If a company is experiencing financial difficulties, winding-up proceedings may ensure that no creditors are given preferential treatment and that the company cannot hide assets.
The bankruptcy court may commence winding-up proceedings against a company if it is insolvent (i.e. the company cannot meet its obligations as agreed), and a creditor who is owed money has filed a winding-up petition with the bankruptcy court. An insolvent company may also file a winding-up petition itself.
The courts do not commence winding-up proceedings on their own accord, and insolvency cases can be heard only if the company is unable to pay. If there are other reasons that the company does not pay, the case may be heard either by the bailiff’s court as a debt collection case or in a civil lawsuit – or efforts may be made to settle the dispute by court-based mediation.
Who can deal with the company’s money and assets?
When the bankruptcy court makes a winding-up order, the company loses the right to deal with its own money and assets. The bankruptcy court appoints a liquidator, whose duty it is to measure and evaluate the company’s total debts. Moreover, the liquidator must collect and sell the company’s assets. The money received by the liquidator is distributed among the creditors.
Do all creditors have equal priority?
No, all creditors do not have equal priority. In winding-up proceedings, there is an order of priority according to which the creditors are paid – the so-called order of priority of creditors. The individual classes do not rank equally, but all creditors within a class rank equally among themselves.
- First, all costs connected with the occurrence of the insolvency event and the winding-up proceedings are paid – i.e. court fees, liquidator, etc.
- Secondly, reasonable costs in connection with failed rescue attempts are paid – e.g. for lawyers’ restructuring attempts.
- Thirdly, wage claims, holiday pay, etc. are paid. However, employees receive their pay from the Employees’ Guarantee Fund, so that they do not have to wait for the winding-up proceedings. Instead, the Employees’ Guarantee Fund sets up a claim against the insolvent estate.
- Fourthly, outstanding taxes to the state are paid, which taxes suppliers are otherwise required to pay (e.g. excise duties on sugar, alcohol, etc.).
- Finally, the last class covers unpaid bills and other ordinary receivables not paid according to the rules above.
If there is still money left when all the preceding classes in the insolvent estate have been paid, interest accrued on the claims during the winding-up proceedings are paid first, and then fines and any promises of gifts.
Within each class, the individual creditors will receive the same percentage share of the amount owing to them. This is also called dividend.
Only when all creditors in a class have received 100 per cent of the amount owing to them is dividend paid to the creditors in the next class.
Debt legally secured by charge will still be charged as agreed.
How do you file a winding-up petition against a company?
You can fill in a form, which you must send to the bankruptcy court in the judicial district in which the company is located.
A winding-up petition must be in writing and contain the name, address and CVR number of the debtor. You must also write the amount owing by the company and for what it is owed. Moreover, you must write your own name, address and telephone number.
If a company petitions to wind up itself, a statement of assets and liabilities (values and debts) as well a list of the creditors must be enclosed.
There are two different winding-up petition forms in relation to companies – one if the company owes you money and one if you apply to wind up your own company.
What does a winding-up petition mean?
When a winding-up order is made, the management/owner loses the right to deal with the company, as the company is now an insolvent estate. This means that the company is no longer entitled to assign or give up its assets, receive payments, receive notices of termination, complaints and similar declarations, incur liabilities or otherwise deal with its assets with effect for the estate.
Who can present a winding-up petition?
To present a winding-up petition, you must be owed money that is not paid or services that are not delivered as agreed. The company against which the petition is presented must be insolvent.
This means that the company cannot pay or deliver as agreed. If the company does not want to pay – e.g. because of disagreement about an amount – the matter may possibly be settled by court-based mediation, collection proceedings in the bailiff’s court or a civil lawsuit.
An insolvent company can also petition to wind up itself.
Where are winding-up proceedings conducted?
The bankruptcy division of the district court with jurisdiction over the place where the company’s registered office is situated conducts winding-up proceedings – in Greater Copenhagen (Copenhagen, Frederiksberg, Glostrup and Lyngby judicial districts), however, the Maritime and Commercial Court of Copenhagen conducts winding-up proceedings.
What does it cost to file a winding-up petition?
