Restructuring: What It Means for You as a Creditor
When a Danish customer enters restructuring, it changes your chances of getting paid. Here is what restructuring is, what you can and cannot do, and how you vote on the proposal.
What is restructuring?
Restructuring (rekonstruktion) is a procedure under the Danish Bankruptcy Act that aims to give a company in financial difficulty a chance to survive, instead of going bankrupt. The goal is either to reduce and reschedule the company's debts, to transfer all or part of the business to a new owner, or a combination.
For you as a supplier, restructuring is not the same as bankruptcy. But it affects your chances of getting paid, and you get a vote on how it ends.
Who runs the restructuring?
The bankruptcy court (skifteretten) appoints a restructuring administrator (rekonstruktør), typically a lawyer, and an accounting trustee (regnskabskyndig tillidsmand). Together with the company, they must find a solution and draw up a proposal for the creditors. The company's management as a rule continues to run the business, but under supervision, and major transactions require the administrator's consent.
The restructuring is published in Statstidende, the Danish official gazette, and the company's status appears in the CVR register.
What does it mean for your claim?
- No enforcement: while the restructuring is ongoing, you can as a rule not levy execution for your claim. Reminders and debt collection will typically not lead to payment either.
- Old debts are frozen: claims that arose before the restructuring are normally not paid on an ongoing basis, but dealt with in the restructuring proposal.
- Write-down: a proposal may involve a composition (tvangsakkord), where creditors only receive part of their claim.
Expert tip: Calculate and document your claim straight away
Gather invoices, account statements and agreements, and send a statement of your claim to the restructuring administrator. That way you can be sure you are registered correctly as a creditor and receive the material about the proposal and the vote.
Should you keep delivering?
Many companies in restructuring need their suppliers to keep delivering. Debts the company incurs during the restructuring with the administrator's consent are as a rule in a stronger position than the old debts if the company later goes bankrupt anyway.
- Get written confirmation from the restructuring administrator before you keep delivering on credit
- Consider requiring prepayment or cash on delivery
- Keep new invoices separate from the old debt
The vote on the proposal
Creditors receive a restructuring proposal and vote on it at a meeting in the bankruptcy court. Under rules introduced in 2022, creditors can be divided into classes that vote separately. If the proposal is adopted, the court must confirm it before it takes effect. If it is not adopted, the restructuring typically ends, and the company may be put into bankruptcy.
When deciding how to vote, compare the proposal with the alternative: what would you probably receive if the company went bankrupt instead? The administrator must provide information about the expected outcome in a bankruptcy.
Expert tip: Attend or give a proxy
Your claim only counts in the vote if you take part, in person or by proxy. If your claim is large, it can pay to have a lawyer assess the proposal and represent you.
Do you hold security?
If you have a valid retention of title, a charge, a bank guarantee or a personal guarantee, you are in a stronger position than the ordinary creditors. Contact the administrator and an adviser about how the security will be treated in the specific case.
If the restructuring ends in bankruptcy
If the restructuring fails and the company goes bankrupt, you must lodge your claim in the bankruptcy estate. So follow the case closely so you do not miss the deadlines.
Getting started
Restructuring is often better for creditors than bankruptcy, but it depends on the proposal. Calculate your claim, take part in the vote, and be careful with new deliveries on credit. Through InkassoHurtig you can get no-obligation quotes from police-authorised debt collection agencies and lawyers who can assess your situation. This content is general information and not legal advice.