DENMARK Law and Practice Contributed by: Henrik Sjørslev, Peter H. Knudsen, Henrik Lund-Koefoed and Levent Kitir, DLA Piper Denmark
Under the special provisions for certain financial institutes, a governmental limited liability company ( Finansiel Stabilitet A/S ) will initiate the recovery and resolution actions to minimise negative repercussions. Recovery and resolution tools may include a transfer of the assets and select portions of the liabilities of the bank to a designated buyer, leaving only the remaining portions of the bank eligible for bankruptcy proceed - ings under the Bankruptcy Act. Besides the special recovery and resolution actions in the financial area, financial institutions must observe the stricter solvency requirements that have been laid down for financial institutions in the EU. The relevant legislation for financial institutions includes: • the Danish Financial Business Act; • the Danish Act on the Governmental Limited Liabil - ity Company; and • the Danish Act on Restructuring of Certain Finan - cial Enterprises. For certain major institutions that have a significant bearing on the Danish economy (so-called systemi - cally important financial institutions (SIFIs)), certain stricter requirements apply. Non-Life Insurance Companies For non-life insurance companies, the policyholders and insured persons have the first right to receive dividends ahead of other simple/unsecured creditors (mainly trade creditors and employees’ claims for sal - aries), although their claims still rank after the costs associated with the insolvency proceedings. Private/ consumer policyholders and insured persons, as well as injured third parties, are – under certain conditions – entitled to compensation from the Danish Guaran - tee Fund for Non-life Insurers (the “Guarantee Fund”), which provides a specific right to receive reinsurance payments (triggered by the coverage provided by the Guarantee Fund); these assets are thus excluded from the bankruptcy proceedings. Since mid-2021, the Guarantee Fund has also cov - ered certain claims covered by work-related accident insurance issued by bankrupt insurance companies or companies that have had their licence to issue such insurances withdrawn. This coverage was previously
provided by the official Danish Labour Market Insur - ance ( Arbejdsmarkedets Erhvervssikrin g (AES)). Since 23 December 2023, the Danish Guarantee Fund has covered motor liability claims arising from insur - ance company bankruptcies, including cross-border cases, as a part of the implementation of the sixth motor insurance directive. Danish policyholders with EU-based insurers and foreign policyholders with Danish insurers can now file claims through their respective national compensation bodies. 1.2 Types of Insolvency Danish insolvency law affords distressed debtors three different in-court insolvency proceedings: • bankruptcy proceedings (winding up/insolvent liquidation); • preventative in-court restructuring; and • “ordinary” restructuring proceedings. Danish legislation does not include provisions on out- of-court proceedings/schemes. Bankruptcy Proceedings Bankruptcy proceedings (liquidation/winding up) may be commenced either by a creditor or by the debtor upon petition to the bankruptcy court. Once the court receives a petition, the debtor and the creditor filing the petition are summoned to a court hearing, which is not publicly announced. If the court finds that there is a basis for issuing a bankruptcy order, it will do so; likewise, the court may choose to stay the hearing for a finite period of time. If bankruptcy proceedings are commenced, the court appoints a trustee who assumes control of the assets and liabilities of the debtor in place of management. The management is relieved of all duties. The trustee is entrusted with pre - serving the value of the assets, liquidating the assets, and distributing the proceeds equally throughout the order of priority of creditors. The bankruptcy order is published in the official Danish Gazette. The trustee must, at regular intervals, issue creditor information letters, whereby the status of the affairs of the estate are accounted for. There is no statutory timeframe dictating how long or short the bankruptcy proceedings may be from start to finish.
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