SECTION 1: Market overview
1.1 What have been the recent bankruptcy and reorganisation
trends or developments in your jurisdiction?
The number of total bankruptcies in Denmark rose from 4,029
in 2015 to 6,674 in 2016. There were 2,364 bankruptcies of
active businesses in 2016 against 2,011 in 2015. The active
businesses that were declared bankrupt in 2016 operated in the
trade and transport (36%), construction (20%), business
services (15%) and agriculture (seven percent) sectors.
Bankruptcies in 2016 resulted in 11,394 lost fulltime jobs
against 9,818 in 2015. One reason for the rise in bankruptcies
in 2016 was an increase in bankruptcy petitions from the Danish
Tax Authorities, after problems had made it difficult for the
tax authorities to enforce public debt in 2014 and 2015.
1.2 Please review some recent important cases and their
impacts in terms of precedents or shaping current
In a judgment of December 22 2016, the Danish Eastern High
Court imposed a bankruptcy quarantine on an attorney who had
served as liquidator in a company under solvent liquidation.
The High Court found that the attorney had acted with gross
negligence because he had failed to submit a bankruptcy
petition on behalf of the liquidation estate at a time where it
was obvious that the company was insolvent.
SECTION 2: Processes and procedures
2.1 What reorganisation and insolvency processes are
typically available for financially troubled debtors in your
The Danish Bankruptcy Act provides for three different
juridical insolvency procedures: bankruptcy, restructuring and
debt relief. Outside these three judicial insolvency
procedures, a variety of non-judicial rescue/reorganisation
arrangements can be completed with creditor consent.
The bankruptcy procedure is based on a bankruptcy order by
the bankruptcy court. The order can be based on a petition by
the debtor or a creditor. Both natural and legal persons can be
taken into bankruptcy. It is necessary that the debtor is
insolvent, as defined in the Danish Bankruptcy Act. The
bankruptcy court will appoint a trustee who is authorised to
act in all matters on behalf of the bankruptcy estate. The
trustee's primary assignment is to liquidate the debtor's
assets and to distribute the proceeds between the creditors
under an order of distribution described in the Danish
During the bankruptcy procedure, creditors will not be able
to enforce their claims against the bankruptcy estate's assets.
Creditors may file their claims with the trustee who will
assess the validity of the claims. The trustee's assessment of
a claim may be brought before court by the creditor who has
filed the claim or by other creditors in the bankruptcy estate.
The final distribution of proceeds to creditors and the
trustee's fee for administrating the bankruptcy estate are
subject to approval by the bankruptcy court.
The restructuring procedure is based on a decision by the
bankruptcy court. The purpose of the procedure is to examine
the possibility of a compulsory composition and/or business
transfer. The restructuring procedure can be commenced with
respect to both natural and legal persons. It can be based on a
petition by the debtor or the creditor. However, a
restructuring procedure which is based on a creditor's petition
(and not endorsed by the debtor) may only be commenced with
respect to legal persons.
Once a restructuring procedure has begun, the outcome will
either be a compulsory composition, the bankruptcy of the
debtor, or that the debtor becomes solvent. To commence the
restructuring procedure, the debtor must be insolvent. The
bankruptcy court will appoint a restructuring administrator and
a restructuring accountant. The debtor maintains control of
his/her assets during the restructuring procedure, but the
debtor is not allowed to enter into transactions of material
significance without the consent of the restructuring
administrator. As a general rule, during the restructuring
procedure, creditors are not allowed to enforce their claims
against the debtor's assets. The debtor cannot be taken into
bankruptcy while the restructuring procedure is going on. The
outcome of the restructuring procedure (compulsory composition
and/or a business transfer; or bankruptcy) will depend on the
restructuring administrator's proposal and a creditor's vote on
whether the proposal should be rejected.
As a general rule, the proposal is considered to be adopted
unless a majority of the creditor claims (as per the size of
the claims) participating in the voting meeting in the
bankruptcy court vote to reject the proposal.
Judicial debt relief is only available to debtors who are
natural persons. Judicial debt relief may – subject to
the bankruptcy court's decision – involve the full or
partial relief of the debtor's debt.
2.2 Is a stay on creditor enforcement action
The judicial insolvency proceedings of bankruptcy and
restructuring will – with a few exceptions –
prevent creditors from enforcing their claims against the
debtor's assets. Furthermore, a stay of execution can be agreed
between the debtor and his creditors or between the
2.3 How could the reorganisation and/or insolvency
processes available in your jurisdiction be used to implement a
During the judicial restructuring procedure, the
restructuring administrator will prepare a restructuring plan.
