Bankruptcies will continue to occur but Ulrik Holsted-Sandgreen expects that they will primarily occur in particularly distressed sectors, at the moment agricultural enterprises or suppliers of off-shore oil and gas due to the decrease in oil prices, and there will always be undertakings operating an unprofitable business until a point when it will be too late to restructure it.

By definition a bankruptcy means that creditors suffer a loss and consequently the wish for alternatives arises. "At the moment it is very evident in the distressed agricultural sector that bankruptcy orders are only issued against the agricultural enterprises that do no cooperate with the principal creditors. The majority of the distressed agricultural enterprises are being closed down in collaboration with the banks in order to limit the losses as much as possible." Ulrik Holsted-Sandgreen also sees this trend in other sectors and he expects that the trend will increase in other sectors as well.

It is not the restructuring rules laid down in the Danish Insolvency Act that are applied to the alternative out-of-court solutions. "The problem of the restructuring rules laid down in the Danish Insolvency Act is that they govern public restructuring proceedings." Ulrik Holsted-Sandgreen emphasises that this is not to criticise the in-court restructuring proceedings that are public, but he would like to point out that the effect of the rules is that as soon as restructuring proceedings commence against an undertaking the surrounding world no longer sees it as a going concern.

"The consequence of the publicity of the restructuring is that so many problems arise in respect of customers, employees and suppliers that the management’s focus shifts from the completion of a turn around to making quick fixes. At the same time the advisors become involved in so many legal problems that the costs of the process become too high", says Ulrik Holsted Sandgreen.

Great demands on the attorneys' qualifications

Ulrik Holsted-Sandgreen experiences a clear trend that the banks and principal creditors wish to solve their commitments by means of out-of-court restructuring proceedings in which the problems may be solved by agreements between the undertaking and its principal creditors. This places great demands on the qualifications of the attorneys.

"The role of the attorney in out-of-court restructuring proceedings is to guarantee the involved parties that the restructuring proceedings take place by the book and that no subsequent just criticism may be raised against transactions that the undertaking makes together with the lender."

More focus on allocation of liability

"Unfortunately we see examples that out-of-court restructuring proceedings go wrong because the assets of the undertaking are moved among the creditors and it raises the question of liability, particularly as to the management."

"The members  of  the management of the distressed undertakings will often find themselves in an exposed position because they often find themselves compelled to comply with the wishes of the principal creditor, but at the same time the law stipulates that the management must attend to the interests of all creditors."

"Our society is increasingly focussed on allocating liability and the trend is that subsequent legal proceedings are instituted against the former management in the cases where the restructuring fails", says Ulrik Holsted-Sandgreen.