Bankruptcy

Last updated: 2021-06-21

A company that for an extended period of time has problems paying its debts risks being declared bankrupt. Being declared bankrupt means that the company is wound up and that all assets are used to, as far as possible, pay the company’s debts.

The company that must pay the debts is called the debtor, and the counterparty to whom the company owes the debt is called the creditor. In a bankruptcy, a bankruptcy trustee takes over the debtor’s, i.e. the company’s, assets to pay the creditor. The bankruptcy trustee reviews the company’s assets and liabilities, and prioritizes the order in which the debts are to be paid.

Both the debtor and the creditor can apply to put the company into bankruptcy. When the bankruptcy administrator has gone through the assets and liabilities, it is then the District Court that decides whether the company should be declared bankrupt or not. In order for the District Court to be able to decide to place the company in bankruptcy, it is required that the bankruptcy administrator’s review shows that the debts will not be able to be paid and that the payment problems the company has are not temporary.