More than 6,700 companies entered insolvency in 2022, a 10% increase compared to 2021 (6,144). Of these, 67 are impact companies, have more than 5,500 employees, register assets worth more than 1.5 billion lei and debts to the state budget of more than 170 million lei, according to an analysis of CITR, the leader of the insolvency and restructuring market in Romania.
“Despite the attempts made by the European regulations to encourage fast and efficient restructuring mechanisms, we observe a maintenance of inertia regarding companies in difficulty. Although in Romania we have two new restructuring mechanisms introduced in time in our legislation, we notice that only 1% of the impact companies that could benefit from a restructuring came under the protection of the insolvency law, most of them being procedures at the request of creditors, not from own will,” said Paul Dieter Cîrlănaru, CEO of CITR.
The study of impact companies published by CITR at the end of 2022 shows that 43% of companies postpone the decision to take recovery measures for more than 3 years, the consequence being the disproportionate increase in the volume of debts to maintain the activity. Postponing, however, reduces the chances of recovery. Last year there was an increase in the number of restructuring procedures in the pre-insolvency or non-insolvency area through the application of tax facilities made available to companies. This market trend shows us that entrepreneurs have been looking for specific debt reduction measures.
“The current figures are a result of the fiscal measures applied in the last period in response to the economic difficulties and are manifested by an increase in the level of global debts in all segments – public, private and household. Only a reversal of this trend would lead to taking measures to actively deal with the difficulties that impact companies go through. And the effect will be seen in the health of companies and our economy,” added Paul-Dieter Cîrlănaru.
After two years of declines in global insolvencies, the latest figures confirm that they are intensifying in the world’s economies, given the phasing out of temporary support measures by sovereigns, which in most cases only delayed the moment insolvency. The later the rescue and restructuring solutions are accessed, the lower the chances of recovery.
Historically, significant waves of insolvencies have come several years behind difficult times in the economy. For example, after the 2008 crisis, the peak period of insolvencies was recorded in 2013-2015. What is different from then is that we now have new restructuring mechanisms that can streamline or support struggling companies to recover much more easily. The business environment can benefit from clear, efficient procedures, namely the restructuring agreement and the preventive arrangement, in which they have the freedom to negotiate with creditors and the suspension of forced executions, and at the same time, the company’s creditors can benefit from a higher degree of recovery of receivables by resorting to these restructuring mechanisms from the first signs of difficulty.