Number of insolvencies up 12pct, Jan.-May; suspensions and dissolutions up 30.81pct, 59.49pct, respectively

The number of companies and registered sole traders (PFA) facing insolvency increased by 11.97 percent in the first five months of this year, compared to the similar period of 2017, reaching 3,686 units, the data published on the site of the National Trade Register Office (ONRC) reveals.

Most of the companies and registered sole traders facing insolvency are from Bucharest, namely 737 (+2.50 percent compared to the same period of 2017), followed by Bihor County with 237 (+22.16 percent), Iasi County with 213 (+4.41) and Timis County with 181 (+27.46 percent). In May a number of 721 companies and PFAs entered insolvency.

Depending on the activity sector, the largest number of insolvencies was registered in the retail and wholesale trade, vehicle and motorcycle repairs - 1,130 (+13.68 percent). A number of 226 insolvencies were registered in this area in May.

Moreover, between January and May 2018, a number of 8,364 companies suspended their activity (+30.81 percent), 1,406 companies in May and 15,751 companies were dissolved, higher by 59.49 percent. A number of 3,098 dissolutions were recorded in May.

In February, the Coface officials reported that Romania's insolvency remains at a level twice as high as the Central and Eastern European (CEE) average.

"2017 brought about 8,256 new insolvency procedures, up 3 pct as compared to 2016, when a number of 8,053 new procedures were registered. Despite the last 15 years low, Romania reports an average level of companies in insolvency pegged to 1,000 active companies of 2.4 percent, which means almost twice above the average in Central and Eastern Europe. In this context, it is more important to assess the size of companies in insolvency, from the perspective of financial losses caused to creditors and of the social dimension, through the lost jobs. From this angle, 2017 recorded a certain stabilisation of insolvent companies with revenues over 1 million euro, 326, respectively, as compared to 333, the previous year," reads the quoted source.

Despite that, company representatives stated that the losses caused to creditors by insolvent companies in 2017 amounted to 9.6 billion lei, up 13 percent as compared to 8.5 billion the previous year. On the other hand, the number of jobs relative to the insolvent companies in 2017 reach 47,578, by 32 percent lower than the previous year.

The three major mistakes of the companies that defaulted on their payments are poor financing of investments, wrong investments and aggressive dividend policy.