DENMARK Law and Practice Contributed by: Morten Krogsgaard and Lennart Meyer Østenfjeld, Moalem Weitemeyer
Enforcement of Shares In acquisition financing, it is unusual for enforce- ment to be made at an asset level. Instead, the lender/security agent exercises its voting rights under a share pledge to appoint directors or observers who can prepare the company for a sales process, often together with an investment bank. Examples of where the lender/security agent has taken over the shares or has initiated the sale of the shares through public auctions are rare. Various types of guarantees are used in acqui- sition finance transactions, subject to financial assistance and “corporate benefit” restrictions. The common types of guarantees include the following. Demand Guarantee A demand guarantee ( Anfordringsgaranti ) is a type of guarantee where the guarantor commits to paying a specified amount to the beneficiary on demand. The beneficiary does not need to prove that a loss or default has occurred to claim payment. Suretyship Guarantee A suretyship guarantee ( Selskabskaution ) is a form of guarantee where the guarantor assumes responsibility for another obligor’s debt as if it were their own. 6. Guarantees 6.1 Types of Guarantees The creditor can demand payment directly from the guarantor upon the default of the obligor.
be enforced without notice, to the extent they are compliant with the facility agreement. Enforcement of Security Rights Enforcement of the security rights may require, in the absence of consent and agreement by the obligor, that the lender/security agent proves to the satisfaction of the Danish enforcement courts that a specific amount secured or an obli- gation to be performed is outstanding and due for payment or discharge. If issues in dispute or evidence produced are complex, the Dan- ish enforcement courts may, at their discretion, order that the matter be presented to a com- petent court for ordinary trial before the Danish enforcement courts will assist in the enforce- ment procedure. Discretion in Enforcement The security documents often grant wide dis- cretion to choose the most adequate means of enforcement. This allows the lender/secu- rity agent to independently enforce the security interest by means of private or public sale of the shares, withdrawal of the funds deposited in the bank accounts and collection or sale of the receivables and even to take over the collat- eral, subject to a valuation process. In exercising these rights, the lender/security agent is subject to a fiduciary duty towards the pledgor and other stakeholders to act fairly and to make efforts to ensure a sale on commercially acceptable terms in the given circumstances. Bankruptcy Enforcement of possessory pledges and similar security (which includes shares, bank accounts and receivables) is not affected by bankruptcy, whereas mortgages can only be enforced by the bankruptcy trustee.
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