Bankruptcies in Poland in 2021 at record low level

Bankruptcies in Poland in 2021 at record low level

In 2021, the number of insolvent entities was the lowest in years. There was a record number of restructuring proceedings.

Data from the Commercial and Judicial Journal of Poland and the National Debtors Register show that in 2021 the courts in Poland declared 412 business entities bankrupt. This is a decrease of 30 percent compared to the previous year and at the same time the least in many years. At the same time, the largest number of companies in history took advantage of restructuring proceedings.

Bankruptcy of Polish companies and their legal form

The number of bankrupt companies in Poland has been falling since 2013, when it reached almost a thousand. In the years 2016-2020, about 600 companies became insolvent on average per year.

Last year, the vast majority (60 percent) of bankruptcies declared were limited liability companies. Every fifth case concerned sole proprietorships. The following places were taken by limited partnerships (7 percent), joint stock companies (5 percent), general partnerships (2 percent).

Bankruptcy in Warsaw city – most frequent

Geographically, large provinces dominated. The largest number of companies (30 percent) which were declared bankrupt by courts originated from Mazovia. The second position was taken by Silesia (10 percent of cases) and the third by Wielkopolska (9 percent).

Among cities, Warsaw stands out in this negative statistic. That’s where every fifth company affected by insolvency was located. The remaining agglomerations, including Poznań, Kraków and Wrocław, were home to a total of 15 percent of financially inefficient entities.

Among the industries defined by the Polish Classification of Activities (PKD), trade (25%) and industrial processing (22%) were the leaders. A relatively large share (12 percent) was also held by companies involved in construction.

Popular simplified proceedings for approval of arrangement

Despite appearances, the lowest number of bankruptcies in years does not mean that the risk of business failure is decreasing. It has been growing for several years. All because of the systematic increase in the number of restructuring proceedings.

In 2021, there were 1888 such proceedings, which is the highest number since the introduction of the law in 2016 that makes it possible to rescue a company from insolvency.

In comparison with the previous year, this means more than a double increase (then there were 800 such cases). It is not a coincidence. Why?

Because in June 2020, due to the pandemic, a simplified procedure for approval of arrangement was introduced. This legal solution increased the protection of entities in a difficult financial situation from creditors. Such a company could not, inter alia, be filed for bankruptcy or have its bank accounts seized. The new law had the expected effect almost immediately, because in 2020 the number of restructurings increased by 3/4 compared to 2018-19.

In 2021, more than five out of six (86 percent) restructuring proceedings were of a simplified nature. Individual entrepreneurs (42 percent of cases) as well as limited liability companies and farmers (25 percent each) applied for them most often.

However, at the end of November, the provisions on accelerated and simplified restructuring ceased to apply. As a result, our corporate and corporate law lawyers predict that the courts will file for bankruptcy more often.