Companies The number of bankruptcies is already breaking records, but in a different direction than previously thought

The number of bankruptcy applications filed by creditors has collapsed and continues to decline. The reason is a temporary change in the Bankruptcy Act.

Finland A special situation has developed in the economy, with the number of bankruptcies falling to a record low instead of the dreaded bankruptcy wave in the spring.

During the previous four months, only 544 bankruptcies have been recorded. In the statistics up to 2003, a period of equally small bankruptcies has only been seen at the turn of the year 2016–2017.

On Wednesday, Statistics Finland publishes bankruptcy statistics for October, which provide new information on the number of bankruptcies initiated. A small number is expected again, although the second wave of the coronavirus pandemic has tested the solvency of many companies and there is currently no cost support in place to ease companies in difficulty.

Bankruptcies are associated with corporate failure, but they are also an important part of economic renewal.

Bankruptcies scheduled to weigh down the temporary amendment to the Bankruptcy Act, which came into force in early May. It was originally scheduled to expire at the end of October, but was extended until the end of January.

The purpose of the interim law is to protect companies in temporary corona problems from bankruptcies. In practice, it makes it difficult to prove a debtor’s insolvency with a bankruptcy demand. Insolvency can now only be established on the basis of claims prior to March.

Chief Inspector of the Tax Administration Timo Helin says the number of bankruptcy filings by the tax administration has fallen by 60 percent between June and October compared to 2019.

In recent months, the number of applications has decreased.

“The number that has such old receivables unpaid is decreasing,” Helin says.

According to Helin, the number of bankruptcy applications has decreased even more clearly than the number of bankruptcies.

“The number of applications filed by creditors has plummeted. The companies themselves have filed for bankruptcy as before, so their relative share has increased. ”

The number of bankruptcies follows the number of applications with a delay, as it often takes months from filing for bankruptcy. It is therefore to be assumed that bankruptcies will rarely be seen for several more months.

However, if bankruptcies were to increase rapidly, the explanation would have to be a sudden increase in bankruptcies filed by debtors themselves.

At the same time At the same time, companies’ problems in coping with payments have increased.

“Currently, we have no subsidies in place. The situation for companies has deteriorated in the autumn, when the second wave has come. It is currently difficult for companies, and there are payment difficulties again, ”says the Finnish Entrepreneur’s Economist Petri Malinen.

A new search for cost support for companies is expected to be launched in December, but problems may have accumulated in several companies during the autumn.

In addition, companies in the summer were made easier by the fact that they could apply to pension companies and the tax authorities for more payment time.

The taxpayer offered a simplified payment arrangement until the end of August. Subsequent payment order requests have been processed in accordance with normal terms and conditions.

The second wave of the coronavirus has hit the service sector in particular. Service employers a survey released on Tuesday according to the bankruptcy risk has clearly increased in companies in the sector since the august survey.

Finnish Entrepreneurs last week unveiled its latest Entrepreneur Gallery. According to the survey, the situation of the companies was still difficult, although it had slightly improved from the previous survey.

14 per cent of the responding companies reported having payment difficulties, 9 per cent considered closing down and 4 per cent reported experiencing the threat of bankruptcy.

According to Malinen, there are clear signs that the number of companies closing down has increased, while the number of new companies has not. Many have made or are in the process of deciding to close down the business, even if there is no threat of bankruptcy now.

According to Malinen, voluntary termination is sometimes a natural solution, as it makes it easier to be an entrepreneur in the future, among other things.

“What is called creative destruction has accelerated on the side of destruction.”

Unclear is how corporate challenges will turn into bankruptcies when the temporary law amendment expires next February. It is also not clear under what rules companies can file for bankruptcy afterwards.

At its worst, the difficulties accumulating this year could erupt into a avalanche of bankruptcies next year.

Probably next year, bankruptcies will see staggering growth figures, at least compared to this year’s figures printed by a temporary change in the law.

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