LIQUIDATION
The owners of a company can decide for the company to enter into solvent liquidation. The owners will choose a liquidator to be in charge of the company. Furthermore, the court can decide for a company to be put into liquidation upon request of compulsory dissolution from the Danish Business Authority. In this case, a liquidator will be appointed by the court.
The liquidator shall make sure that all outstanding creditors are paid, and distribute the remaining assets to the owners, upon which the company will be dissolved.
BANKRUPTCY
HOW IS A COMPANY DECLARED BANKRUPT?
A petition for bankruptcy can be filed by a creditor or by the company itself - or by any other legal entity.
The bankruptcy decree is declared by the court upon a hearing if the court is satisfied that the company is insolvent. A company is insolvent when it cannot pay its debts by their due dates and when this inability to do so is not just temporary.
WHO TAKES RESPONSIBILITY FOR THE COMPANY SUBSEQUENT TO THE BANKRUPTCY?
When issuing a bankruptcy decree, the court will appoint a trustee of the bankruptcy estate. The trustee is the only person entitled to represent the bankruptcy estate and is obliged to realise all the company’s assets. In cooperation with the major creditors, the trustee may decide to carry on the business of the company for a limited period.
The trustee investigates the causes of the bankruptcy, examines whether the company, the board members or managing director have violated the law, and review the company’s books.
When all assets are realised, all outstanding issues solved, and the claims have been approved, the trustee will prepare the accounts of the bankruptcy estate. Upon the approval of the court (and the creditors), the trustee will pay out dividend payments in the order of priority of the creditors, and the company ceases to exist.
WHAT ARE THE RESPONSIBILITIES OF THE PARTNER, BOARD DIRECTOR, AND MANAGING DIRECTOR?
The partners or the board members and managing director shall assist the trustee and inform him of all the company’s assets and debts.
RESTRUCTURING
A limited company or any other legal entity with financial problems can seek an arrangement with its creditors to avoid bankruptcy.
In order to have time to investigate the possibilities of an arrangement, a creditor or the company – or any other legal entity - can file a petition for reconstruction to the court. The court appoints a supervisor and can also appoint a person skilled in accounting to watch over the interests of the creditors.
A reconstruction leads to either a scheme of arrangement or a transfer of assets. If the reconstruction fails or is not approved, the company is declared bankrupt.
The petition for reconstruction is approved, unless a majority of the creditors disapprove, thereby enforcing the reconstruction on the minority of the creditors.
