Spike in ‘Zombie’ Companies Going into Administration Fuels Fear of Australian Insolvency Wave

There are worrying signs company collapses could leap back to historical heights as pandemic-related assistance draws to a close after propping up “zombie” enterprises that would have otherwise failed, The Australian reported. CreditorWatch’s latest Business Risk Review data released on Tuesday shows external administrations spiked by 61 per cent in February – the highest they have risen for a year. “This figure is likely to rise again in the coming months, as JobKeeper ends and the three-month reprieve on credit arrangements for struggling smaller businesses comes to a close,” chief executive Patrick Coghlan said. The federal government implemented a temporary moratorium on insolvent trading last year to allow businesses that were unable to pay their debts prior to the pandemic to trade through it, giving them time to right their operations as the economy normalised. It ended on December 31 but businesses with debts of less than $1m were given extra time to work with an insolvency practitioner to restructure their operations and come to agreements with creditors to allow them to continue trading. The moratorium ends on March 28, along with the JobSeeker wage subsidy. Read more.
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