Number of filed bankruptcies on the up, especially by small firms with fewer than ten employees

Taxman and insurance companies most eager to file bankruptcy petitions against companies with solvency issues

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The number of bankruptcies continues to grow steadily. Statistics Finland announced on Thursday that in January-March nearly 900 bankruptcy petitions were filed. This is a third higher than the corresponding figure from last year.
      According to Suomen Asiakastieto Oy, the leading business and credit information company in Finland, the number of bankruptcy petitions filed in April was slightly lower than in February-March, but overall the rate is believed to be heading upwards.
     
The rising trend in the number of filed bankruptcies has continued since last summer. The figures do not yet reveal the final number of bankruptcies, for a filed bankruptcy petition can still be withdrawn if an agreement is reached with the creditors.
      The number of filed bankruptcies is also slowed down by company reorganisation proceedings. During the first part of the year, company reorganisations and debt rescheduling, where new payment arrangements are agreed with the creditors, were initiated twice as often as last year.
      “Perhaps around 20-25 per cent of the filed bankruptcy petitions result in an actual bankruptcy”, estimates Statistics Finland senior actuary Pekka Hänninen.
     
The latest statistics do not surprise Hänninen, who would not be overly concerned about the current trend.
      “The presented numbers still remain a far cry from the previous recession’s top figures. Right now we are fairly close to the figures of 1998, the time period that followed the actual recession of the early 90s”, Hänninen points out.
      The Federation of Finnish Enterprises follows the bankruptcy statistics closely.
      “We have a finger on the pulse, so to speak. We are pleased with the fact that the current number of filed bankruptcies is not higher than this, even though a rising trend is always a bad thing”, says Antti Neimala, director at the Federation of Finnish Enterprises.
      “If the bankruptcy figures remain approximately at the beginning-of-the-year’s level, there will be around 3,500 bankruptcies this year”, Neimala calculates.
      Neimala also reckons that there may still be plenty more bankruptcies next year.
      “I imagine in 2011 we will start approaching normal figures.”
     
So far it has mostly been small companies that have filed for bankruptcy. ”Around 90 percent of the cases involve companies with fewer than ten workers”, Hänninen states.
      A quarter of the early year’s bankruptcy petitions have been filed by building trade businesses.
      The petitions primarily concentrate on areas where there are plenty of jobs. Helsinki’s take alone of the January-March statistics was around 15 per cent.
     
The bankruptcy petitions are in most cases filed by the creditors. Usually only a quarter or a fifth of the filed petitions are instigated by the company itself. According to Suomen Asiakastieto, the number of businesses that spontaneously filed for bankruptcy grew in March.
      The most common reasons for filing for bankruptcy are unpaid taxes and insurance payments. Acting as creditors, the taxman and the insurance companies filed 90 per cent of last year’s bankruptcy petitions.
     
The bankruptcy process can be complicated and can take months or years to be completed. Sometimes, especially when a company itself has filed for bankruptcy, the handling time may be as short as a couple of days.
      In other words, the entrepreneur who filed for bankruptcy is relatively quickly able to start a new business.


Previously in HS International Edition:
  Katainen expects financial crisis to hit Finnish economy through corporations (1.10.2008)

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