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Insolvencies in Romania 2017


The number of insolvencies decreased by 21% in 2016 compared to 2015, from 10,174 to 8,053 and with 54% compared to the average of the last 10 years. 2016 is the first year when the decrease frequency of the insolvencies phenomenon  (their number) is accompanied by an decrease of its severity, according to the latest Coface study.

The significant decrease of insolvencies registered in 2016 is on the background of a base effect and of the high weight of insolvencies among very small companies. The decrease of the number of insolvencies can be found 84% among companies which were not operational (the turnover registered in 2015 being zero) or whose level of revenues registered in 2015 did not exceed 100K EUR.

Only 333 companies which registered revenues over 1M EUR became insolvent last year, and this is the minimum level of the last 10 years for this company segment. Under these conditions, the companies that became insolvent in 2016 registered a debt surplus over the level of their assets in value of 8.5 B RON, 41% less than the same indicator registered in 2015.

These numbers confirm that the incidence of the insolvency phenomenon is found especially within micro businesses, as approximately 93% of insolvent companies register revenues below 500K EUR.

At the same time, numbers confirm the fact that the insolvency incidence is found more often among companies with more employees, and the dynamics is probably correlated with the accelerated advance of the minimum wage in the last years. The minimum wage increased 12 times in the last 8 years, and increased much faster than the average productivity level, and its weight in the average gross wage on the level of the economy increased from 27% in 2008 to 43% in 2016. This dynamics confirms the fact that the consecutive increases of the minimum wage were applied in a much accelerated rate, which was not supported by the corresponding evolution of average productivity registered on the level of the business environment.

The number of jobs reported by insolvent companies in 2016 decreased only by 14% compared to the one registered in the previous year, in a slower rate compared to the decrease of insolvencies of -21%. In this context, the average number of employees for each insolvent company remained similar in the last two years, namely 16.

The significant decrease of revenues, combined with the accumulation of increasingly high losses, was one of the main causes that accelerated the insolvency risk:

  • Out of the total 8,053 insolvent companies in 2016, 4,429 companies filed financial statements related to activities carried out in 2015. One of the main causes that accelerated the insolvency risk was the significant decrease of revenues, combined with the accumulation of increasingly high losses.
  • In the context of a significant decrease of revenues, companies showed a limited capacity for restructuring. The limited flexibility of these companies and their incapacity for efficient restructuring were caused by the very high level of fixed expenses. Given that 93% of the companies that became insolvent in 2016 registered revenues below 500K EUR, the efficiency of these companies was probably negatively affected by the incapacity of coping with the fast advance of the minimum wage.
  • The sectors that are most affected by the insolvency phenomenon, in relation to the number of active companies, are manufacture of textile products, constructions and horeca, industries which require intense human capital and which predominantly use employees below the minimum revenue level imposed by law.
  • The indebtedness degree of the respective companies constantly increased, from 71% in 2008 to approximately 92% in 2015. This dynamics was caused by the accumulation of losses which eroded the level of equity, the very low capitalization contribution of the shareholders, and the necessity of supplementing debts in order to manage the pressure on liquidity.
  • The money conversion cycle (calculated by the accrued level of stock and receivable rotation minus the average payment term of suppliers) became negative in 2015, which means that the main financing source was the increase of short-term debts, whose weight in the overall borrowed capitals increased from 42% (2008) to 70% (2015). For the latter, the contribution of supplier credit became increasingly high (the weight of suppliers in the overall short-debts increased from 33%, the level registered in 2008, to almost 58%, for 2015).

Territorial distribution of insolvent companies:

  • Bucharest and N-W remained the first two regions with the highest number of insolvencies. 
  • W, S-W and Center areas hold the last two positions from this point of view.

„2016 is the first year that marks a major contraction of insolvencies among large companies, which means a lower financial impact. Only 333 companies with revenues over 1M EUR became insolvent in 2016, the minimum level registered in the last ten years in this companies segment. Although it increased by 15% the number of newly registered LLCs, Romania has over 2 companies who interrupt their activity at every new registered company”,stated Eugen Anicescu, Country Manager, Coface Romania.


“By analyzing the data published by the Trade Register National Office, the ratio between the number of companies which ceased their operations (all forms), related to the number of newly incorporated companies (LLC) increased by approximately four times in the analyzed period, from the level registered in 2008, namely 0.48, to almost 2.3, the level in 2016.

This dynamics proves that the activity cessation evolution was clearly higher than the incorporation of new companies, in the context of an extremely low entrepreneurial spirit, and a fiscal framework lacking any long-term predictability and sustainability”, Iancu Guda, Services Director, Coface Romania, mentioned.

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Diana OROS

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