DENMARK Law and Practice Contributed by: Henrik Sjørslev, Peter H. Knudsen, Henrik Lund-Koefoed and Levent Kitir, DLA Piper Denmark
By amendment to the Danish Bankruptcy Act on 17 July 2022, the possibility of performing a compulsory composition during bankruptcy was reintroduced. Consequently, a debtor is – with the consent (and help) of the trustee – able to present the creditors’ proposal for a compulsory composition during the The rules were substantially amended in March 2021 and July 2022, and two kinds of restructuring pro - ceedings now exist: preventative restructuring and ordinary restructuring. Preventative restructuring Preventative restructuring proceedings can be initi - ated by the debtor but not by a creditor. The rules gov - erning the proceedings differ depending on whether a stay on enforcement actions has been requested. If such a stay is requested, most of the rules of ordinary restructuring apply. bankruptcy proceedings. In-Court Restructuring The court must automatically grant an enforcement stay if requested by the debtor, and the court will publish this in the official Danish Gazette. Further, an • that an initial meeting be held in the court where the creditors are informed of the plan – though contrary to the ordinary restructuring proceedings, the creditors cannot vote on the plan; and • that the rules on providing the court and creditors with information and issuing a restructuring plan and proposal at set deadlines apply. If an enforcement stay is not granted, the debtor is still free – but not obliged – to comply with the rules. Preventative restructuring proceedings must con - clude within one year. The debtor is not automatically declared bankrupt if the preventative restructuring proceedings fail. In both preventative and ordinary in- court restructuring proceedings, the executive man - agement and board of directors retain control of the business. It is also possible for the court to appoint a restructuring accountant, who will have to approve enforcement stay will also require: • that an administrator be appointed;
the financial parts of the restructuring plan and the proposal set forth by the administrator. A floating charge will not crystalise when preventa - tive restructuring proceedings commence, contrary to ordinary restructuring and bankruptcy proceedings. Following the implementation of the provisions, the Bankruptcy Division of the Maritime and Commercial Court, which is Denmark’s largest bankruptcy court, concluded five cases of preventive restructuring in 2022; during the same period, two cases were pend - ing. In 2023, the Bankruptcy Division of the Danish Maritime and Commercial High Court completed three cases of preventive restructuring, while zero cases were pending. So far, it seems that the provisions on preventive restructuring may not have had a major impact in Denmark. However, in view of the fact that the provi - sions are new, it cannot be ruled out that the number of preventive restructurings will increase in the future. Ordinary in-court restructuring Danish in-court restructuring proceedings are some - what similar to other debtor-in-possession proceed - ings, in the sense that management retains control of the affairs of a debtor. The administrator does not, generally, have any influence over how the manage - ment conducts the day-to-day business during the restructuring process. However, the administrator must consent to all material actions taken by the debtor. The practical reality surrounding restructur - ings is nevertheless quite different, as a successful restructuring requires that the administrator confirms to the court and the creditors that the management has been fully co-operative throughout the process; in practice, this means that the administrator is often heavily involved in the day-to-day affairs of the debtor and not only in the major and material actions. If the administrator has faith in the business case, but not in the executive management and board of direc - tors, the administrator may request that the insolvency court replace them with the administrator, effectively side-lining management and handing full control of the business over to the administrator.
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