In accordance with new figures from the Australian Securities and Investments Commission (ASIC), NSW construction companies are rapidly folding due to a drastic decrease in building and a rising illegal trend known as ‘phoenixing’.

The statistics demonstrate that 169 NSW-based construction companies went into receivership, administration or court ordered shut-down this June quarter: the highest number of shut downs in almost four years. The reason? Experts theorise that it could be an echo of NSW’s slowing housing market. There is a significant reduction in housing construction with roughly 50,000 less apartments being constructed compared to the same period of time, two years ago.

ASIC did not offer any comment on their worrying statistics, however, stated that the most common reason for the construction companies shutting down was ‘poor financial control’ and ‘inadequate cash flow’.

Experts in the field have, however, suggested another reason: a trend known as ‘phoenix activity’. This is where a deliberately liquidated company creates a new company in order to continue business and to avoid paying its debts and dues. A number of reforms by the NSW Government have been established to counteract this; such as penalties under the Corporations Act 2001 which impose up to five years imprisonment and considerable fines for company directors who carry out phoenix activity.

Over 550 NSW construction companies were liquidated in the 2018-19 financial year: 101 more than the previous financial year. Whether this proves to be due to the rise of the ‘phoenix’ or simply a decrease in the housing market, it is a notable trend impacting the NSW construction industry.

 

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