DENMARK Law and Practice Contributed by: Henrik Sjørslev, Peter H. Knudsen, Henrik Lund-Koefoed and Levent Kitir, DLA Piper Denmark
informal restructuring efforts have no stay on singu - lar enforcement proceedings, an informal restructur - ing requires the business and/or major lenders to either pay out small and aggressive creditors or to otherwise persuade such small creditors to partici - pate in the restructuring. The new rules on preventa - tive restructurings allow for more “informal” in-court restructurings, somewhat similar to consensual, out- of-court restructurings, depending on whether a stay of enforcement actions is granted. So far, the new preventative restructuring proceed - ings have not been widely used by creditors, probably because the proceedings only have limited moratorium effect unless an enforcement stay is granted; at that point, most of the rules of the ordinary restructuring proceedings apply. However, preventative proceed - ings will not necessarily block a bankruptcy petition from a creditor, weakening the preventative effect of the proceedings. On the other hand, the amendments of the ordinary restructuring rules seem to have led to an increase in restructuring cases over the last couple of years, providing debtors and practitioners with new and valuable tools in an attempt to save businesses and jobs while preserving the assets. With the newly amended in-court restructuring rules, it is now possible to carry through a fast-track busi - ness transfer (but only if the proceedings are made public). This is expected to provide for greater use of pre-packed solutions. Please refer to 1.2 Types of Insolvency for further details. In instances where a consensual restructuring is fea - sible, a debtor will confer with major and/or secured creditors on the content and timing of the contem - plated restructuring. The major creditors will often form an ad hoc steering committee in the sense that the success of the restructuring is dependent upon all these creditors agreeing to the restructuring plan. Standstill agreements are not uncommon in, or lead - ing up to, a restructuring, but they also occur as a form of defence of a lender’s mortgage rights – ie, as an attempt to postpone or avoid a debtor’s full-blown financial breakdown.
Usually, a debtor will nominate a lawyer and/or an accountant to assist in the restructuring, and pro - vided the suggested advisers are reputable, major creditors will not object. Depending on the amounts involved, major creditors will often insist that their adviser (typically a lawyer) be hired by the debtor to work in conjunction with the debtor’s advisers; and seeing as these types of restructuring processes are trust-driven, the debtor will never object. The board of directors in question will also sometimes hire a separate lawyer to advise them on their duties to the company and ultimately to the creditors. The formal proceedings almost always serve as the benchmark against which consensual restructurings are measured, so they are only successful if there is an appreciable upside for major creditors. If such an upside cannot be reasonably quantified, the creditors will most likely terminate their participation in the out- of-court proceedings. There is no law that dictates the duties of creditors to one another. Creditors are free to vote as they see fit. The only restriction is that a creditor’s vote in restruc - turing proceedings may not be influenced by a debtor, or any third party, giving that creditor preferential treat - ment of any kind. Non-compliance with this restriction will lead to the insolvency court refusing to confirm a restructuring proposal or – if already confirmed by the insolvency court – rejecting the restructuring proposal. Danish Law does not provide for a cram-down of an out-of-court restructuring towards dissident credi - tors. Dissident creditors must either be paid in full or otherwise persuaded to co-operate. Also, the formal Danish restructuring regime through the insolvency court is not geared towards providing a separate cram-down process – ie, the relevant rules do not allow for only the cram-down parts of the regime to be invoked. This lack of cram-down enforcement of a consensual restructuring is due to the desire of the Danish legislature and insolvency courts to encour - age distressed businesses to seek assistance through formal insolvency regimes.
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