DENMARK: An Introduction to Restructuring/Insolvency

Market Overview

Denmark’s gross domestic product (GDP) increased by 3.6% in 2024. However, this growth was not evenly distributed across sectors. The pharmaceutical industry, particularly Novo Nordisk, was a significant driver of economic growth in the fourth quarter and throughout the year. A few large companies contributed substantially to Denmark’s overall growth in a year where several sectors faced challenges.

The current economic forecasts from the Central Bank of Denmark indicate that the Danish economy is expected to expand by 3.6% in 2025. The forecasts are, however, clouded by considerable uncertainty. Risks include a potential trade war between the EU and the USA, which could weaken the Danish economy if the Trump administration were to impose extensive tariffs on EU products. Other factors influencing Danish businesses include economic developments in Germany, public spending growth, interest rate changes, and geopolitical issues such as the war in Ukraine.

Bankruptcy Trends

There were a total of 2,491 bankruptcies in Denmark in 2024, which is 19% less than 2023. Compared to the past ten years, the 2024 bankruptcy level is average, indicating stability in new insolvency cases.

Uncertainty in the sustainable sector

In recent years, sustainable energy has been a hot topic in both the investment environment and in wider societal discussions. However, early 2025 saw several notable green businesses initiate insolvency proceedings. In Denmark, these include the solar cell developer, Better Energy, the fuel cell manufacturer, Blue World Technologies, and the electrolyser manufacturer, Green Hydrogen Systems. These developments are expected to result in significant losses for investors in the green sector. In March 2025, the Swedish battery producer, Northvolt, filed for bankruptcy, resulting in significant losses for creditors and owners, including Danish pension funds that had invested billions in Northvolt.

The challenges in the sustainable energy sector appear to be primarily high production costs and low demand. Furthermore, the increase in solar and wind renewables has led to low wholesale electricity prices during windy and sunny periods, reducing profitability for renewable energy producers. 

The Danish government has chosen to pause several green projects, including offshore wind farms and the so called “Energi Islands”. The plan to build a hydrogen pipeline between Germany and Denmark is also being scaled back and postponed. The purpose of the hydrogen pipeline is to use the excess energy from wind turbines to produce hydrogen through the “Power-to-X” method.

The uncertainty over profitability and returns on investment in the sustainable energy sector may limit investors’ willingness to commit further funding in this area, causing an increase in distressed companies. There are, however, still actors, including Copenhagen Infrastructure Partners (CIP), a green asset manager, that continue to show faith and that have seen growth despite uncertainty in the sector.

Rising geopolitical uncertainty in the world, may risk pushing the green agenda out of the Danish political and regulatory spotlight in favour of initiatives to boost the competitiveness of the country’s (and wider European) business. The European Commission has, as an example, adopted rules to simplify the scope of ESG reporting to the market. The uncertainty in the sector could risk delaying Denmark’s green transition.

Focus on Fraud and Money Laundering, Including “Invoice Factories” and the Hawala System

A major topic in Denmark has been the so called “invoice factories”, which are businesses issuing fictitious invoices in various set-ups for money laundering and tax evasion purposes. This topic has experienced increased public attention.

The Danish legislature has introduced new initiatives and regulation to mitigate invoice factories and hold those responsible accountable. Several bankruptcy estates have been identified as former invoice factories, which can be complex and thus require significant resources to investigate and unravel. Co-operation between trustees and public authorities to uncover fraud is expected to rise.

Linked to the invoice factories and money laundering schemes is the so called Hawala system, an international closed banking system with access to significant amounts of cash that is being traded by two or more parties through intermediaries. Using the Hawala system, money can be transferred through several countries around the authorised banking system. Cases have shown that the Hawala-system is often used as a tool to transfer money to and from countries subject to national or international restrictions and sanctions.

The scope of the Hawala system is unknown but some media estimates have hundreds of millions of Danish kroner from Danish companies involved in money laundering and tax evasion that has likely ended up in an Hawala system.

In 2022, The European Court of Justice ruled that access to information about companies’ beneficial owners must not be open to everyone. Information on companies’ beneficial owners is currently available to the public in Denmark. Denmark is thus expected to implement regulation no later than July 2025 that restricts public access to information about companies’ beneficial owners (ie, the natural person(s) who ultimately, either directly or indirectly, own or control companies). The expected bill has been criticised for hindering the prevention and combatting of money laundering.

EU Harmonisation of Insolvency Regulation

The EU continues to harmonise regulation related to financial distressed businesses in EU member states in order to strengthen the internal market. In December 2022, the European Commission proposed for another directive harmonising further aspects of insolvency law. Among the initiatives in the proposed Directive, those that are new for Danish Insolvency law are “pre-pack proceedings” and special procedures for a more cost-effective and quicker winding down of microenterprises.

Denmark is not part of or bound by the EU Regulation on Insolvency Proceedings due to the Danish opt-outs from the European Union. Several EU directives, including the EU Directive 2019/1023, the Bank Recovery and Resolution Directive (BRRD) and Bank Recovery and Resolution Directive II (BRRD II), have been implemented in Danish law under the EU rules concerning the internal market.

The latest proposed directive is also expected to be implemented under the EU rules concerning the internal market. The proposed directive will thus have effect in Denmark.