DENMARK Law and Practice Contributed by: Henrik Sjørslev, Peter H. Knudsen, Henrik Lund-Koefoed and Levent Kitir, DLA Piper Denmark
vency – eg, retention of ownership until payment is made for cars must be registered in the land register. Pre-judgment attachments are available. The Admin - istration of Justice Act and the Danish Bankruptcy Act provide for interim measures, including the arrest of assets. Such interim measures are, however, preclud - ed once formal insolvency proceedings are opened, and in the case of preventative restructuring proceed - ings if a stay on enforcement actions is granted. Arbitration clauses must generally be respected by the debtor during insolvency proceedings; however, arbitration in relation to title of ownership, priority of claim in the hierarchy of claims, etc, must not be respected by a bankruptcy estate as these matters are handled by the bankruptcy court. If approved by the administrator/trustee, arbitration can also be agreed upon between the debtor/bankruptcy estate and an opposing party during the proceedings. Danish insolvency law does not divide creditors into classes, apart from (fully) secured and unsecured creditors. However, the creditors can be put into vot - ing classes when voting on a restructuring proposal. The determination of the classes is made by the court upon a proposal from the debtor/administrator, and as such a kind of cross-class cram-down is possible. In a formal restructuring process, trade creditors are equal to the other unsecured creditors of the debtor. A statutory procedure cannot release non-debtor parties from liabilities. Bankruptcy Proceedings Unsecured creditors may ask the insolvency court to hold an election for the trustee of an estate, but this right is limited to the first few weeks after the opening of bankruptcy proceedings. After that point, creditors have, in general, no formal possibilities other than fil - ing a complaint regarding the trustee with the insol - vency court. In-Court Restructuring Proceedings In the restructuring process, the creditors’ role in moulding the proceedings is more noticeable, as the general body of unsecured creditors is the body vot - ing on whether a proposed restructuring plan and
the final restructuring proposal should be adopted. The restructuring plan and proposal is adopted by the creditors if a majority of creditors present at the meeting vote in favour of the plan and the proposal. For the restructuring proposal to be valid, it must also be ratified by the court. 3. Out-of-Court Restructuring 3.1 Out-of-Court Restructuring Process In general, Danish parties prefer statutory restructur - ing processes to consensual or out-of-court restruc - turings. Therefore, even when a consensual restruc - turing is attempted or suggested, there will usually be an expectation that it will be structured to reflect the basic principles laid out in the Danish Bankruptcy Act. There is no requirement to attempt or even consider informal restructuring before formal judicial insolvency proceedings are initiated. Danish banks, financial institutions, etc, are usually reluctant to engage in talks about the restructuring of a distressed business. If approached with a restructur - ing request from a debtor, the bank will ask that debtor to procure or produce the necessary documentation on its financial position. Only in relation to customers/ debtors with significant engagement with the bank will the bank procure the necessary documentation and take a more active role in the restructuring process. It should be noted, however, that significant debtors are very often kept out of formal insolvency proceedings using intercreditor or inter-bank agreements, enabling the major creditors to have direct control over how the value of the debtor’s assets should be preserved and/or liquidated. This is usually as formal restructur - ing proceedings have difficulty in preserving the value of the debtor’s assets. From a legislative and judicial perspective, over the last ten years, momentum has been building towards gearing formal insolvency pro - ceedings (principally in-court restructuring proceed - ings, but also bankruptcy proceedings) to be able to better preserve the assets’ values, jobs and business, whereas previously there was a strong focus on the protection of creditors’ rights. In Denmark, there is no tie between formal and infor - mal restructuring efforts/proceedings. Therefore, since
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