On October 6, 2020, the moratorium on bankruptcy expires, which temporarily protected 525 thousand companies from creditors' claims, as well as 1,6 million sole entrepreneurs. The Ministry of Economic Development and Trade is discussing the possibility of extending it, but no decision has been made to date. The cancellation of the moratorium could lead to a significant increase in bankruptcies.
The number of arbitration cases in economic disputes increases significantly during the bankruptcy moratorium period. Other early warning sign is a negative dynamics of the authorized capital.
Reasons of the negative dynamics of the authorized capital
The authorized capital is a guarantor of the interests of creditors, and its decrease must raise questions from potential partners of the company.
If the net assets value (difference between assets and liabilities) becomes less than the authorized capital, then the company is obliged to reduce the capital to the net assets value. Thus, the very fact of a decrease in the authorized capital for this reason may indicate an increase in obligations. In addition, the decrease in the authorized capital occurs as a result of the payment of shareholder income in case of net loss, or as a result of the buyback of own shares from the market in order to keep their market value.
If the company keeps the minimum amount of the authorized capital allowed by the law, which cannot be reduced, this indicates a small scale of business or a short period of the company's activity.
Reduction of the authorized capital is not widespread
During the restrictive measures from March to September 2020, 116 companies from those that fell under the moratorium reduced their authorized capital by a total of 16,1 billion RUB. Of these, 28% of firms are engaged in wholesale and retail trade, 18% are related to the activities of hotels and restaurants, 13% are transport companies.
Crisis is a driver
The financial model of many companies that fell under the moratorium does not imply high profitability. Companies will be able to overcome the fall in demand and restrictions related to the coronavirus if they receive financial support, including by increasing the authorized capital.
Despite the difficult economic situation, from March to September 2020, the owners of 3,247 companies under a moratorium on bankruptcy
The Federal State Statistics Service (hereinafter “Rosstat”) has published data on the Russian companies’ turnover for January-June 2020. Obviously, the impact of the crisis caused by COVID-19 pandemic and restrictions was different for companies and depended on the industry they are engaged in. The highest losses are recorded for transport and servicing companies, and mining industry.
For example, turnover of the railway passenger transportation reduced by 61,7% compared to the same period of 2019; airlines’ figures decreased by 43,6%, hotels’ – by 36,4%, and turnover of companies engaged in crude oil and gas extraction fell by 29,3%.
At the same time, pharmaceutical companies have doubled their turnover. IT and tobacco companies have 30% increase, and over 21% increase was recorded for post and courier services.
These figures prove the specific character of the current economic situation within the country and abroad (see Table 1).
|Activity||Activity code (OKVED2)||Turnover for January-June 2019, billion RUB||Turnover for January-June 2020, billion RUB||Increase / decrease in turnover %|
|Manufacture of medicines and materials||21||324||483||49,1|
|Manufacture of tobacco products||12||122||158||30,2|
|Post and courier services||53||126||153||21,6|
|Manufacture of textiles||13||133||153||14,7|
|Construction||F||3 452||3 933||13,9|
|Production and distribution of steam and hot water||35.3||752||854||13,6|
|Activities of water transport||50||133||149||12,4|
|Metallurgical production||24||3 733||4 143||11,0|
|Manufacture of clothes||14||136||150||10,3|
|Food production||10||3 133||3 444||9,9|
|Manufacture of rubber and plastic products||22||631||693||9,8|
|Fishing and fish farming||03||190||207||9,1|
|Wholesale||46||28 646||31 147||8,7|
|Water supply; drainage, collection and disposal of waste||E||654||708||8,2|
|Plant growing and animal husbandry||01||1 458||1 571||7,8|
|Mining of metal ores||07||852||911||7,0|
|Forestry and logging||02||136||145||6,7|
|Activities in the field of telecommunications||61||1 142||1 207||5,7|
|Retail trade||47||10 009||10 512||5,0|
|Real estate operations||L||1 587||1 664||4,9|
|Activities of the freight road transport||49.4||670||695||3,7|
|Manufacture of machinery and equipment||28||739||764||3,4|
|Manufacture of electrical equipment||27||570||589||3,2|
|Manufacture of other non-metallic mineral products||23||925||945||2,2|
|Warehousing and auxiliary transport activities||52||2 190||2 233||2,0|
|Activities in the field of healthcare and social services||Q||1 625||1 657||1,9|
|Wood processing and manufacture of wood products||16||370||377||1,9|
|Manufacture of finished metal products, except for machinery and equipment||25||1 265||1 285||1,6|
|Rail transport: cargo transportation||49.2||1 245||1 258||1,1|
|Production, transmission and distribution of electricity||35.1||4 128||4 146||0,4|
|Manufacture of chemicals and chemical products||20||1 812||1 786||-1,4|
|Manufacture of other vehicles and equipment||30||900||884||-1,8|
|Wholesale and retail trade with motor vehicles||45||3 779||3 709||-1,9|
|Pipeline transport activities||49.5||1 672||1 618||-3,3|
|Manufacture of paper and paper products||17||599||566||-5,5|
|Manufacture of other finished goods||32||132||124||-6,5|
|Production of beverages||11||531||493||-7,1|
|Activities in the field of culture, sports, leisure and entertainment||R||156||142||-8,6|
|Production and distribution of gaseous fuels||35.2||881||804||-8,7|
|Administrative activities and related additional services||N||986||893||-9,5|
|Computer software development||62||717||646||-9,9|
|Professional, scientific and technical activities||M||2 750||2 446||-11,0|
|Manufacture of computers, electronic and optical products||26||643||565||-12,2|
|Manufacture of leather and leather products||15||44||37||-17,0|
|Manufacture of motor vehicles, trailers and semi-trailers||29||1 578||1 306||-17,2|
|Food and beverage provision activities||56||600||496||-17,3|
|Activities of other land passenger transport||49.3||275||220||-20,1|
|Extraction of other minerals||08||330||258||-21,6|
|Production of coke and petroleum products||19||7 580||5 661||-25,3|
|Extraction of crude oil and natural gas||06||7 327||5 178||-29,3|
|Provision of temporary accommodation||55||156||99||-36,4|
|Air and space transport activities||51||855||482||-43,6|
|Rail transport: intercity and international passenger transportation||49.1||196||75||-61,7|
Source: Rosstat, calculations by Credinform
Turnover includes the cost of self-produced shipped goods, self-performed works and services, as well as revenue from the sale of acquired goods (excluding value added tax, excise taxes and other similar payments).
The data of current statistics are formed for the full range of enterprises, based on information from the unified form of federal statistical observation No. P-1 "Information on the production and shipment of goods and services".
Federal statistical observation form No. P-1 is provided by all legal entities that are commercial organizations, as well as non-commercial organizations of all forms of ownership that manufacture goods and services for sale to other legal entities and individuals (except for small businesses, banks, insurance and other financial and credit institutions), the average number of employees of which for the previous year exceeds 15 people, including those working part-time and under civil law contracts.