Reconstruction

The purpose of a reorganization is to turn around a company that finds itself in a financially difficult situation.

A reorganization is initiated if the company is unable to meet its obligations as they fall due.

The goal of reconstruction is usually to get the company back on its feet. If this is not possible, bankruptcy proceedings are often the next natural step.

Reconstruction is formerly known as suspension of payments

Before 2011, restructuring was known as suspension of payments - a state where a distressed business could get a 'break' from its creditors to give it the peace of mind to work out a plan for possible future operations.

Reconstruction is basically about the same thing as suspension of payments and has the same purpose. However, legally, the term suspension of payments is no longer used.

How does a reconstruction proceed?

A reorganization takes place when a creditor - or their advisor, accountant or lawyer - applies to the Bankruptcy Court for reorganization.

In a reconstruction, the Bankruptcy Court appoints a so-called reconstructor. In addition to the administrator, the Bankruptcy Court can also appoint an accounting expert trustee, which is typically an accountant.

During the reorganization itself, it is often seen that the company's management is allowed to continue daily operations to avoid further losses. However, it is the task of the administrator to make major decisions, such as purchases and sales during the reconstruction. Here, the day-to-day management has no influence.

What are the possible outcomes of a reconstruction?

There can be many outcomes of a reorganization. Basically, a reorganization can result in the company continuing to operate - possibly through the sale of all or part of the company's assets.

Alternatively, if there is no other way out, the outcome may be that the company is placed in bankruptcy proceedings.

How can you tell if a company is under reconstruction?

There are several ways to find out if a company is under reconstruction. Firstly, a reorganization is announced in the Official Gazette, which states when the company was placed under reconstruction and who has been appointed as reconstructor.

In addition, the company's status will be marked as "under reconstruction" on CVR.dk.

If you subscribe to a company and receive information from CVR.dk, you will typically be notified if the company is placed under reconstruction.

What should I do as a supplier if my customer goes into administration?

As a supplier and creditor, there's not much you can do if you become aware that a debtor has gone into administration.

We recommend that you stop work immediately or wait if you are about to start work for the customer, have ongoing work with the customer, or are owed money by the customer. You should contact the person responsible for the reconstruction to get clarity on how you should proceed. Information about this can be found in the Official Gazette.

It's important to be realistic and not expect the customer to be able to pay all or part of your invoice during the reorganization.

It's always a good idea to start a dialog with the restructuring company. If you have a debt collection agency or lawyer involved in your debt collection cases, you can also ask them to initiate the dialog.