Companies facing court action more likely to collapse

Companies and directors facing court action are more likely to see their business fail. A company is 11 times more likely to collapse if it’s facing court and eight times more likely to fail if one of its directors is.

“Already this year close to 4,800 Australian companies have collapsed,” said Christine Christian, CEO of Dun & Bradstreet. “That’s an eleven percent increase on the same period last year.

“With economic conditions expected to remain challenging at least in the short term, businesses cannot afford to ignore any signs that indicate a customer or a supplier could find themselves facing financial distress.

“The history of a director and other adverse credit events are easy to identify and this knowledge could prevent businesses executives from a significant amount of pain.”

Court actions, collections activities and creditor petitions are all clear indicators of likely failure.

“The best way for business to stay ahead of the pack is to develop an accurate insight into their customers’ financial health and debt paying behaviour. This should include a thorough examination of the history of directors and company court actions,” said Christian. “Knowing who you are dealing with can prevent significant losses and it can stop the domino effect that often occurs as a result of monies owed by failed businesses.”