No later than four weeks after commencement of the
restructuring procedure, the creditors vote on whether to adopt
or reject the plan. The plan is considered adopted unless a
majority of the claims (as per the size of the claims)
represented at the meeting in the bankruptcy court vote to
reject it and this group of claims represents at least 25% of
the total known debt. If the plan is adopted, the restructuring
procedure will continue and the restructuring administrator
will prepare a restructuring proposal in accordance with the
overall terms of the restructuring plan. The proposal will
contain the terms of a compulsory composition and/or a transfer
of the debtor's business. The proposal is subject to a
creditors' vote in a meeting at the bankruptcy court which will
be held no later than six months after commencement of the
restructuring. The proposal is considered adopted unless a
majority of the claims (as per the size of the claims)
represented at the voting meeting in the bankruptcy court vote
to reject it.
Furthermore, non-judicial restructuring plans can be agreed
between the debtor and one or more of his creditors. A
non-judicial restructuring plan may – but does not
necessarily have to – describe a plan to sell in whole
or in part the debtor's assets and business activities. It may
describe how the proceeds from the sale of certain assets are
to be distributed between the creditors. It may contain:
provisions concerning extension of payment obligations
(moratorium); a partial debt relief; a stay of the
participating creditors' right to commence enforcement
proceedings; financing of the non-judicial restructuring
process; the participating creditor's consent with respect to
the debtor's payment of minor creditor claims; subordination of
certain debt, and/or the establishment of security in certain
assets concerning new debt of the debtor.
In order for a non-judicial restructuring plan to be
successful, the debtor – or perhaps a steering
committee acting as a link between the debtor and his creditors
– should seek accession to the plan from all of
his/her major creditors.
2.4 How can a creditor or a class of creditors be crammed
In bankruptcy, secured creditors will receive the proceeds
from the sale of secured assets. Unsecured debt will be covered
in accordance with the order of distribution described in the
Danish Bankruptcy Act. A natural person who has been in
bankruptcy will still be liable for debt that has not been
covered by the proceeds of the bankruptcy. A legal person that
has been in bankruptcy will cease to exist after the bankruptcy
procedure has been completed.
In a judicial restructuring procedure, secured debt can
comprise a compulsory composition as part of an adopted
restructuring proposal. This means that the part of the debt
not covered by the value of the assets in which the creditor
holds a security interest will be reduced on the same terms as
other unsecured creditors of the same class. The bankruptcy
court may, at the request of the debtor, fix the value of
certain secured assets with a binding effect for a creditor who
holds a security interest in these assets. This means that the
unsecured part of the creditors' claim subject to the
compulsory composition can also be fixed.
2.5 Is there a process for facilitating the sale of a
distressed debtor's assets or business?
A judicial restructuring procedure allows for the
possibility of a sale of the debtor's assets and/or business as
part of the restructuring proposal.
During the first six months of a bankruptcy procedure, a
forced sale of pledged assets can only be completed on the
request of, or with the consent of, the bankruptcy estate. This
period allows for the trustee to examine whether it is possible
to sell the debtors' pledged assets in a free sale at a higher
price than what is to be expected if the assets are sold in a
2.6 What are the duties of directors of a company in
Numerous Danish court cases have involved the question of
whether the management of a company is liable to pay damages
due to the management's actions or failure to take action
during a period of financial difficulties. Three themes in
particular have been addressed in Danish case law. The
management of a company in financial difficulty may become
liable to pay damages if:
- the management sells the company's assets at far
- it is responsible for an uneven distribution of the
company's assets in favour of certain creditors and at the
expense of others; and
- it has failed to halt the company's operations after the
point at which management should have realised that there was
no reasonable prospect for the company to be able to
2.7 How can any of a debtor's transactions be challenged on
In bankruptcy, certain transactions completed by the debtor
before the bankruptcy may be declared void under the rules in
Chapter 8 of the Danish Bankruptcy Act. Generally, the rules
governing voidance of transactions concerns transactions that
have benefited one creditor at the expense of other creditors
and transactions that have reduced the value of the debtor's
assets at the expense of all creditors.
The conditions for declaring a transaction void depend on a
number of factors including: what kind of transaction the
bankruptcy estate seeks to have declared void (for example,
gifts, payments or provision of a security interest in the
debtor's assets); when the transaction was carried out; whether
the beneficiary of the transaction is a related party; whether
the debtor was insolvent at the time of the transaction; and
whether the beneficiary of the transaction knew or should have
known that the debtor was insolvent at the time of the
2.8 What priority claims are there and is protection
available for post-petition credit?
