With the cooperation of the creditors and the bankruptcy court, the purpose of a restructuring plan is to financially improve a distressed company to make the company healthy again. If the restructuring fails, insolvency proceedings may be commenced against the company.
If it seems that an insolvent company can become solvent again, the bankruptcy court may be asked to initiate restructuring proceedings. A restructuring may include the sale of parts of the company or involve the creditors’ acceptance that debts are reduced or deferred.
In a restructuring, the bankruptcy court appoints one or more restructuring administrators. Moreover, the bankruptcy court may appoint an expert nominee (e.g. a state-authorised or registered public accountant). The expert nominee can help restructure the company so that its finances become healthy again. Usually, the company’s management is allowed to continue the day-to-day management of the company, but major decisions must be approved by the restructuring administrator.
How does a restructuring proceed?
When the bankruptcy court has commenced the restructuring of a business, the bankruptcy court appoints one or more restructuring administrators. Moreover, the bankruptcy court may appoint an expert nominee. The bankruptcy court also fixes the date and time of a planning meeting with the creditors. Then an advertisement is placed in the Danish Official Gazette, calling for all creditors to lodge their claims and attend a planning meeting to be held in the bankruptcy court within four weeks.
At the planning meeting, the restructuring administrator presents a general plan, on which the creditors must vote.
If the plan is adopted by the creditors, the restructuring administrator has up to six months to make a restructuring proposal and have it adopted at a voting meeting in the bankruptcy court. In consultation with the court and the creditors, the voting meeting may be postponed for up to four months. If a majority of the creditors cannot vote in favour of the proposal or if the bankruptcy court cannot ratify the proposal, the bankruptcy court must commence insolvency proceedings.
If the restructuring proposal is adopted and the bankruptcy court ratifies it, it will have legal effect. This means that the proposal will also apply to the creditors who rejected the proposal.
What happens if a restructuring plan cannot be adopted?
If a majority of the creditors are against the restructuring plan, and it is not possible to negotiate a plan that can be adopted, the bankruptcy court may instead treat the case as insolvency.
What does a restructuring proposal include?
A restructuring proposal typically includes a compulsory composition or a business transfer – or both.
A compulsory composition means that all debt is reduced to a percentage – e.g. fifty per cent. A business transfer may involve the sale of the entire business or the sale of parts of the business.
Where are restructuring proceedings conducted?
The bankruptcy division of the district court with jurisdiction over the place where the insolvent business is located conducts insolvency proceedings – in Greater Copenhagen (Copenhagen, Frederiksberg, Glostrup and Lyngby judicial districts), however, the Maritime and Commercial Court of Copenhagen conducts insolvency proceedings.
Who can apply for restructuring?
Creditors who are not paid on time because of insolvency can apply for restructuring.
The insolvent business can also apply for restructuring.
How do you ask the bankruptcy court to open restructuring proceedings against a company?
If you want the court to attempt to restructure an insolvent company, you must write to the bankruptcy court in the judicial district in which the company is located. There is no form, so you must send the petition as a letter or an email.
You must write the debtor’s full name and address, line of business and CVR number. Moreover, you must write why you want the company to be restructured – and you must write your suggestion as to who should be the restructuring administrator. It is no longer a requirement that an expert nominee should be suggested. The restructuring administrator (and the expert nominee, if any) must declare in writing that they are willing to take on the task and are not unfit.
Together with the letter/email, you must send a new (no more than three months old) transcript listing the responsible management of the company – a signature authorisation document showing the names and signatures of persons authorised to sign for the company. You can find this document on virk.dk.
If it is your own company you want restructured, you must also enclose a list of values (assets) and debts (liabilities) as well as a list of all creditors (individuals, businesses and authorities who are owed money).
If restructuring proceedings are opened without the debtor’s consent, you must provide security for the costs of any subsequent insolvency, which security will be used only if the restructuring is unsuccessful, and if a subsequent insolvency ends without money to cover the expenses. This security will usually be fixed at DKK 30,000-40,000. If restructuring proceedings are to be opened without the debtor’s consent, you must also provide security to ensure that the restructuring administrator and expert nominee are paid for their work.
In connection with the opening of restructuring proceedings, a court fee of DKK 1,500 is payable and petitions for the restructuring of your own business are fee exempt.
How does the bankruptcy court appoint a restructuring administrator and expert nominee?
When you send a petition for restructuring to the court, the petition must contain suggestions as to who should be a restructuring administrator. It is no longer a requirement that an expert nominee should be suggested.
The restructuring administrator is most often an attorney, while any expert nominee must be a finance expert – often it will be an accountant. Both the restructuring administrator and the expert nominee, if any, must declare in writing that they are willing to take on the task and are not unfit.
The bankruptcy court may decide to appoint a restructuring administrator and an expert nominee other than those suggested.
How long does a restructuring process take?
A restructuring process typically takes seven months and must be completed within one year. If the company is still insolvent after the restructuring, the bankruptcy court automatically initiates insolvency proceedings.
Can a company be restructured against management’s will?
If the management of a company is against a restructuring plan, the bankruptcy court may still choose to follow the plan. In that case, the restructuring administrator will take over the management of the company.
Can restructuring proceedings be stopped?
If the bankruptcy court has opened restructuring proceedings, they cannot be stopped again.
The restructuring proceedings may end either with an agreement on reducing the debt (composition) or with the healthy parts of the company being sold off. The debtor does not automatically go bankrupt if the restructuring fails, but it is a possibility.
What happens if a petition for restructuring is dismissed?
If a company has attempted restructuring and it fails, the bankruptcy court may open insolvency proceedings.
If the petition for restructuring proceedings has been submitted by a creditor, and if the debtor has consented to the petition, the bankruptcy court may immediately open the restructuring proceedings. If the debtor has not given his/her/its consent, the bankruptcy court summons the debtor to a meeting in the bankruptcy court, where the petition is considered. If the debtor, who is a natural person, does not consent to the petition at this meeting at the latest, it will be considered a bankruptcy petition, which will be heard immediately.
Can a company in the process of restructuring be declared bankrupt?
While a company is in the process of restructuring, it cannot be declared bankrupt. However, a petition for winding-up proceedings and a petition for restructuring may be filed at the same time – any winding-up petition will, however, not be heard until the restructuring has been completed.
If the bankruptcy court ratifies a restructuring proposal, any winding-up petitions are cancelled.
Can restructuring be applied to individuals?
As for companies, a petition can be filed for the restructuring of individuals.
The procedures are the same as for companies.
Sidst opdateret: 21. januar 2022