Covid-19 crisis in business: thousands of companies have been liquidated

Last year, the lowest number of new companies in the last 17 years has been registered, according to a Lursoft study. Last year, no new companies were established in three municipalities - Cibla, Rugāji, and Zilupe. At the same time, last year, despite the crisis, the number of liquidated companies has been lower than in 2019, when a record number of companies were liquidated.

The information gathered by Lursoft shows that during 2020, 8938 new companies were registered, which is 14.42% less than in 2019. Last year, similar to 2019, most were low capital SIA companies. However, not only the curve of new company registration has shown a decline, but also the number of liquidated companies, which, compared to previous years, has decreased significantly last year. During 2019, almost 24 thousand companies were liquidated in Latvia, which was the largest number of liquidated companies in one year, but last year their number decreased by 51 percent. Exactly during the crisis, that is, from March to the end of December last year, 9463 companies were liquidated, while 6957 new companies were registered.

Last year, Lursoft explained the record number of liquidated companies in 2019 to the simplified liquidation process of the Register of Enterprises for high-risk clients, first excluding from the register those legal entities that have not disclosed the true beneficiaries, if among the participants were legal entities registered abroad. As a result, last year there were times when several hundred companies were removed from the register at once in a simplified liquidation procedure alone.

The year started hopefully

Analyzing the registration of new companies by months, it can be seen that January 2020 was on a positive trend and registered as many as 3% more new companies than in January 2019, while a small decrease was recorded in February (also by about 3%). In the following months, with the state of emergency declared due to the Covid-19 pandemic, significantly fewer new companies were registered than in 2019. Lursoft has researched that in March, when the state of emergency was declared for the first time in the country, 19.16% fewer new companies were registered than in 2019, but in April their number was even half as low as a year earlier. After January, when there were more new enterprises than in 2019, only July (with 6.07% more new enterprises than in July 2019) and September (with 3.78% more new enterprises than in September 2019) had a positive trend. Already in October, the number of new enterprises was one-fifth or 21% lower than a year earlier, a negative trend was also registered in November and December.

Dynamics of new company registration per month / Lursoft

The number of newly established companies has increased in 34 municipalities

Almost half of all new companies are registered in Riga. Data from the Lursoft study reveal that 4451 new companies were registered in the capital in 2020, which is 12.8% less than in 2019. Just like in Riga, the number of new enterprises decreased in other large cities of Latvia. The only exception among large cities was Jēkabpils, where 8 more companies were registered than a year earlier, namely, in 2019 63 new companies were registered in Jēkabpils, but last year - 71.

The picture is similar in most other municipalities - new companies are being established, but not as many as last year. The exception is 34 municipalities, where the number of new companies has even increased during the crisis. The fastest increase in the creation of new enterprises in 2020 was recorded in Ludza municipality, where last year the number of newly registered enterprises was twice as large as in 2019 (19 new enterprises in 2019, 39 new enterprises in 2020), reaching the highest result of the last six years.

On the other hand, no new companies have been registered in Cibla, Zilupe, and Rugāji municipalities during the past year. In 2019, for example, as many as 9 new companies had been established in Cibla municipality.

The largest start-up is building a biscuit factory in Ādaži

Although most of the start-ups are low-capital companies, the share capital of 37 companies exceeds 1 million euros. The largest of them is SIA Orkla Biscuit Production, registered in May last year. The company's initial share capital was 10 million euros, but at the end of December last year it doubled. In November 2020, the company started the construction of a new biscuit and waffle factory in Ādaži.

"The current situation creates additional burdens, but the process is ongoing and Covid-19 has no impact on project deadlines. Following all safety and precautionary measures that are in place in the country, work is continuing on the construction site. Currently, pile driving has already taken place, and the foundations of the plant will be built by mid-January. At the same time, underground communications are being installed and roads are being prepared. The next step is the construction of the above-ground part of the building, for which the installation of concrete columns for the construction will start, thus even getting slightly ahead of the planned time schedule,” says Lineta Mikša, Communication Director of Orkla Latvija.

To ensure maximum safety during the Covid-19 pandemic, the construction company's employees work in two shifts. Digital communication systems are used for communication and workgroups. There are also more than 40 cameras installed on the construction site, which help both monitor and evaluate the progress of the process. For work safety and protection, the company has engaged external service providers who perform regular visits and supervision of work together with representatives of the construction company. The plant is planned to be completed in 2022.

The holder of the company's shares is Orkla Eesti AS, registered in Estonia.

The largest - those belonging to foreign capital

The second-largest newly established company in 2020 is SIA Marijas 2 registered in December last year, which was registered on December 21, 2020, with a share capital of 2.8 thousand euros, but already two days later it has been increased to 14.50 million euros. The sole shareholder of the company is SIA Regals Nami, whose owners include Arturs Rakovskis, Ilona Savčenkova, and the Estonian company OU L1LV. However, Ilona Savčenkova is registered as the only real beneficiary of SIA Marijas 2, Indra Urtāne, the communication manager of Lursoft, revealed to Neatkarīgā. SIA Regals Nami together with Novira Capital is planning to build a seven-story office and retail building at the intersection of Marijas and Satekles streets opposite the Central Railway Station. Developers plan to invest about 40 million euros in this project.

Dynamics of company registration and liquidation, in thousands. Dark green - New companies, in thousands. Light green - Liquidated companies, in thousands / Lursoft

For SIA LEH INV.CSP, whose share capital is 7.15 million euros, the sole shareholder and at the same time the real beneficiary, according to the information available to Lursoft, is from Spain - Castella Garcia Marcos Vicente.

The owner of SIA RL2A, registered with a share capital of 6.11 million euros, and also the real beneficiaries are from Lithuania, while the owner of SIA Ulmana 115 (share capital of 4.79 million euros) is a Norwegian company.

Of all companies registered in 2020, in 1,046 companies at least one of the shareholders was from abroad. Representatives from the neighboring countries - Russia, Estonia, and Lithuania - have most often shown interest in registering new companies in Latvia. Several companies from Germany have also registered new companies in Latvia last year. In general, the amount of foreign investments in the share capital of Latvian companies in 2020 increased to 7.59 billion euros. Compared to 2019, this is an increase of 147.71 million euros, according to Lursoft data.

Auce loses 57 companies

Although in general fewer companies were liquidated in Latvia last year than in 2019, a relatively large number of companies have ceased operations in some local governments. For example, in Auce municipality in 2020 63 companies were liquidated, but only 6 companies were newly established.

Last year, companies were liquidated not only in Auce region. In fact, it has happened in all regions and cities of Latvia - in some more, in some less.

The most frequently liquidated companies are companies operating in the retail and wholesale sectors (22.6% of all companies liquidated in 2020).

Among the liquidated companies, companies engaged in specialized construction works, land and pipeline transport services, as well as real estate operations are also widely represented.

Analyzing the data, Lursoft has concluded that every year more and more young companies are liquidated, namely, in 2018 the average age of liquidated companies was almost 11 years, in 2019 - 8.4 years, last year - 7.4 years. Among the trading companies liquidated last year, there are five companies that started operating only in 2020.

Last year, in 56 cities and municipalities the number of new enterprises exceeded the number of liquidated enterprises. In other municipalities, the balance has been negative. The largest predominance of the number of newly registered companies over liquidated companies in 2020 was recorded in Mārupe municipality. Despite the fact that the number of new enterprises in the territory of the municipality decreased last year, the decrease in the number of liquidated enterprises was even faster, thus the total number of enterprises in Mārupe municipality increased by 38 enterprises last year.

The largest companies registered in 2020 by the amount of share capital

Source: Lursoft