The report from credit reporting agency Dun & Bradstreet, which looked at 560,000 companies, also said the number of corporate failures in the six months to June this year had risen 11 per cent to 4,800, compared with the same period the year before.
A company was 11 more times more likely to fail if it had a court action against, it compared with those that aren't the subject of any actions, and eight times more likely if a court action was been brought against one of the firm's directors.
The risk of corporate failure doubled if one of the directors had been on the board of a previously failed firm.
"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 supplier could find themselves facing financial distress," D&B chief executive Christine Christian said in a statement.
Christian said also having a good understanding of credit matters cannot be overstated, particularly in the current economic climate.
"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," Christian said.
During 2007, 5.2 per cent of companies that had at least one court action brought against them had failed, D&B said.
By state, some 8.5 per cent of companies in New South Wales with at least one court action against them failed.
The figure drops to 5.25 per cent and 5.07 per cent, respectively, for companies residing in Victoria and Queensland.
Company age also impacts the likelihood of failure, with younger companies at a higher risk.
Around nine per cent of companies up to nine years old that had at least one court action failed.