From 1 October 2021, a court fee of DKK 1,500 is payable for filing a winding-up petition. A petition for the winding-up of your own company is fee exempt. The petitioner must also provide security to ensure that the costs of administering the estate can be paid if it turns out that there is not enough money left in the insolvent estate to pay for the administration of the estate.
The amount of the security is fixed by the bankruptcy court and will usually be DKK 30,000-40,000 – however, employees who are owed pay by the insolvent company need not provide security.
How long do the winding-up proceedings take?
There are large difference as to the duration of the winding-up proceedings, because it very much depends on the circumstances of the individual company.
The liquidator can relatively easily get an overview in a case with few creditors and few assets that are easy to sell. In such case, the administration of the estate will be quick.
If there are many creditors and assets that are difficult to measure and sell, it will take longer.
What is disqualification?
Disqualification means that a person is not allowed to participate in the management of a company for a period of time – typically three years.
A disqualification order may be made against persons who have participated in the management of a company that has been ordered to be wound up, and the court finds that they have participated in grossly irresponsible business conduct in the company. Usually however, disqualified persons are allowed to manage businesses where they have personal and unlimited liability for the obligations of the business.
Who can be disqualified?
The courts can make a disqualification order against persons who have participated in grossly irresponsible business conduct in the management of a company that has been ordered to be wound up.
Persons who were part of management for up to one year before the presentation of the winding-up petition can be disqualified. Consequently, not only the persons in management at the time when the company went into liquidation can be disqualified.
How is the liquidator in winding-up proceedings appointed?
The bankruptcy court appoints the liquidator after having consulted the attending creditors.
The liquidator must not be unfit in relation to the insolvent company.
If one or more creditors so request within three weeks of the winding-up order, a so-called meeting of creditors must be held, at which meeting the creditors vote for the appointment of a liquidator. The meeting of creditors may decide to appoint several liquidators.
The bankruptcy court may appoint one additional liquidator.
How does a creditor prove a claim against an insolvent estate?
Creditors having claims against an insolvent debtor must send a letter with a statement of the claim to the liquidator (prove their claims). Claims must be proven within four weeks of the publication of the winding-up order in the Danish Official Gazette. The liquidator prepares a list of proven claims. This is also called a register of debts and claims.
The liquidator examines the proven claims, usually during a meeting at the liquidator’s office. The date and time is announced in the Danish Official Gazette. Two weeks before the meeting, the register of debts and claims with the proven claims and the liquidator’s recommendation of the claims can be inspected at the liquidator’s office and in the bankruptcy court. If the liquidator disagrees with a creditor about, for example, the amount of a creditor’s claim, the creditor will receive notice to this effect before the meeting.
If the creditor and the liquidator cannot agree on the claim, the creditor can bring a lawsuit against the estate. The lawsuit is heard by the bankruptcy court. A writ of summons must be submitted to the bankruptcy court within four weeks of the meeting at which the liquidator examined the claim. The creditor must pay a court fee according to the provisions of the Danish Act on Court Fees in Civil Cases.
If the creditor does not bring an action before the time limit fixed, the liquidator’s recommendation stands and is final.
What rights and duties does the debtor have?
A debtor has certain duties and rights during the administration of the estate.
- The debtor must give the bankruptcy court and the liquidator access to all the information that is necessary for the administration of the estate. This duty of disclosure applies also to executive officers, board members, auditors, liquidators and others who have previously held these positions.
- The debtor may not leave Denmark, unless the bankruptcy court gives its permission.
- The debtor must inform the bankruptcy court before changing address or permanent place of residence.
- The debtor is entitled to participate in all meetings of creditors.
Interruption of postal services means that letters and shipments to the debtor are redirected to the liquidator. This will happen when the bankruptcy court assesses that it is of importance to the administration of the estate. Interruption of postal services is an ordinary part of insolvency casework.
The bankruptcy court’s decision on interruption of postal services is made at a court hearing. An interruption of postal services applies for three months, but the period may be extended. The interruption of postal services must be lifted when it is no longer necessary.
Sidst opdateret: 26. januar 2022