The Western High Court has ruled that a chargee was entitled to choose the trustee of a bankruptcy estate in which all assets were covered by a charge as the chargee has the highest interest in who is appointed trustee.

An employee filed a petition for bankruptcy against a company. The parties agreed that all assets were covered by a charge, and that dividends were therefore not to be paid to the creditors, neither to the staff nor the unsecured creditors. 

In these situations, the bankruptcy court has often rejected appointing the attorney requested by the chargee as trustee with reference to the fact that the creditors will have no voting rights as to the choice of trustee because there are no free assets in the estate.

This was also the situation in this case as the Bankruptcy Court of Randers appointed the employee's attorney as trustee. The employee claimed approx. DKK 37,000 while the chargee had a receivable of approx. DKK 12 million.

The Western High Court ruled against the bankruptcy court's decision as the high court found - based on an overall assessment - that the chargee had the highest interest in who was appointed trustee.

We believe that this ruling is correct, and the subject is of great importance in practice as many estates do not have any free assets because banks to a wide extent hold a floating company charge covering with few exceptions all assets in the company.

contacts

Piya Mukherjee

Partner

Helle Kofoed Hansen

Senior Attorney