Share of businesses to go bankrupt hits record low in 2016 ({{commentsTotal}})

Source: Photo: Postimees/Scanpix

In 2016, courts declared the bankruptcy of 340 legal entities, including 335 companies and five nonprofits. These 340 entities accounted for 0.16 percent of all businesses, marking the record lowest share of businesses to go bankrupt in one year.

The number of bankruptcies decreased by 12 percent in one year. The decrease is especially marked compared to the recession, when 2009 and 2010 each saw the bankrupcy of more than 1,000 legal entities — over three times more than last year.

A total of 1,320 people were employed by the entities declared bankrupt last year.

Nearly two-thirds of these entities were without assets, meaning that it was not possible to repossess anything from the bankruptcy estates in order to pay back their creditors.

The largest number of bankruptcies were in the hospitality and construction sectors as well as in manufacturing.

Over ten bankruptcies per year are recorded in just four counties: Harju, Pärnu, Tartu and Ida-Viru County.

The average debt of a single entity was €73,890 and the combined debt of all of last year's bankruptcies totaled nearly 25 million euros, which can be considered relatively little.

Persistent insolvency was identified in bankruptcy proceedings in 11 percent of insolvent companies; the remaining 89 percent were removed from the register without initiating bankruptcy proceedings.

The combined debt of companies with debts removed from the register was relatively small at €20,000.

Typical bankruptcy

The majority of bankruptcies typically have not essentially operated for some time prior to the bankruptcy. They are in large part small businesses whose revenue and total assets typically total around €200,000, who employ six or fewer employees and whose losses occurred or grew within the preceding operating period. The share of equity is virtually non-existent due to large losses, payment difficulties have arisen as a result of low liquidity indicators and the company has not been able to meet short-term obligations.

A year prior to their bankruptcy, most companies to go bankrupt have had unclear business ratings (37 percent) or management reports have gone unsubmitted, i.e. overviews of their activity have been missing for some time (29 percent). Just eight percent of companies to go bakrupt are newly created.

"The primary reason for bankruptcy has been a non-functioning business plan," Creditinfo Eesti deputy director Alar Jäger summarized.

Ten largest bankruptcies of 2016

1. Mareenos Grupp OÜ (motor fuel wholesale)

2. G.S.G. Metal AS (scrap metal purchase and wholesale)

3. FTH Ehitus OÜ (water, gas and sewer line construction)

4. Drayton Trade OÜ (metals distribution)

5. Derma Logistics OÜ (wholesale trade)

6. Inteka OP (motor fuel wholesale)

7. Tameo MT OÜ (electrical supply and equipment wholesale)

8. Weimer OÜ (production of agricultural and forestry machinery)

9. Protekton OÜ (production of medal products)

10. Siprest OÜ (food, drink and tobacco product wholesale)

The total turnover of these businesses was €155 million.

Editor: Editor: Aili Vahtla

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