Insolvencies up by nearly 12 pct in the first 5 months. Suspensions and dissolutions up 30.81 pct and 59.49 pct respectively

The number of companies and insolvency-licensed individuals increased by 11.97 percent in the first five months of this year, compared with the same period in 2017, to 3.686, according to data published on the National Trade Register Office (ONRC).

Most companies and sole traders in insolvency are in Bucharest, respectively 737 (plus 2,50 percent year-on-year) and in Bihor counties – 237 ( up by 22,16 percent year-on-year), Iasi – 213 (up by 4, 41 percent) and Timis – 181 (up by 27,46 percent). In May alone, 721 firms and PFAs went into insolvency.

By field of activity, the largest number of insolvencies was recorded in wholesale and retail trade, repair of motor vehicles and motorcycles – 1.130 (plus 13.68 percent). A number of 226 insolvencies were reported in May only.

Also, between January and May 2018, 8,364 companies suspended their activity (plus 30,81 percent), 1,406 only in May, and 15,751 were dissolved, up by 59,49 percent. In May, 3,098 companies were dissolved.

In February, Coface officials reported that insolvencies in Romania remain at twice the level of the Central and Eastern European (CEE) average.

“2017 brought 8,256 new insolvency proceedings, up 3 percent from 2016, when 8,053 new procedures were registered. Despite the minimum in the last 15 years, Romania reports an average level of insolvency companies compared to 1,000 active companies of 2,4 percent, which is almost twice the average in Central and Eastern Europe. In this context, it is more important to assess the size of insolvent companies, in terms of financial losses to creditors and the social dimension, through lost jobs. From this perspective, 2017 saw a certain stabilization of insolvent companies with revenues above 1 million euros, or 326 firms, compared to 333 in the previous year, according to the cited source.

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Despite this, company representatives said, the losses incurred by insolvency firms in 2017 amounted to RON 9.6 billion, up 13 percent  year-on-year, or RON 8,5 billion. On the other hand, the number of jobs reported by insolvent companies in 2017 amounts to 47,578, 32 percent lower than in the previous year.

The three major mistakes of companies that have entered insolvency are: poor financing of investments, wrong investments, and aggressive dividend policy.