Legal protection and insolvency

The Office of Bankruptcy Ombudsman | National Administrative Office for Enforcement

The Bankruptcy Ombudsman supervises bankruptcy proceedings

Source: The Office of Bankruptcy Ombudsman

Bankruptcies 2015–2019

As shown in Figure 1, the number of debtors declared bankrupt in 2019 rose by 5.7 per cent year-on-year. There are currently 3,131 bankruptcy proceedings pending, of which 486 will continue under public receivership with state funds.

Special audits 2015–2019

The number of special audits remained at the previous year's level (Figure 2). Special audits ordered by the Bankruptcy Ombudsman are mainly conducted on insolvent bankruptcy estates, in which the administrators have determined that there is a need for a more detailed investigation into the operations of the debtor prior to bankruptcy.

A simplified operating model was developed for special audits in regulatory co-operation under the previous Action Plan against the Shadow Economy and Economic Crime (2016-2020). The operating model was put into practice and applied during 2019 in various bankruptcy proceedings for which it was appropriate, and the feedback has been positive. Special audits have been implemented at an earlier phase and with improved consideration of process needs. In addition, the pre-trial investigation phase of the criminal process is faster, proceeds of crime are recovered more effectively, and the procedure has increased the exchange of information and co-operation among the estate administrator, the police, the prosecutor, and the party implementing the special audit.

In 2019, the Bankruptcy Ombudsman financed the completion of the books of 47 bankruptcy estates. The number has kept increasing each year, and it was 20.5% higher in 2019 than in 2018.

Costs of special audits 2015–2019

Costs of audits have stayed well within the limits of annual appropriations, which is largely due to the use of tendering in procurement.

As special audits are carried out in insolvent bankruptcy estates, recovery is only possible if the bankruptcy estate manages to accumulate enough funds through recovery actions or criminal compensation, for instance.

Public receivership 2015–2019

Sixty (60) new public receiverships were initiated in 2019, which is in line with the corresponding figures of recent years (Figure 5). The number of cases under public receivership accounts for 15.5 per cent of all pending bankruptcy proceedings. The number of public receiverships has remained high, as criminal processes and the handling of civil lawsuits, as well as the initiation of recovery proceedings, typically take many years.  

In 2019, the Bankruptcy Ombudsman co-ordinated three shadow economy inquiries connected to several bankrupt companies. For some of these companies, the bankruptcy proceedings are handled under public receivership.

Costs of public receivership 2015–2019

The costs of public receivership have kept rising. The rising costs are due to the large number of pending public receivership cases and the requirement of the new invoicing guidelines to always invoice fees and costs during the calendar year so that the sufficiency of the estimated appropriation can be reliably monitored.

The apportionments of the public receivership proceedings completed in 2019 were clearly lower than the corresponding figures of previous years (Figure 6). Significant annual fluctuations can be expected in the future as well.

Enforcement measures are taken as a response to neglecting an obligation

Source: The National Administrative Office for Enforcement

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 

There is major annual variation in the amount of monetary receivables paid to creditors and the number of debtors investigated. In 2019, investigations were initiated on 366 debtors and the enforcement matters of 596 debtors were processed. Approximately EUR 30.3 million was collected in 2019 through special collection. 

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.

Number of enforcement matters still high 

The decrease in the number of pending enforcement matters in 2019 is mainly explained by the renewal of the tax refund schedule (Figure 1). More matters than usual were initiated in late 2018 due to the renewal. The number of tax matters initiated in 2019 was lower than in the previous year, whilst the number of other matters dealt with under public receivership increased.

Figure 3 shows the number of enforcement matters initiated in total and in groups based on taxes, other public receivership matters (e.g. insurance contributions and various payments owed to municipalities and other public organisations, such as health care   and day care fees).

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.