Herald
Bankruptcy signs during the moratorium period

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.

Picture 1. Warning signs of financial distress during the period of prohibition of bankruptcy claims. Source: globas.ru Picture 1. Warning signs of financial distress during the period of prohibition of bankruptcy claims. Source: globas.ru

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.

Picture 2. Absolute change in the authorized capital of companies being under the moratorium on bankruptcy, March – September 2020. Source: globas.ru Picture 2. Absolute change in the authorized capital of companies being under the moratorium on bankruptcy, March – September 2020. Source: globas.ru

Despite the difficult economic situation, from March to September 2020, the owners of 3,247 companies under a moratorium on bankruptcy

Ranking
Top industries by dynamics of turnover of the companies in Russia for January – June 2020

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).

Table 1. Dynamics of turnover of the companies in Russia by industries, January-June 2020, to January-June 2019, billion RUB, %
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
IT 63 207 277 34,0
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
Printing activities 18 166 161 -3,1
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
Furniture manufacture 31 145 133 -8,4
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
Publishing activities 58 68 62 -9,1
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
Education P 325 273 -16,1
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
Coal mining 05 872 682 -21,8
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.