The corporate watchdog says it expects a large number of companies going into administration after a grace period is lifted.
The Australian Securities and Investments Commission is taking it easy on companies as they struggle with the downturn caused by the coronarvirus pandemic.
The latest figures presented to a parliamentary committee on Friday show in the last two quarters of 2019 there were 3912 external administrations started, while in the first six months of this year 2932 companies entered external administration.
However, ASIC deputy chairman Daniel Crennan QC told a hearing of the joint committee on law enforcement it was expected the number of external administrations would “increase significantly” once the grace period ended.
“We do anticipate there will be large volumes of unfunded liquidations,” he said.
“What is alarmingly referred to as ‘the cliff’ will effect, in our view, a significant increase … it will not only go back to the ordinary volume but eclipse it because of the economic circumstances that many companies and the economy itself finds itself in.”
Asked whether the grace period should be extended, Mr Crennan said it was a matter for government, but ASIC would “welcome” any request for data.
Mr Crennan also told the inquiry the number of scam reports had doubled during the coronavirus pandemic.
“We have noticed through our surveillance activity, which is daily, increased scam reports approximately doubling including various … romance scams and crypto scams, cyber crime, cyber related crime and fraud,” he said.
The commission is also concerned about phoenixing activity, which companies use to evade tax obligations or hide proceeds of crime.