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Business bankruptcies jump in 2010

THE NUMBER of bankruptcy proceedings increased in Slovakia last year. District courts initiated 814 bankruptcy proceedings in 2010, 36 percent more than in 2009. Based on statistics of the Justice Ministry, the number of declared bankruptcies increased too, up 25 percent to 344.

THE NUMBER of bankruptcy proceedings increased in Slovakia last year. District courts initiated 814 bankruptcy proceedings in 2010, 36 percent more than in 2009. Based on statistics of the Justice Ministry, the number of declared bankruptcies increased too, up 25 percent to 344.

According to Andrej Glézl, external restructuring manager at KPMG in Slovakia, last year many companies fully experienced the impact of secondary insolvency, the situation when a company is not able to collect its own receivables and because of this is late in meeting its obligations to its own creditors, the SITA newswire wrote in early April.

As Glézl pointed out, even though the companies were able to cover their obligations from their own assets last year, these resources are now drying up and many companies are getting into serious trouble that can lead to insolvency proceedings.

Last year the district courts received 1,248 bankruptcy declarations, an 18-percent increase. Glézl admitted that the number of insolvency proceedings may grow further this year and that this trend may continue until the economy completely stabilises.

Last year the number of companies seeking to solve their financial problems via restructuring increased too. While in 2009 courts registered 78 restructuring proposals, in 2010 that number had increased to 129. In total, the courts greenlighted 87 restructurings compared to 58 in 2009.

Ivan Lužica, the head of the consulting department at Deloitte Slovakia, ascribes this development to the impact of the crisis, which is still stinging. Another factor behind the increase is, according to Lužica, a better legal understanding of the restructuring process.

“It is also possible to expect an increased number of bankruptcies and restructurings this year,” said Lužica.


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