Appeals court rejects bid to put bankruptcy deal to a vote

Iceland’s Court of Appeal has upheld a decision refusing to let creditors vote on a proposed composition for the bankrupt Táar ehf. The ruling, reported by mbl.is, found that claims had been transferred to companies on paper to get around rules on creditors’ voting rights.

The court issued its ruling on Friday. Claims against the bankruptcy estate total nearly 434 million krónur. The woman who brought the appeal was ordered to pay the estate 250,000 krónur in legal costs.

Táar ehf. entered bankruptcy proceedings in May 2018. The woman, who was among the company’s owners and managers, sought permission in July last year to pursue a composition agreement on its behalf.

Her proposal would have repaid creditors the full principal of their claims through interest-free bonds, paid in five equal annual instalments. It relied on restarting the company’s business selling, renting and maintaining vehicles, construction machinery and forklifts. She argued that the company’s former managers had the experience and business connections needed to make a revival possible.

The bankruptcy administrator rejected the request, citing substantial doubt that creditors would approve the proposal or that the company could meet its obligations.

The appeal court focused on claims transferred to Árfari ehf. and JV Capital ehf. A claim worth nearly 127 million krónur was transferred to Árfari in June 2025. It had previously belonged to JE eignarhaldsfélag ehf., which was owned by the woman’s children and her husband. On the same day, the couple’s daughter transferred her claim against the estate to JV Capital.

The court agreed with the Reykjavík District Court that the transfers were made on paper to bypass bankruptcy law, which bars creditors close to a debtor from voting on a composition agreement. Both transfer contracts allowed the buyers to cancel if no agreement was reached, the court noted. It found that the transfers had no independent commercial purpose and were intended to shift the claims to parties with voting rights.

The court also ruled that the bankruptcy estate of Spá ehf. was entitled to vote, but said this did not change the outcome. The law requires approval from 60 per cent of eligible creditors, both by number and by the value of their claims. The Tax Authority held more than 40 per cent of the total eligible claims, making its approval necessary. The authority had said it could not approve the proposal under the law on collection of public taxes and charges because it had filed a value-added tax claim against the estate.