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Bankruptcies on the Rise

 bankruptcy

According to the Swiss association of creditors, the data for May shows a steep rise in bankruptcies.

Close to 450 bankruptcies were registered last month, making the fourth consecutive month where bankruptcies exceed 400 per month. So far 2009, there have been more than 2100 companies declaring bankruptcy.

A large percentage of these companies are young companies, start-ups and PMEs.

Nonetheless, extrapolating these figures gives an estimate of over 5000 bankruptcies for 2009 in Switzerland, something not seen in Switzerland since 1974.

In May there were 2600 new companies (roughly 10% less than last year in May) registered with the Chamber of Commerce. The number of firms struck from the lists rose 20% to 200 companies.

To put these numbers in perspective, in 2004 there were 460,000 companies registered (the period of the last recession) and this number rose to 515,000 in January 2009, thus an overall rise of 55,000 companies. The number of SARL companies rose 90% of the same period and the number of individual companies (i.e., independents or ‘INC’s) rose 40%. SA companies rose 25% during this same 5 year period.

In 2008, almost 60% of the surveyed companies were less than 5 years old, as opposed to 48% in 2004. And only 23% of registered companies are older than 10 years.

Analysts say that the high proportion of young companies is an important risk factor for the economy. For one, these companies have less funds for investment and also tend to suffer first in economic downturns when overall business decreases.

Analysts are asking whether financing structures are appropriate for the needs of younger companies. Specialists are asking whether the government can play more of a role in fostering or godfathering younger companies if the options are scarce in the private sector.

Surprisingly, amid the general steep rise in companies declaring bankruptcy, personal bankruptcies actually decreased in May to 503, a drop of 7.7%. From January to May the drop was even steeper – down 11.5% to 2420 bankruptcies.

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