The FINANCIAL — In total, 11,928 business entities went into liquidation in 2015, up from 9,243 as of 2014. Sole proprietors are dominating among liquidated business entities in Georgia. During the past ten years the largest number of liquidated businesses was shown in 2011 when the number totalled 18,057.
According to the National Statistics Office of Georgia, 6,007 business entities have been liquidated during the first half of 2016. The main share (or 5,835 entities) were sole proprietors. Since 2006, the lowest number of liquidated businesses was in 2006 when the number totalled 917. In 2007 the number was 1,684; in 2008 – 973; in 2009 – 1,157; in 2010 – 11,530; in 2011 – 18,057; in 2012 – 17,098; in 2013 – 11,507; in 2014 – 9,243; and, in 2015 – 11,928. Sole proprietors are the leading business entities prone to liquidation. Their number exceeds 90%.
According to the Georgian Public Service Hall, liquidation of a legal entity may occur if there is a decision to liquidate made by the partners/founders or a legal person or by the court; a guilty verdict concerning a criminal case; or a decision of the court on completion of a bankruptcy case and annulment of registration of the legal person.
The liquidation process should be completed within 4 months after registration of initiation of the liquidation.
JSC Sanatorium Surami, operating since 1957, was one such liquidated business. The decision was made by the Government which was 98% shareholder; the remaining 2% by collective bodies.
As Yuri Melikidze, Director at Sanatorium Surami, said, he cannot understand why the company went into liquidation, as he was optimistic about the previous success of the Sanatorium and was in negotiation with investors.
“For quite a long time the Sanatorium had been working all year round. Later it was functioning only in the summer. Refugees of the 2008 August war settled in the Sanatorium. It was not proper as the complex was still working and there were lots of uninhabited buildings in Khashuri. That year only four employees, including myself, were at the complex. The number was 30 before that. Our monthly salary was GEL 250, adding up to GEL 1,000 for all the workers. It seems that the decision to liquidate was taken in order to save this sum. We were taking care of the environment. I am now afraid that the infrastructure has been worsening and the surrounding woodland will be cut down,” said Melikidze.
According to Melikidze, apartments for refugees are currently under construction in Khashuri and are scheduled to be completed in September of the current year. Hence there will soon no longer be any refugees remaining in the Sanatorium.
“The Surami climate, and in particular the location of the Sanatorium, is dry subtropical. It is well-known as the best location for the treatment of various diseases. Accordingly, the place was very popular. We were planning to restore it to its previous popularity and fill the Sanatorium with guests during all four seasons as it used to be,” Melikidze added.
Surami Sanatorium had a 200 bed block. In 1987 the complex was expanded further and another block with 100 beds was added. Due to its multifunctional treatment services, additional 500 bed accommodation was planned to be constructed. The complex used to host children and doctors from all over the world.
“I was told that the liquidation was carried out for the purpose of optimization. No one ever explained to me what that optimization meant though,” said Melikidze.
“An investor should be found urgently in order to save the complex,” Melikidze told The FINANCIAL.
Another sanatorium that also went into liquidation last year was JSC Sanatorium Kartli. The medical complex targeted at the rehabilitation of post-heart attack patients had also been settled by refugees. According to Vladimir Kapanadze, former Director of the Sanatorium, over 700 refugee families were settled there. During the rule of the previous government refugees legalized the space.
49% of the Sanatorium Kartli complex was owned by trade unions and 51% by the Government.
Founded in 2008, JSC Belarashen Investments went into liquidation this year. As the representative of the company explained, the establishment of the company coincided with the war. Due to the post-war conditions the company failed to run its economic activities and went into liquidation.
The list of bankrupted branches of foreign companies incorporate: European Patient Service; Booz Allen Hamilton Inc. – an American management consulting firm; Chc Global Operations International Inc. – a company working in air transport business activities; UAB COWI Lietuva, involved in architecture, construction and engineering spheres; British Midland Airways Ltd – air cargo transportation; insurance company AIG; East Access Trans (FZC), and others.
“Companies stumble for many reasons,” observed Clyton Christensen in Across the Board, “among them bureaucracy, arrogance, tired executive blood, poor planning, short-term investment horizons, inadequate skills and resources, and just plain bad luck.” According to Referenceforbusiness.com these factors—as well as myriad others—can have a debilitating impact on an operation, as many small business surveys will attest. Chief reasons for business failure cited within such surveys include the following: poor planning, poorly conceived expansion, cash flow difficulties, inability to rein in flawed business strategies, deterioration of customer base, and inattention to warning signs.
As the observation of Referenceforbusiness.com stated, business failure is usually a demoralizing event in a person’s life because it impacts both professional and personal self-esteem. “Indeed, many experts believe that the entrepreneur who experiences a business failure goes through many of the same stages as individuals who suffer from the loss of a friend or loved one—shock, denial, anger, depression, and acceptance. But observers are quick to point out that people who experience business failure can still go on to lead rewarding professional lives, either as part of another company or—down the line—in another entrepreneurial venture.”
“Many analysts believe that chances of subsequent success in the business world often hinge on the entrepreneur’s activities in the first year or two after the failure has occurred, said the report of Reference for Business. “After a business failure, you need a period of decompression to rethink and recharge,” one executive told Entrepreneur. “People are too quick to rush into the next thing just to prove they can do it.” Instead, victims of business failure are often urged to take the time to honestly examine the reasons for the failure, even as they return to the work world in their old capacity as employee. Was your marketing plan flawed? Did you underestimate the amount of time it would take to become profitable? Did your manufacturing processes compromise product quality? Was your family fully committed to supporting the endeavour? Did you pay enough attention to workforce training issues? Small business consultants strongly encourage entrepreneurs to seek out the opinion of others—industry experts, area businesspeople, loan officers, investors, family members, etc.—when taking on this task, for their perspectives can be invaluable in helping you to establish a successful business on your next attempt.”