Andrey Mikonin commented the increase of bankruptcy proceedings for Delovoy Peterburg Newspaper
St. Petersburg and Leningrad Region faces a barrage of bankruptcy proceedings. Law firms expect the increase of debtor and creditor clients and strengthen their insolvency departments. But the market will not rise money-wise: the insolvent companies’ assets are now 1.6 times less than earlier.
Just as DP experts predicted, the increase of lawsuits in the local arbitration court that had become evident in past Fall, now gradually turned into the growth of bankruptcy cases. For 2014 the court has started 25 per cent more of insolvency proceedings than for 2013. And whereas in previous years a considerable part of the bankruptcy cases were the applications of the taxation service carrying out regular sweeping of shell companies, it currently decreased its activity by half and the share tax-motivated bankruptcy cases is four time less than before (from 75 to 18 per cent). Thus the majority of bankruptcy cases now are about liquidation of real companies that have been doing real business until recently.
Lawyers note that growth of the need for legal services in liquidation, debt restructuring, assets protection (and, the other way around, in debt collection, assets chasing) has become clear only at the end of the year. This is confirmed by statistics: a sharp increase in the daily number of bankruptcies was recorded at the very New Year. Therefore, in 2015, experts believe, this increase will take even more distinct character.
S&K Vertical Law Offices also confirm the trend. The bankruptcy department of our business has significantly increased in 2014 as compared with all the others, - says the managing partner of the St. Petersburg office of the Firm Andrey Mikonin. – The growth is evident both by the number of cases, which reflects the objective statistics, and by our income. We expect that next year's growth will be even more pronounced"
There are objectively more of bankruptcy cases,- notes Kachkin & Partners managing partner Denis Kachkin.
According to him, the company is preparing to increase the volume of work on the bankruptcy direction.
"This growth is only the beginning. The real barrage of bankruptcies will go in 2015 and 2016 - said the expert. - So by the end of January we have planned a series of organizational measures to strengthen our bankruptcy division."
According to managing partner of Prime Advice St. Petersburg Inna Vavilova, the year 2014 was not different for the firm that the year 2013t, although it acquired new bankruptcy cases. "All the shocks that the business came through - or rather, failed to come through- in recent months, will take effect only in 2015. This is when you can expect an increase in our market - predicts Inna Vavilova. However, she says, I cannot say that I am happy about it: I would have preferred to collect earnings on a growing business, not on a falling one".
One who is bankrupt is little
It is not only lawyers who are preparing for an increase in demand - and celebrate this recovery - but also the largest trading platforms that sell the property of insolvent debtors.
Thus, the First Deputy General Director of JSC "Russian auction house" Konstantin Rayev predicts that by the end of year the share of the bankruptcy estate in sale will double in kind. But the market will most probably fall money-wise: "The problem is that the number of potential buyers of the bankruptcy estate will reduce, which is a consequence of the overall reduction of the investment activity in the country."
Lawyers can also hardly hope that the market of bankruptcy will grow, since the bankruptcy cases of the last year are noticeably inferior in quality than the ones of the year before. Thus, according to CredInform analytical agency, while in 2013 there were 1332 companies and individual entrepreneurs in St. Petersburg and Leningrad region that went bankrupt and their assets totaled 1.619 trillion rubles, in 2014 there were 1739 such companies and individual entrepreneurs with total assets only 1.071 trillion rubles worth.
Given that it is the book value of assets in bankruptcy that determines the spending limit for bankruptcy cost, the market may reduce in money, despite an increase in the total number of cases.
Towards the client
Meanwhile, the market participants say that it is not only demand that is growing but also the supply, and competition is likely to reverse the growth of cash flows. Many law firms that have not engaged in bankruptcy or did it just for statistics, streamed into this business segment. "We are preparing our arsenal, we are sharpening the relevant skills of the lawyers of our litigation department - says the managing partner of Borenius Russian office Andrey Gusev. - Because many of our regular clients - and we are working in the premium segment - are having insolvent counterparts that may soon start bankruptcy proceedings. We are engaged in negotiations, some of them go already in the most acute phase and when the services of bankruptcy professionals will be required, we will be ready for that. "