What ASIC’s Latest Review Means for Accountants Advising Distressed Businesses

ASIC has recently released its first comprehensive review of the voluntary administration (VA) and Deed of Company Arrangement (DOCA) regime, analysing more than 5,000 appointments over a four-year period. The report provides valuable insight into when voluntary administration succeeds, when it doesn’t, and perhaps most importantly for accountants, when businesses are seeking help too late.

While the report is primarily aimed at insolvency practitioners and policymakers, there are several practical takeaways for accountants who are often the first trusted adviser to identify financial distress.

Earlier Intervention Leads to More Restructuring Options

One of the strongest themes emerging from ASIC’s review is that company size and financial position materially influence restructuring outcomes.

Appointments involving larger businesses were significantly more likely to result in an approved DOCA, while smaller businesses were far more likely to proceed directly into liquidation. Companies with liabilities exceeding $10 million entered a DOCA almost half the time, compared with only around 15% of companies owing less than $250,000.

Importantly, ASIC notes this may reflect directors seeking advice only after their financial position has materially deteriorated.

For accountants, this reinforces something we see regularly in practice: timing matters. The earlier conversations occur, the broader the range of restructuring options available.

A Voluntary Administration Isn’t Simply “Step One Before Liquidation”

Many directors still assume that appointing a voluntary administrator inevitably leads to winding up the company. ASIC’s data tells a different story.

Among companies that entered into a DOCA:

• almost half continued trading;
• around one in five achieved a sale of the business or its assets; and
• many others used the process to negotiate a commercial compromise with creditors that delivered a better outcome than an immediate liquidation.

For many viable businesses experiencing temporary financial pressure, VA remains an effective restructuring tool rather than simply an orderly path to closure.

The Proposal Matters

Another interesting finding is that creditors overwhelmingly supported DOCA proposals once they were put forward.

Approximately 87% of proposals presented to creditors were ultimately approved. Administrators recommended acceptance in the vast majority of cases, but even where they did not recommend the proposal, creditors still approved a significant proportion.

This highlights the importance of developing a realistic, well-supported restructuring proposal before creditors lose confidence.

Accountants Remain the First Line of Defence

In many distressed businesses, the warning signs appear months before an insolvency appointment becomes necessary:

• persistent ATO debt;
• increasing reliance on payment arrangements;
• unpaid superannuation;
• deteriorating cash flow;
• pressure from key suppliers; or
• directors funding ongoing trading personally.

These issues don’t necessarily mean liquidation is inevitable, but they should prompt a broader discussion about the available restructuring options before those options narrow.

The Takeaway

ASIC’s report reinforces a principle that has long underpinned effective restructuring advice: early engagement creates better outcomes.

Whether that ultimately leads to an informal workout, a Small Business Restructuring process, a Voluntary Administration, or an orderly liquidation, the quality of available options is usually determined by how early the issues are identified.

As trusted advisers, accountants are uniquely positioned to recognise those warning signs before directors reach the point where choices become limited.

If you’d like to discuss a client experiencing financial pressure or simply want a confidential sounding board before recommending a formal process, we’re always happy to have an obligation-free conversation.