Legal protection and insolvency
The Office of Bankruptcy Ombudsman | National Enforcement Authority Finland | Pay Security
The Bankruptcy Ombudsman supervises bankruptcy proceedings
Source: The Office of Bankruptcy Ombudsman
Bankruptcies in 2019–2023
The still uncertain economic situation, and higher prices and interest rates have had a large effect on the financial standing of companies and the volume of insolvency proceedings. For the Bankruptcy Ombudsman, this global uncertainty has resulted in an increase in the number of monitored insolvency proceedings. For now, the number is still increasing. The Bankruptcy Ombudsman has monitored and continues to closely monitor the development of insolvency proceedings.
In 2023, a total of 3,315 bankruptcy petitions were submitted (2,656 in 2022), up by 24.8 per cent from the previous year. A total of 2,715 bankruptcy proceedings (2,189 in 2022) were initiated in 2023. The number of initiated bankruptcies increased by 23.9 per cent from the previous year.
The number of cases involving enterprise restructuring started strongly growing at the start of 2023. A total of 448 enterprise restructuring applications were submitted in 2023, which is 32.15% more than in the previous year (339). A total of 306 restructuring proceedings were started, which is 46.4% more than in the previous year (209).
Public receiverships in 2019–2023
In 2023, 44 new public receiverships were started, which is almost 50% more than in the previous year. A key reason for this is the increased number of bankruptcies, but the personnel resources freed up from the Kosti project also affected the number.
Special audits in 2019–2023
A total of 102 special audits concerning debtors’ operations, administrative bankruptcy estate audits and finalisations of accounting records were conducted, which is 63% more than in the previous year. The increase was largely due to the same reasons as for public receiverships.
Costs of special audits in 2019–2023
In 2023, special audit costs totalled roughly €473,000, while approximately €175,000 were recovered from bankruptcy estates.
Costs of public receiverships in 2019–2023
Public receivership costs totalled €686,000 (including VAT). A total of €416,000 was recovered from bankruptcy estates in previously paid public receivership costs. Roughly €542,000 were paid to creditors in disbursements from the public receivership cases closed in 2023.
Enforcement measures are taken as a response to neglecting an obligation
Source: National Enforcement Authority Finland
The enforcement authorities are part of the judicial administration. They carry out court rulings and collect directly distrainable receivables, such as taxes, fines and insurance contributions. The enforcement authorities seek to combat the shadow economy and economic crime through their statutory tasks; that is, efficient enforcement collection. They also generate information needed in determining creditworthiness.
They co-operate actively with other authorities in combating the shadow economy and seizure of criminal proceeds, such as with the Police, Customs and Tax Administration. The objective is to take the proceeds of crime away from the offender and thus make it more complicated to operate a business that is based on criminal activities. The enforcement authorities identify assets for recovery proceedings. They may also apply enforcement measures if the debtor uses artificial arrangements to hide assets from creditors and avoid enforcement. Such cases are mainly dealt with by enforcement units in charge of special collection measures, which focus on the more time-consuming and labour-intensive cases.
Indebtedness remains high
In Finland, the payment morality of citizens and companies is at a high level in international terms. Finns pay their debts and take care of their obligations. However, there are situations in which both companies and people run into debt, and enforcement proceedings are initiated.
Running up debt and becoming subject to enforcement proceedings do not constitute either shadow economy phenomena or economic crime. People in all income categories can end up in debt.
In recent years, the enforcement authorities have paid close to a billion euros per year based on applications
In 2023, approximately €1.19 billion were collected. In special enforcement, there is annual variation in the amount of monetary receivables paid to creditors and the number of debtors investigated. In 2023, 331 new special enforcement investigations on debtors were started and the enforcement matters of 258 debtors were processed with approximately €36,2 million collected.
The shadow economy may be tempting
Those in financial difficulties may be tempted to do undeclared work, hide assets or neglect their obligations as an employer and otherwise in their business operations. For this reason, the Grey Economy and Economic Crime website also includes enforcement statistics.
Changes are evident in the statistics
The enforcement statistics provide us with information on changes in the amounts of debt and the number of debtors subject to enforcement proceedings. The statistics show the trend in the changes and help us to put things into perspective. In fact, the enforcement statistics should be examined by comparing them with the observations and statistics of other authorities presented on the website.
Record amounts were paid to creditors
In 2023, 2.6 million cases were submitted to the National Enforcement Authority, which is around 8.5 per cent less than in 2022. In contrast, in 2023, the number of cases related to taxes increased by around 8.7 per cent compared with the previous year. Private law cases decreased by nearly 30%. The number of corporate debtors increased by more than three per cent.
After the National Enforcement Authority’s organizational restructuring, 2023 marked the third full year of operations. A total of €1.19 billion were collected. A decrease of 5.6% was seen compared to the previous year. However, in euros, this is still the second highest amount ever.
Half of Finns live in Helsinki and other parts of Southern Finland, and more than half of new companies are established there. This is reflected in the regional distribution of enforcement matters. Indebtedness increases the risk of participating in the shadow economy.
Pay security payments correlate strongly with economic trends
Source: Centre for Economic Development, Transport and the Environment
Pay security covers employees’ employment-related claims in situations where the employer is insolvent. Statistics on the amount of pay security represent the significant correlation between pay security and economic trends. Employees’ claims are transferred to the state when pay security is paid. Only a fifth of the paid amount can be recovered from insolvent employers.
Neglected statutory employer contributions or notifications do not prevent pay security, but they are rather indications of employers’ insolvency, which is a requirement for pay security. In case law, pay security can, however, have been rejected if the mutual understanding between the employer and employee for carrying out work as undeclared can have been demonstrated.
Preventing misuse is one reason for rejecting pay security, and these cases may also involve shadow economy operators. Roughly half of misuse cases involve situations where an employee has considered to have become aware of their employer’s insolvency after an extended period of unpaid work.
In 2023, cases of misuse accounted for 9.6 per cent (9.9 per cent in 2022) of all rejected claims. The total number of cases rejected based on misuse was 846 (852 in 2022), and the amount of rejected claims totalled €1,948,368 (€2,062,069 in 2022).