Major amendments to Danish restructuring rules
On 23 March 2021, the Danish Parliament unanimously passed amendments to the rules on restructuring proceedings and some, but not all, of the rules have now entered into force.
One of the reasons for the amendment of the rules is the fact that many Danish undertakings are currently having financial difficulties due to the COVID-19 pandemic. The amended rules are intended to make it easier to continue operating viable companies that are currently facing financial challenges.
As a consequence of the amendments, it will now be possible to withdraw unsuccessful restructuring proceedings without bankruptcy proceedings being commenced, provided that withdrawal takes place before the date of the meeting at which the restructuring proposal is to be presented. Such a meeting is as a rule to be held no later than 4 weeks after the commencement of the restructuring proceedings. Following the withdrawal of unsuccessful restructuring proceedings there will be a one-month waiting period before it will be possible to file a petition for commencement of restructuring proceedings again.
When restructuring proceedings are commenced, it will no longer be necessary to provide security for costs related to potential subsequent bankruptcy proceedings. Moreover, it is no longer compulsory to have a restructuring accountant appointed but following the adoption of the restructuring plan the restructuring administrator or 25% of the creditors eligible to vote may request that the bankruptcy court appoint a restructuring accountant.
The above rules entered into force on 29 March 2021.
Furthermore, a possibility is introduced to complete a fast-track business transfer during restructuring proceedings if a majority of creditors, based on the weighting of their votes, do not object to the transfer within 5 weekdays after written notification has been sent to them. The entry into force of these rules is pending the Danish Minister of Justice fixing a date because the rule presupposes an adaption of the Danish Business Authority’s IT system registering notifications of contemplated business transfers under the suggested fast-track procedure.
The purpose of the amendments to the legislation is to place employees in a better position than before as the commencement of restructuring proceedings now - just as the commencement of bankruptcy proceedings - also becomes a reason for compensation from the Employees’ Guarantee Fund (Lønmodtagernes Garantifond) with respect to those employees who are dismissed or discharged from the obligation to work before or during the restructuring proceedings. This also provides for the possibility of obtaining financing - with the consent of the restructuring administrator - from the Employees’ Guarantee Fund of three months’ salary after commencement of the restructuring proceedings and one months’ salary before commencement of the restructuring proceedings.
As far as business transfers during restructuring or bankruptcy proceedings are concerned, the amendment introduces the new approach that a buyer now only adopts rights and obligations with respect to matters relating to employees’ collective agreements, salaries and working conditions for the period after the commencement of restructuring or bankruptcy proceedings while the guarantee provided by the Employees’ Guarantee Fund now covers unpaid salary etc before the commencement of restructuring proceedings.
The entry into force of these new rules with respect to employees is subject to the Danish Minister of Employment fixing a date for such entry into force.