The current economic situation in 2022 means that we will experience more bankruptcies. Unfortunately, the trend shows an upward curve and here in October it is expected that the number of bankruptcies will also be high, as in the previous months [1] . This is where restructuring can be used to make a last ditch effort to prevent bankruptcy and give the company a chance to get back on its feet.
The purpose of a reconstruction
It is to place the company in a state of hibernation, where the financial conditions are examined and where the options for saving all or part of the company are clarified. It provides an overall overview of how best to handle the liquidity crisis. The creditors may have different interests and one option for them to take care of them is to enter into composition agreements where the amount of the debt is reduced. In a number of cases, the creditor may be better off by waiving part of the debt during a restructuring than by taking the company under bankruptcy proceedings.
Why does the company end up in a reconstruction
If the company has liquidity problems and fails to pay their bills on time. But even if you are no longer able to pay your bills on time, it does not necessarily mean that you have a bad business.[2] In many cases, the poor liquidity can be caused, for example, by a large customer going bankrupt, a lost court case or the like, where an unexpected loss occurs.
The practicalities of reconstruction
You can, both as an owner or as a creditor, where the payment has not taken place on time, request a reconstruction in the probate court.
It can be a long process, but typically takes about 7 months and must be completed within 12 months, otherwise the probate court automatically requests bankruptcy proceedings. During this period, a reconstructor will be appointed to handle the process. At the same time, a planning meeting with the creditors is scheduled, and then an advertisement is placed in the Statstidende, where the creditors are encouraged to register their claims and come to the planning meeting in the bankruptcy court. The planning meeting itself includes a vote where the creditors must vote on whether they can approve the overall plan from the reconstructor. If the overall plan is approved, the final reconstruction proposal must be drawn up within 6 months, which must then be adopted at a voting meeting in the bankruptcy court. If the proposal is accepted and confirmed by the probate court, it has legal effect and thereby also applies to creditors who may not have voted in favor.
If the plan for reconstruction cannot be adopted, the bankruptcy court will basically declare the company bankrupt.
Counseling
At DreistStorgaard, we have extensive experience in advising companies in connection with liquidity problems. Our specialists are familiar with the issues of insolvency law and can therefore help with the establishment and implementation of financial reconstructions of crisis-affected and insolvent companies.
We are ready to advise and help you
Contact us on 5663 4466 or kontakt@dslaw.dk
By lawyer Steffen Kristiansen
[1] https://www.finanshus.dk/makrookenomi/brat-stigning-i-konkurser/
[2] https://www.finanshus.dk/makrookenomi/brat-stigning-i-konkurser/
