Why troubled companies aren’t coming out of administration

One of Australia’s most experienced insolvency experts has thrown a cat among the pigeons that dominate the corporate restructuring game.

Bill Hamilton, who managed several high profile external administrations in the 1960s, has lifted the lid on a topic that is rarely discussed publicly.

Hamilton says that the big firms handling the bulk of work handed out by the major banks don’t have enough qualified staff.

He says there are two important ramifications from this lack of resources.

Firstly, companies that are under external administration are not being managed efficiently and the additional costs are being borne by creditors.

Secondly, he says that without the necessary qualified staff, the big firms are unable to manage troubled companies out of insolvency and back to being a going concern.

Hamilton says it is not easy to put a company back on its feet. To do so requires well-trained, dedicated and experienced staff.

He says the amount of work being taken on by the big firms that dominate the industry means that the quality of work must be suffering.

Hamilton is one of the doyens of the insolvency industry. He commenced practice as a sole practitioner in May 1960. When he was appointed an official liquidator in 1962, he was the sole official liquidator for NSW.

He partnered with Ian Ferrier to form Hamilton and Ferrier Chartered Accountants in November 1962. The partnership lasted until 1976.

Two of the firm’s high-profile insolvency jobs in the 1960s were Australian Factors Ltd and George Hudson Ltd.

Ferrier went on to found Ferrier Hodgson, which later lured away one of Hamilton’s recruits, Max Donnelly. Donnelly is still with Ferrier Hodgson but Ferrier has moved to BRI Ferrier.

Hamilton, who is a partner at Hamiltons, has just published a treatise on the various means of external administrations available for companies and individuals in insolvent situations.

He says that while the voluntary administration system that was introduced in June 1993 had saved many unnecessary legal fees, it did not appear to be working as intended.

Hamilton says one of the policy objectives behind the inclusion of Part 5.3A in the Corporations Act was to make it easier to get companies out of insolvency and continue operating, for the benefit of employees, creditors and customers.

But he says very few companies come out of administration. Instead, most are liquidated.

Hamilton believes a lot of people are suffering because of the lack of available staff at the big firms able to bring insolvent companies back to health.

This article first appeared on Business Spectator.