DENMARK Law and Practice Contributed by: Henrik Sjørslev, Peter H. Knudsen, Henrik Lund-Koefoed and Levent Kitir, DLA Piper Denmark
If management fails to cease trading of the company after the point of hopelessness has been reached, management can become personally liable for the losses creditors face by trading with the company beyond that point in time. Please also see 7.1 Duties of Directors for further details on the management’s obligations. 7.3 Duties and Personal Liability of Officers Regarding the duties and personal liability of officers, please see 2.2 Personal Liability of Directors . 7.4 Other Consequences for Directors and Officers Members of the management of an insolvent company may be subject to the rules on insolvency quarantine or director disqualification provided that the person in question has participated in the management of the company within the last year prior to the petition date, and (i) if the person in question in this period has grossly mismanaged the business or (ii) failed to correct gross mismanagement that took place earlier than the year prior to the petition date. The rules on insolvency quarantine were revised in 2024, and the Danish Bankruptcy Act now contains the following examples (among others) of gross mis - management: • substantial failure to fulfil obligations under tax, customs or excise legislation; • material breach of obligations under the rules on bookkeeping and financial reporting; • contribution to a significant reduction in the debt - or’s assets to the detriment of the creditors through non-commercially justified transactions; • registration as a member of the management in the Danish Business Authority’s IT system, and either (i) entrusting the performance of the managerial duties to another person who is not registered as a member of the company’s management in the Danish Business Authority’s IT system or (ii) performing the managerial duties by instruction or similar from such person; • the person actually performing the managerial duties in the company in violation of Section 10 of the Danish Companies Act has not been registered as a member of the management in the Danish
Business Authority’s IT system, despite the fact that the person in question actually functioned as part of the management and exercised the powers of a director; and • contribution to the continuation of the business for a long period after the time where the person in question must have realised that the continuation of the business would result in a significant loss for the creditors. Insolvency quarantine will, as a starting point, apply for a period of three years. The period can extend to five years if the circumstances and the gross mis - management are characterised as exceedingly seri - ous. Insolvency quarantine may also be applied for a shorter period, or waived completely under very special circumstances, depending on the severity of the gross mismanagement as well as the person in question’s personal circumstances. Furthermore, according to the revised rules on insol - vency quarantine, the person in question and the trustee may settle for a deduction in the applicable period of quarantine. Such settlement can only be applied if the quarantine period amounts to at least one year and (ii) is fair given the circumstances. The bankruptcy court shall verify the settlement by rul - ing. By way of exception, the bankruptcy court can deny such settlement provided (i) it is evident that the person in question has not grossly mismanaged the company, (ii) the person in question fulfils the con - ditions for the application of an extended period of insolvency quarantine or (iii) the person in question has previously been subject to insolvency quarantine, which has not expired by the bankruptcy petition date, and the gross mismanagement of the company has taken place after the previous insolvency quarantine has entered into force. 8. Setting Aside or Annulling a Transaction 8.1 Circumstances for Setting Aside a Transaction or Transfer Chapter 8 of the Danish Bankruptcy Act contains pro - visions regarding claw-back measures against actions
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