What is insolvency in Denmark

If the owner of a Danish limited liability company (ApS or IVS) has had more costs than assets for some time - he or she becomes insolvent, and this can be the first step towards bankruptcy and declaration of insolvency. If the entrepreneur does not pay the supplier, but at the same time does not make any complaint about the goods or services he has supplied, the creditor has the right to take legal action.

The owner of a company in Denmark should start to act when he or she receives the first demand for payment from the creditor. Sometimes a settlement may be reached, but if dissatisfied with the product delivered, an email should be written to the supplier describing the problem and proposing some solution. The entrepreneur should call the creditor with an explanation if he or she has not made a payment due to lack of funds, as this will usually be met with understanding from the creditor and the debt may be written off, as the creditor will not want to incur court costs - all that is needed is a frank presentation of the financial situation to the creditor, and sending him or her the balance. However, if the entrepreneur does not pay and does not inform the creditor of the reasons for the situation, it is likely that the case will end up in court.

Once the company's insolvency proceedings have commenced in Denmark, the entrepreneur has the right to register a new business, but it is preferable to set up the company even before the insolvency proceedings have commenced, as SKAT, to whom the entrepreneur owes money, may not allow the new company to be registered as an employer or VAT payer without paying a security deposit of between DKK 100,000 and 200,000, which the entrepreneur, after registering the new company, will be able to use, for example, to pay employee taxes or VAT.

It is worth considering that any repayments made prior to bankruptcy may be invalidated, as debts cannot be paid to selected creditors and not to others. The superintendent has the right to undo such repayments up to, for example, two years back. Therefore, it is better not to inform the bank of the company's bankruptcy, as any repayments made to date may be invalidated.

What should you do during the company's bankruptcy proceedings in Denmark?

1. First, you need to prepare thoroughly for the entire process.
2. Secondly, you need to complete the company's accounting, which will avoid "bankruptcy quarantine", that is, a situation in which the company owner will be prohibited from managing another company in the future.
3. When the creditor contacts the court, the company owner will be informed of the date of the hearing (you should contact the court if you wish to attend a telephone session).
4. To avoid arrest, it is essential to inform the court of your inability to attend the hearing.
5. The court will appoint a guardian to try to secure funds for creditors.
6. The owner of the company loses both access to the bank account and control to the curator, once the bankruptcy process begins.
7. Any outstanding receivables from the company's customers, will have to be paid to the curator.
8. If the owner of the company had a store, the padlocks will be changed to secure the assets by the curator.
9. The superintendent will try to inexpensively and quickly sell any assets of the company that the owner has the right to buy back from him.
10. It may take one to two months for a court date to be set, from the time the creditor takes legal action.
11. In Denmark, the superintendent usually works on the bankruptcy proceedings for one to two years, and after the work is completed, sends a prepared bankruptcy review, containing, among other things, data on the amount of money obtained from the assets and the amount that creditors will recover.
12. The bankruptcy review sent by the superintendent will terminate the bankruptcy. The company will change its status from CVR to "bankruptcy," any unpaid debts will disappear, and the superintendent and the court will no longer contact the owner of the closed company.

If a company owner in Denmark has a hearing in court for mismanagement of his business, he can be barred from managing his new company for a period of one to three years - this is known as a "bankruptcy quarantine," and failure to comply can result in a fine or six months' imprisonment. Bankruptcy proceedings for one-person Danish companies can be much more complicated.