The seventh annual Estonian bankruptcy survey conducted by Krediidiinfo AS shows that although the number of companies has grown fast in Estonia, the number of bankruptcy cases has been falling during the last three years. 

In 2006, 352 companies were declared insolvent in Estonia. Over the year, the number of bankruptcy cases decreased by 16%. While in 2005 0.44% of the total number of companies in Estonia went into bankruptcy, last year only 0.33% or every 300th company was declared bankrupt. 

The region with the highest bankruptcy rate is still Ida-Viru County, where a company is twice more likely to turn bankrupt than the Estonian average. The counties with smaller bankruptcy rates are Saaremaa, Viljandi County, Tartu County and Jõgeva County. Among business areas, the greatest bankruptcy risk lies in the manufacturing sector and catering.

Analysing the balance sheets of bankrupt companies proved that the factors most frequently referring to the risk of going bankrupt are negative owner’s equity, last year’s heavy loss, low liquidity and a significant increase of short-time liabilities. 

The bankrupt companies have considerably more long-term debts to the Tax and Customs Board than the other companies. Nearly half of the companies gone into bankruptcy in 2006 had serious tax debts for more than a year before their insolvency was declared. Creditors should be particularly alerted to growing tax debts. A tax debt that has been constantly growing for three months refers to problems in the companies’ solvency. 

Bankruptcy risk can also be foreseen by means of Krediidiinfo rating. Each year, Krediidiinfo gives the Estonian companies a rating defining the company’s riskiness from the creditor’s standpoint. 82% of the companies that went bankrupt last year had received a weak Krediidiinfo rating on the basis of their last annual report presented. 

In comparison with other European countries, the Estonian bankruptcy rate is lower than average – 34 bankruptcy cases per 10,000 companies. The country having the lowest percentage of bankrupt companies is Poland (2 bankruptcy cases per 10,000 companies) and the highest percentage is in Luxembourg (239 bankruptcy cases per 10,000 companies). Latvia and Lithuania have 61 and 127 bankruptcy cases per 10,000 companies, respectively.