A new study reveals the need for changes in bankruptcy proceedings. The Minister of Justice has announced plans to change the controversial practice in bankruptcy proceedings, where companies appoint their own trustee in voluntary petitions. According to new figures from the Court Administration, presented in a response to the parliament by Minister Peter Hummelgaard, over a quarter of corporate bankruptcies are handled as voluntary petitions.
Peter Hummelgaard emphasizes the need to further investigate the area. “When we can see that around a quarter of all Danish corporate bankruptcies are handled as voluntary petitions, it only underscores the need for us to look into the matter more closely,” he stated in a written comment.
The debate on voluntary petitions in bankruptcies intensified after the documentary “The Black Swan” was released. The documentary revealed how this practice can be abused for criminal purposes, where fraudsters can appoint a trustee who could potentially help them minimize losses in a bankruptcy estate. The Minister of Justice expressed his outrage that such situations can occur. “It is completely contrary to the trusted task of being appointed as a trustee,” Hummelgaard said.
From 2021 to 2023, there were an average of 9242 annual bankruptcies, and 2361 of these were handled as voluntary petitions. To address the issues, the Minister has asked the Bankruptcy Council to investigate how the rules in the area can be tightened.
The figures were presented in response to a question from the spokesperson for SF (Socialist People’s Party) in the Parliament’s Legal Affairs Committee, Karina Lorentzen. Lorentzen expressed concern about the high number of voluntary petitions and the possibility of abuse. She suggests that in the future, the court should appoint trustees to eliminate the risk of a bankrupt company choosing a trustee who is “more sympathetic to the potential fraud being planned.”
Both the Minister of Justice and Lorentzen, however, stress that most companies operate within the confines of the law, and there may be many legitimate reasons for choosing voluntary petitions in bankruptcy.