Decreasing number of companies in the unified state register of legal entities (EGRUL)

Following the results of 2016, the number of liquidated companies in Russia goes beyond newly established by record 282,3 th. According to the Federal Tax Service (FTS), this significant amount was recorded for the first time throughout data collection in EGRUL.

In 2016 781 th legal entities ceased operation, and 498,6 th were established (see Picture 1). Total amount of liquidated companies exceeded the data of 2015 in 2,4 times.

More or less it is about almost all sectors of economic activities. The number of liquidated companies in some sectors exceeded newly established in two or three times. The majority of liquidated companies were engaged in retail and wholesale.

The number of registered, established and liquidated legal entities, dynamicsPicture 1. The number of registered, established and liquidated legal entities, dynamics

Total number of companies reduced to the five-years-ago level: as of January 1, 2017, there are 4,55 mln registered companies that is almost equal to 2012 with about 4,54 mln active companies.

According to the FTS, the jump of liquidated companies is caused not so much by economic reasons as by removing inactive, “abandoned” and fly-by-night companies from the register.

The main reason of ceasing the activity is liquidation of legal entities due to the decision of registering authority to remove bogus companies from the EGRUL: 655,9 th cases in 2016 and 181,8 th in 2015, i.e. increase in 3,6 times (see Picture 2).

Number of legal entities liquidated due to removal from EGRUL after the decision of registering authorityPicture 2. Number of legal entities liquidated due to removal from EGRUL after the decision of registering authority

Liquidation for bankruptcy in the past year reduced to 10,1 cases in comparison with 11,2 th in 2015 (see Picture 3).

Number of legal entities liquidated due to other reasons, after reorganization and bankruptciesPicture 3. Number of legal entities liquidated due to other reasons, after reorganization and bankruptcies

The majority of companies is registered in Moscow – 950,3 th, Saint-Petersburg – 349,2 th and Moscow region – 235,1 th. 33,8% of all companies in Russia accounts for these regions. The share of first ten regions is 52,7%.

The table 1 contains regions by relative increase (decrease) in the number of companies registered in 2016.

In relative terms the number of legal entities decreased most of all in Murmansk region –16,9%, Republic of Kalmykia –15,5% and Moscow –14,4%. After recalculation of absolute figures Moscow demonstrated the most negative dynamics: 160,3 th companies ceased operations in the past year.

Table 1. Regions with the highest relative increase and decrease in the number of registered legal entities (LE).
  Region Increase/decrease in the number of registered LE for the year, % Number of registered LE as of 01.01.2016 Number of registered LE as of 01.01.2017
1 Sevastopol 11,4 9 352 10 418
2 Republic of Crimea 11,2 28 506 31 704
3 Vologda region 4,1 43 424 45 204
4 Chechen Republic 4,0 9 904 10 296
5 Voronezh region 3,7 56 278 58 374
6 Republic of Tatarstan 3,2 122 410 126 350
7 Tula region 2,6 34 994 35 901
8 Ryazan region 2,6 30 889 31 677
9 Nizhniy Novgorod region 2,2 99 017 101 160
10 Republic of Dagestan 1,7 33 492 34 066
76 Republic of Ingushetia -7,2 5 245 4 867
77 Kursk region -7,5 23 750 21 977
78 Arkhangelsk region (with autonomous districts) -7,7 24 907 22 981
78 Kirov region -8,3 38 364 35 198
80 Volgograd region -9,5 52 993 47 983
81 Chelyabinsk region -9,6 111 852 101 081
82 Novosibirsk region -11,4 140 469 124 430
83 Moscow -14,4 1 110 510 950 255
84 Republic of Kalmykia -15,5 5 258 4 445
85 Murmansk region -16,9 21 863 18 160

22 of 85 RF subjects demonstrate positive dynamics and the number of registered companies is increased. Two new regions, Sevastopol and the Republic of Crimea, with increase in companies for the year by 11,4% and 11,2% respectively are in the lead. Vologda region with lowlier 4,1% closes the top three.

According to the results of 2016, the significant reduction in the number of active companies in most cases took place not due to bankruptcy, but upon the decision of registering authority on removing the “abandoned” companies from EGRUL. This should be considered as a benefit: business is in need of periodical elimination of bogus companies acting on paper only (do not provide financial accounts, with no accounts activity).

Anyway, decrease in entrepreneurial activity is out of question, because in 2016 the number of established companies was only by 1,1% lower than in 2015.

The Ministries' projects

New efforts of the Ministry of Economic Development and the Ministry of Industry and Trade of the Russian Federation are aimed to improve the business environment in the short and long term periods.

2016 interim economic results seem better than forecasts. On the one hand, the key indicators are on the rise, on the other hand, the negative factors, influencing on the Russian economy, became less significant. The oil prices exceeded the budgeted amount; the investment of Western investors has grown. The citizens, who followed the saving line during the last few years, began to increase the consumer activity. The Government preparing new ideas to support the industries, taking into account the importance of anti-crisis activity.

Targeted development. The key document regulating the country’s short-term economic development is the economic support plan for 2017 signed by the Prime Minister Dmitry Medvedev on January 20. The plan was prepared by the Ministry of Industry and Trade of the Russian Federation and provides allocation of 107,5 bln RUB (in addition to the budgeted) for industries’ support; the plan is based taking into account the invariance of such negative factors as sanctions and low oil prices in the medium term. The document prepared by Denis Manturov Ministry suggests the additional support for different economy sectors. More than half of funds will go to the automotive industry (for example, for concessional lending and leasing), the support will also receive the Industrial Development Fund and such industries like agricultural machine building and equipment manufacturing for food industry, which is already protected by the retaliatory sanctions. The main focus is made on engineering industry development as the industry might exert the significant influence on the economy from the point of engineering principles, technological base and long-term dynamics. It is expected, that funds for plan execution will be allocated from the budget reserves of the Government.

Long-term certainty. Simultaneously with the strategy of short-term economic strengthening, the Russian White House is working out the Government integrated action plan 2017 – 2025 aimed at achieving the economic growth rate above the world average no later than 2020. The plan is based on structural and institutional reforms in economy, which should spur economic growth, decrease the share of black economy, decrease the taxes for legitimate business and provide business community and citizens with the certainty of business prospects; the last point is the main barrier to capital inflow at the moment. According to the Head of the Ministry of Economic Development Maxim Oreshkin, who is responsible for plan preparation, economic uncertainty is one of the key reasons why companies set aside the investment and postponed the expansion of production. Because of that the main focus of economic authorities at the moment is return of certainty in economic agents’ expectations. In this case the predictability of inflation is important as well as fiscal policy and stability of tax legislation. From this point of view the significant progress is already achieved – the three-year budget. The budget demonstrates the stability of state finances without increase of tax burden upon the three-year conservative script with oil price of $40 per barrel. The main aim of economic policy is to have the set of actions in case of different and difficult external conditions, not to predict the oil situation. According to Maxim Oreshkin plans, the first edition of the document will be ready in March; by order of the President of the Russian Federation the final edition should be adopted in May.

Starting point. According to the experts’ forecasts, this year the economic and GDP growth might be captured first time for a long time. The positive price dynamics on primary goods will influence on personal income growth, the growth of industrial production will also support the economy. Russia is the large and interesting market for the world investment community; market access is limited due to political dimensions and the situation regarding this issue might also start changing. In this context the Government steps focused on stabilization and growth of domestic economy will have significant importance. Decline in tax burden, business risks and return of certainty in business community’s expectations - might become the starting point of stable long-term economic growth.