Remuneration of Trustee: Analysis of Reorganization and Bankruptcy in Danish Law

Thomas Langkilde Kjær & Steefan Vinther Wallin

Student thesis: Master thesis


This master thesis will focus on the legal requirements and economic aspects of bankruptcies and reorganization. Furthermore, it is examined how the trustee’s remuneration is defined whenever a company files for bankruptcy or starts a reorganization process and whether this remuneration is efficient for society or not. The second part of the thesis will examine and analyze the complex legal aspects of the processes for bankruptcy and reorganization and how the trustee’s remuneration is set according to Danish bankruptcy law (hereinafter Konkursloven) in § 239, cl. 1 and 2. Regarding reorganization legal articles were added to Konkursloven in 2010 with the main purpose of keeping insolvent but viable companies on the market to avoid economic losses in society caused by bankruptcy. The regulated process for reorganization describes the rights, limitations and duties for the parties involved. As an alternative to reorganization a company can file for bankruptcy. This process has existed for many years and has a rigorous set of rules to create the highest output for the creditors of the bankrupted companies. The principles for the determination of the remuneration to the trustee has been developed to increase focus on quality rather than on the quantity of hours spent on handling the case. In the third part of the thesis the economical-interdisciplinary analysis examines and analyzes the incentives of the parties in reorganizations and bankruptcies, as well as its efficiency levels. The incentives analysis is based on the Principal-Agent Theory where creditors and skifteretten acts as principals and the trustee acts as an agent. It has been found that the trustee possess hidden information from the principal, whereby there exists a Moral Hazard issue. The processes of reorganization and bankruptcy have been analyzed with a game theoretic approach to analyze the efficiency of the processes and determination of the trustee’s renumeration. Game theoretic models based on sequential games with perfect information have been constructed and analyzed. The effiency-criteria is based on Kaldor-Hick’s criteria of effiency as the main purpose is to investigate the efficiency in society. This paper finds that reorganization is the most efficient solution and that the remuneration is Kaldor-Hicks optimal seen from a perfect information perspective. However, it also finds that perfect information does not exist in the real world as there is a Moral Hazard issue. It has also been found that Konkursloven § 239, cl. 1 and 2 are trying to eliminate the Moral Hazard issue and is increasingly getting better at achieving this over the years.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2018
Number of pages132
SupervisorsTroels Michael Lilja & Caspar Rose