The ranking of claims in bankruptcy under Danish law is as
- the costs of the bankruptcy proceedings
and debt that has occurred after commencement of the
- reasonable costs relating to an attempt to restructure
the debtor, and other debt incurred by the debtor during a
judicial restructuring procedure with consent from the
restructuring administrator, and reasonable costs relating to
a liquidation of a company before the bankruptcy;
- employee claims and related tax
- certain supplier claims regarding charges
claimed for certain goods;
- all other unsecured debt; and
- interest claims concerning non-preferential unsecured
debt, and fines and penalties.
Secured creditors will receive the proceeds from the sale of
the assets forming their security interest (after payment of
costs, a sales fee and an administration fee to the bankruptcy
A bankruptcy estate may obtain a loan during the bankruptcy
procedure. A claim concerning repayment of such a loan will be
considered preferential debt which should be covered at the
same level as other costs relating to the bankruptcy
2.9 Is there a different regime for credit institutions and
The Danish Financial Services Act and the Danish Act on
Restructuring and Winding-Up of Certain Financial Institutions
contain specific rules concerning the winding-up of and
bankruptcy of financial institutions.
SECTION 3: International/cross-border issues
3.1 Can reorganisation or insolvency proceedings be opened
in respect of a foreign debtor?
As a general rule, a foreign debtor who resides in Denmark
or who operates a business in Denmark can be taken into
bankruptcy in Denmark.
3.2 Can recognition and assistance be given to foreign
insolvency or reorganisation proceedings?
Denmark is not bound by the EU Bankruptcy Regulation because
of Denmark's opt out status with respect to the EU's justice
and home affairs system. In addition, Denmark has not
implemented the Uncitral Model Law on Cross-Border Insolvency.
According to the Danish Bankruptcy Act, the Danish Ministry of
Justice has authority to grant binding effect to foreign court
decisions concerning bankruptcy, restructuring and similar
judicial insolvency procedures. The Ministry of Justice has
not, however, used this authority. This means that most foreign
court decisions concerning bankruptcy, restructuring and
similar judicial insolvency proceedings are not recognised in
Denmark. A creditor may thus enforce a claim against the
debtor's assets in Denmark, even if the debtor is subject to
judicial insolvency proceedings in another country.
Denmark has acceded to the Nordic Bankruptcy Convention
which means that a bankruptcy in Sweden, Norway, Finland or
Iceland will also comprise the debtor's assets and liabilities
SECTION 4: Other material considerations
4.1 What other major stakeholders could have a material
impact on the outcome of the reorganisation?
Major stakeholders in many insolvency procedures include the
Danish tax authorities (due to the size of their claim in many
bankruptcy estates) and the Danish employees' guarantee fund
(due to the fact that the fund will cover most employees'
claims against a bankruptcy estate and consequently take over
the employees' claims against the bankruptcy estate).
SECTION 5: Outlook 2017
5.1 What are your predictions for the next 12 months in the
corporate reorganisation and insolvency space and how do you
expect legal practice to respond?
We expect that number of bankruptcies of active businesses
to stabilise at the same level or a slightly lower level than
2016. Retail businesses in particular appear to be under
pressure in the current market and we may see an increase in
bankruptcies and restructurings in this sector.
Partner, Poul Schmith/Kammeradvokaten
T: 45 72 30 72 22
Boris Frederiksen is head of Poul
Schmith/Kammeradvokaten's insolvency and restructuring
department. He represents public and private clients in
all matters relating to insolvency and restructuring.
He is appointed as trustee in some of the country's
largest bankruptcy estates, including bankruptcies in
the financial sector and the commercial property
sector. He also handles complex litigation cases
concerning insolvency-related disputes.
Partner, Poul Schmith/Kammeradvokaten
T: +45 50 77 84 38
Morten Plannthin is a partner in Poul
Schmith/Kammeradvokaten's insolvency and restructuring
department. He represents public authorities, financial
institutions and other clients in all matters relating
to insolvency and restructuring. Areas of expertise
include restructuring of insolvent companies,
bankruptcy administration, asset tracing, complex debt
collection proceedings, securing assets through
attachment proceedings and dispute resolution. He often
conducts cases before the Danish city courts and the
Danish high courts concerning insolvency-related
disputes, management liability, commercial disputes,
finance law and M&A.