Line Lundorff Brokholm, Horten Law Firm, Denmark
Line Lundorff Brokholm, Horten Law Firm, Denmark

The risk of bankruptcy or restructuring casts a significant shadow over struggling companies. To learn more about how to handle a critical situation, we have talked to Line Lundorff Brokholm, an experienced lawyer specializing in insolvency at Horten Law Firm in Denmark. With her expertise, Line assists distressed companies through turbulent times, offering invaluable insights and strategic guidance.

Can you tell us about your role as a lawyer specializing in insolvency?

“As an insolvency lawyer, I focus on helping distressed companies who are facing financial challenges navigate through bankruptcy or restructuring based on inquiries from owners and CEOs. I also advise creditors who have claims against distressed companies. Clients, that is the CEO or the board, often contact me at a late stage when the company is already experiencing financial distress, and my strong advice to distressed companies is to seek legal assistance at an earlier stage. By intervening sooner, we can explore options and develop strategies to mitigate the financial challenges.”

Why is it important to involve the CFO in the recovery process?

”The CFO is often a crucial partner in the recovery of a company as they possess deep knowledge about the company’s finances. Collaborating with the CFO ensures that we have a comprehensive understanding of the financial situation and can make well-informed decisions.”

What is the process of restructuring or filing for bankruptcy?

“The process begins with a thorough assessment of the company’s financials and situation. Based on this evaluation, we advise whether restructuring or filing for bankruptcy is the best course of action. Restructuring can be more expensive but offers the possibility of survival if the company has sufficient cash flow. When a company applies to the court to initiate restructuring, a reconstructor is appointed. The reconstructor must inform all creditors about the reconstruction and propose a restructuring plan. The creditors must approve this plan to continue the restructuring process, which can continue for several months. During the reconstruction period, funds must be provided that can be distributed as dividends to creditors – for example by selling assets or providing additional capital.”

What is the role of a reconstructor in the process?

“A reconstructor, typically a lawyer appointed by the court, oversees the restructuring process on behalf of the creditors. The reconstructor ensures that the company adheres to the agreed plan and may advise on important decisions. It’s crucial for the reconstructor to remain impartial and act in the creditors’ best interests.”

How has the recent economic climate impacted your work?

”The recent recession and volatile economic conditions have led to an increase in reconstructions and bankruptcies. However, seeking advice at an early stage can increase the chances of success, as it demonstrates proactive measures to creditors. It’s been a busy start of 2024, and we are dedicated to helping companies navigate these challenges.”

When a company is facing bankruptcy or restructuring, several key parts are typically involved:

  1. Management Team: The leadership team plays a crucial role in navigating the company through the process. They may need to make tough decisions about the company’s future and communicate effectively with stakeholders.
  2. Legal Counsel: It is recommended that companies seek legal representation to navigate the complex legal proceedings involved in bankruptcy or restructuring. Legal counsel helps the company understand its rights, obligations, and options under the law.
  3. Financial Advisors: Financial advisors provide expertise in financial matters, such as assessing the company’s financial situation and analysing the feasibility of various options.
  4. Creditors: Creditors are individuals or entities to whom the company owes money. They have a significant stake in the outcome of the bankruptcy or restructuring process and are involved in negotiations to recoup their losses.
  5. Shareholders: Shareholders are the owners of the company and may be affected by decisions made during the bankruptcy or restructuring process.
  6. Employees: Employees are vital stakeholders in any company facing bankruptcy or restructuring. They may be concerned about job security, changes in compensation or benefits, and the overall future of the company.
  7. Regulatory Agencies: Depending on the industry and jurisdiction, regulatory agencies may have oversight or involvement in the bankruptcy or restructuring process. Compliance with applicable laws and regulations is essential.
  8. Customers and Suppliers: Customers and suppliers may be impacted by the company’s financial difficulties. They may experience disruptions in service, changes in contracts or agreements, or other effects depending on the nature of their relationship with the company.
  9. Courts and Trustees: In formal bankruptcy proceedings, courts and trustees oversee the process to ensure fairness and adherence to applicable laws. They may approve restructuring plans, oversee asset sales, and resolve disputes between parties involved.

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