Large pending cases before the national and international courts
From March 2019 onwards, a number of Danish and international investors have filed class actions against the largest Danish bank, Danske Bank, and certain individuals for the purpose of seeking indemnification for declining share prices and violation of disclosure requirements following the money laundering case relating to the bank's Estonian branch.
Four class actions have been initiated before the Danish courts, and one civil action has been commenced in the United States. In August, the US action was dismissed with prejudice by the United States District Court for the Southern District of New York. The claimants have since filed a notice of appeal. According to Danske Bank’s interim report (Q1 to Q3) 2020, the total claim under the Danish class actions is approximately DKK 14 billion.
Another bundle of securities claims involve the former Danish bunker oil trading company, OW Bunker A/S. In March 2014, OW Bunker earned a market capitalisation of approximately DKK 5.3 billion in a public offering, only to face bankruptcy just seven months later in November 2014.
Four securities claims have been filed by Danish institutional investors, a consortium of private Danish investors and a consortium of primarily international institutional investors. Beside these filings, the estate of OW Bunker A/S has initiated a case against the issuer.
Adding further complexity to the procedural web, the former owner of OW Bunker (the private equity fund, Altor) and former members of OW Bunker’s management have filed a claim against Deloitte in Singapore for damages over breaches of their contractual audit obligations relating to the financial statements of the OW Bunker subsidiary, Dynamic Oil Trading (Singapore) Pte Ltd.
Another case that has attracted considerable attention is the civil litigation brought by the estate of the former Danish lighting company Hesalight A/S against the founder and CEO, three former members of the company's board of directors and the company's accountant. The estate claimed damages of DKK 200 million. It argues that the defendants had neglected their duties and responsibilities, in relation to dissipation of a DKK 562 million investment in corporate bonds from six institutional investors, and by presenting incorrect financial information in the company's annual accounts.
In its judgment of 31 March 2020, the court held the former CEO, two of the former members of the board of directors and the accountant jointly liable to pay damages for the amount of DKK 200 million. The court found that the fact the investors had not performed their own due diligence before investing in Hesalight, did not exclude civil liability, as the management had known the institutional investors had relied upon information in the company's annual accounts, including information that the annual accounts were confirmed by a state-authorised public accountant. The judgment is currently awaiting appeal to the High Court.
The number of securities claims in Denmark will probably continue to rise over the coming years. We now also see recovery companies such as Deminor Recovery Service operating in Denmark to assist shareholders in potential lawsuits against large companies and the management/board of directors in such companies.
As the claims become larger, the premium for D&O insurance in Denmark is also on the rise. It is therefore of the essence for large companies to ensure a sufficient sum on their D&O insurance, and it is necessary for insurance companies to ensure that the premiums collected and coverage are tailor-made for each company based on a thorough risk assessment.
Read others items in Professions and Financial Lines Brief - December 2020
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