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Number of big companies facing insolvency up, study shows

Number of big companies facing insolvency up, study shows

A growing number of big size companies are facing insolvency, although the cases are decreasing overall. The average of insolvency incidence is fourfold higher in Romania than in other countries from the region, a study conducted by KeysFin reveals.

“Insolvency, the “cancer” of the Romanian economy, has perverse effects. Although, the number of insolvency cases is dropping, an alarming situation is hiding behind the figures- more and more companies running businesses of over EUR 1m are declaring insolvency. Moreover, there are fourfold more companies in insolvency than in the neighboring countries,” KeysFin experts argue.

Statistics show that the average of the insolvency incidence in Romania is 45 cases reported to 1,000 active companies, thus the domestic economy is topping the insolvency ranking in Eastern Europe.

According to the statistics provided by the National Office of the Trade Register, over 4,700 companies went into payment default in the first six months of the year, down by 55.98 pc compared to the same period of 2014.

The higher number of insolvent companies- 1,076- has been registered in Bucharest, however in a downward trend compared to the same period of last year.

Bihor county is ranking second with 303 insolvent companies, Timis comes third with 284 companies and Maramures- fourth with 276 companies. Maramures is the only county where the number of insolvencies increased compared to last year.

The official data reveal that when it comes to insolvency risk, the safest counties are Calarasi, Harghita, Bistrita-Nasaud, Botosani, Salaj and Teleorman, where the number of companies declared insolvent is beyond 50 cases.

When it comes to medium and long term risks, the experts are mainly targeting companies activating in construction field.

This happened mostly due to the enactment of Insolvencies Code, which raised the threshold value of the debt-claim from RON 30,000 to RON 40,000 and doubled the deadline of the procedure opening request from 30 days to 60 days.

“Legislation made a clean sweep in the business environment, mostly among small companies. Yet, insolvency experts say that we shouldn’t build our hopes up,” KeysFin analysts also said, as the big issue here is that insolvencies increased among big companies, which have a major impact on the domestic economy.

However, the KeysFin study concludes that insolvency should be seen as a “protective umbrella” which gives a second chance to the honest debtor. A proof is the growing number of successful reorganizations in Romania.

About Alina Grigoras Butu