Denmark

Denmark
       

Denmark

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2014: 5/189 countries
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Complexity of collecting debt:

grading
Notable High Very High Severe


Executive summary

  • Payments take 7 to 30 days on average, but delays of approximately 12 days may be expected. The EU legal framework provides reliable tools when it comes to late payment matters.​
  • Courts are reliable but the system provides no fast track proceedings that suitably facilitate the undisputed collection process. Delays and costs otherwise remain significant when a claim is disputed, and EU standard proceedings are not fully applicable in the country.
  • Although domestic insolvency law aims at rescuing companies to increase the chances of recovering debts, it provides no limitations as to how much of the debt may be written off in restructuration negotiations and it is rare for unsecured creditors to recover from insolvent debtors in practice.
 
General Information GENERAL INFORMATION arrow-transparent
 
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
 
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
 
General Information 

GENERAL INFORMATION

Days Sales Outstanding (DSO)

Payment terms in Denmark are often calculated on a 'current month plus 10-12 days' basis. Payments take 7 to 30 days on average, but delays of approximately 12 days may be expected. Caution maybe needed insofar as the paying behavior of local companies has degraded over the last two years.

 

Late payment interest

The Recast Directive 2011/7/EU which stipulates that payments in the EU must be made within 60 days was transposed into Danish law through the Renteloven law which was set in effect on March 1st 2013. The rules in Denmark are stricter than the EU requirements: as a general rule, business-to-business transactions must be paid within 30 calendar days following the invoice due date. Thus, late payment interests may be claimed from the day following the due date. The applicable interest rate ought to be agreed upon as a contractual matter, but the law otherwise provides that interest may be calculated on the basis of the reference rate fixed twice a year (January and July) by the National Bank of Denmark, increased by at least 8 percentage points.

In line with the Directive, the law furthermore entitles creditors to receive a flat EUR 40 compensation covering their collection costs. Beyond this amount, collection costs are determined by the Danish Ministry of Justice and depend on the size of the principal amount. Debtors would normally tend to use costs as a negotiation tool, but Euler Hermes always endeavors to have these paid to the creditor during the collection phase.

 
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collection practice 

COLLECTIONS PRACTICES

Orchestrated negotiation first

Amicable settlement opportunities should always be considered as a strong alternative to formal proceedings. Before starting legal proceedings against a debtor, assessment of assets is important as it allows verification as to whether the company is still active and whether recovery chances are at good. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it indeed becomes impossible to enforce a debt (see below).

 
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Court Proceeding 

COURT PROCEEDINGS

The Danish legal system is governed by the Administration of Justice Act, and is composed of a hierarchy of courts, the main of which may be listed as follows: twenty-four District Courts, two High Courts, the Maritime and Commercial Court and the Supreme Court. There are no courts specifically dedicated to commercial matters, therefore all claims would usually be brought before District Courts (Byret), although the Maritime and Commercial Court would typically be competent to deal with international trade matters, trademarks, competition (as well as insolvency issues in the Copenhagen region).

There is no formal Payment Order procedure in Denmark aiming at solving undisputed claims but, since 2008, small claims not exceeding DKK 100,000 are typically dealt with by District Courts under simplified proceedings (forenklet inkasso). An enforcement order would generally be rendered within fourteen days but amicable (undisputed) files could usually be solved in three to eight months, but larger delays should be expected for more complex cases (see below). If the amicable phase fails or if the debtor questions the claim, the option of starting legal proceedings remains. A Writ of Summons must be served by a judicial officer to the debtor ten days prior to filing a claim. The latter is then given two weeks to bring a defence. The court may invite the parties to reach a compromise through mediation (Chapter 27 of the Administration of Justice Act), but hearings would normally take place in order to help the court rendering a decision (usually within four weeks). The courts then typically order remedies in the form of damages or specific performance, but punitive damages cannot be obtained unless the parties' contract provides for a penalty provision. Domestic tribunals are reliable however judicial procedures are lengthy. It should also be noted that Denmark is not bound by the various dispute settlement mechanisms put in place at the EU level.

 
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insolvency Proceeding 

INSOLVENCY PROCEEDINGS

A debtor in Denmark is regarded as insolvent if it is unable to meet his obligations as they fall due for payment, unless the inability to pay is temporary. The Danish bankruptcy Act (Act no. 298 of 8 June 1977, now consolidated act no. 588 of 1 September 1986, also known as the Konkursloven), is the result of many years of reform work. Once the debtor (or a creditor) has filed for insolvency, different alternatives may be considered.

 
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