And other legal entities – Newspaper Kommersant No. 149 (7350) of 08/17/2022

Experts from the Higher School of Economics recorded an increase in economic activity in Russia – for the first time in six years, an increase in the number of created legal entities was noted while a decrease in the number of liquidated companies. However, the trend has not been reversed – in total, so far, noticeably more companies are being closed than are being created. This is partly due to the fact that the liquidation of companies in recent years has been accompanied by a flow of legal entities into the category of individual entrepreneurs and self-employed – business prefers to switch to alternative regimes in the face of economic uncertainty, first due to covid restrictions, and then sanctions in connection with the military operation of the Russian Federation in Ukraine .

The Institute for Statistical Research and Economics of Knowledge of the Higher School of Economics, following the results of 2021, noted the revival of entrepreneurial activity in Russia. So, in 2021 in Russia, for the first time in six years, the number of established organizations increased – 234.2 thousand legal entities against 225.6 thousand in 2020, an analysis of 18 industries in 85 regions showed. At the same time, the number of liquidated companies decreased to 391.6 thousand against 527.2 thousand a year earlier. Such dynamics may indicate a possible change in trend and a reduction in the rate of loss of companies, experts say. The fact is that the moratorium on bankruptcy for the industries most affected by COVID-19 was a temporary measure and could affect the dynamics only in 2020.

However, the “balance” of entrepreneurial activity is still in the negative zone – the number of liquidated legal entities exceeds the number of created ones by 157.4 thousand. According to analysts, companies from the areas most vulnerable to restrictions – trade and services – were most actively closed. The first accounted for 47% of companies that left the market in 2020-2021, the industry has become an anchor for the all-Russian increase in the number of legal entities. The service sector (repair, beauty salons, recruitment, travel agencies, construction, financial and insurance activities) accounted for another 20% of the loss of companies in the country. In the regional context, the lowest growth rate of the number of legal entities (calculated as the difference between the birth and death rates of organizations; the latter is the ratio of organizations created and liquidated during the reporting period to the number of operating ones in percent) was recorded in Moscow (minus 11.1) and St. Petersburg ( minus 10.7), where the epidemic was the strongest, and the concentration of industries most affected by the coronacrisis is the highest – for example, capital cities account for 20% and 7% of all organizations in the trade sector.

The reduction in the number of legal entities in 2020–2021 was accompanied by an increase in the number of individual entrepreneurs and self-employed. The number of the latter in July 2022 exceeded 5.4 million people. The tax regime is popular not only in the areas of delivery, the top 5 most popular industries include “repair”, “auto”, “IT-sphere”, “beauty” and “information services”, the authors of the study note. Previously, experts have already noted a trend towards the transformation of legal entities into individual entrepreneurs and self-employed – such dynamics is explained by the opportunities to optimize costs and reduce administrative pressure in the context of regulatory arbitrage in relation to various business segments (see “Kommersant” dated April 6). According to experts, such a shredding of business can slow down the development of entrepreneurship.

The statistics for the first five months of 2022 so far also look positive, despite the sanctions imposed and the withdrawal of foreign companies from Russia. Thus, the growth rate for the number of companies was minus 0.8 against minus 4.9 in 2021 and minus 8.6 in 2020. “It is possible that another moratorium on initiating bankruptcy cases, introduced since April 2022, plays a certain role here,” experts state.

Diana Galieva