy Institute noted that commercial Chapter 11 filings increased 105% in May 2023 as compared to May 2022 and across the board filings are on the rise as well.
Managing the financial health of a business to ensure it continues to be viable and successful can be challenging, particularly in today’s economic environment.
June 2023
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