Corporate enforcement director reports rise in liquidations

THE DIRECTOR of Corporate Enforcement Paul Appleby has reported a rise in the number of insolvent companies going into liquidation at the end of 2007 as economic conditions worsened. The trend has continued to rise in this year, he said.

Publishing his 2007 annual report yesterday, Mr Appleby said the liquidation of 40 insolvent companies in April compared with the liquidation of 30 insolvent companies per month in late 2007. A monthly tally of 22 insolvent liquidations was recorded earlier in 2007.

Attributing this increase to uncertain economic conditions, Mr Appleby's report said it can be expected that an "increasing number of companies will face challenges in 2008 and some will inevitably fail". Citing 2007 figures, the report said the construction (27 per cent), wholesale and retail (23 per cent) and the manufacturing (15 per cent) sectors continued to feature strongly in insolvent liquidation.

While reporting on the disqualification of 14 company directors last year, Mr Appleby said there had already been 10 such disqualifications in the year to date.

However, he said at a press conference that timing factors in the scheduling of court cases meant it would be wrong to attribute the higher level of disqualifications this year to an outbreak of non-compliance with company law.

There were 28 convictions last year for company law offences, down from 48 in 2006. Offences included acting as an auditor while unqualified, failing to keep proper books of account and acting as a director while restricted and in breach of the statutory conditions relating to company capitalisation.

Mr Appleby told reporters he could see no major reason why there should not be any provision in the Companies Act to facilitate "whistleblowers" who draw attention to wrongdoing in business. He said his office was committed to publishing a discussion paper this year on that topic, also known as "good faith reporting".

"I believe that there is a need to create more favourable conditions for the reporting of misconduct or illegality in the company law area. This approach is consistent with international best practice in corporate governance in bringing potential problems to light for rectification," he said.

"I would like to see a whistle-blowing provision included in the forthcoming Companies Consolidation and Reform Bill in the same way that similar provisions are increasingly being included in other Government legislation."