Electronic storage of financial records in a foreign country has now become a reality
Since 1 March 2015, legislative changes have given Danish companies the opportunity to store their accounting material electronically in foreign countries. The change is expected to lighten the administrative burden on especially international groups, and the new rules have resulted in an increasing flexibility, as for the companies’ internal structures and intra-group corporations on administrative tasks.
Until March 2015, it has been mandatory for all Danish registered companies to keep paper-based accounting materials within the borders of Denmark. A legislative amendment now makes it possible for companies to store such materials electronically in a foreign country without any prior permission.
However, there are some requirements that must be met, when a company chooses to store its accounting materials electronically in a foreign country. The most important are:
- The Danish Bookkeeping Act must be observed
Danish registered companies are subject to Danish legislation, and thus the company must at any time comply with the Danish Bookkeeping Act – regardless of how the company chooses to store its accounting material.
- Access from Denmark
The accounting material shall be accessible online from Denmark and all login information, incl. any passwords, must be stored in Denmark. This requirement inter alia means that companies are not given the possibility solemnly to store their accounting physically outside Danish borders.
- The Financial Records must be printer-friendly from Denmark
Finally, all accounting material shall at any time be printable from Denmark. Thus, the material must be available in a generally recognized and readable format.
SNEAK PEEK: Another proposed legislative amendment aims at simplifying financial reporting for SMEs
On 28 January 2015, an amendment to the Danish Financial Statements Act was presented to the Danish parliament. The proposal aims at reducing the disclosure requirements for smaller companies and raising such requirements for bigger companies.
The proposal e.g. contains an easing on the administrative burdens on companies in the co-called reporting class B, i.e. small companies. Furthermore, the thresholds between reporting class B and reporting class C – the latter consisting of medium-sized and big companies – has been suggested increased, so that the smallest of the medium-sized companies currently categorized as reporting class B-companies can make do with a minor annual report that only meet with the requirements for class B companies.
Please note that the proposed amendment has not been carried through, but we will keep an eye on the process and keep you posted on any news.
The level of legislative requirements to the Danish companies’ annual report should at any time reflect a balance between particularly two considerations. On one hand the shareholders of the company, its bank, the suppliers, collaborators and other stakeholder should have the opportunity to gain some insight in the financial conditions of the company – after all, this is the whole purpose of the annual reports being publicly available.
On the other hand companies each year spend a lot of time and resources on preparing more or less comprehensive annual reports, and we should at least be entitled to require that any legal burdens on this matter are well-reasoned. In other words, the legislative requirements to an annual report should always be proportionate with the purpose they serve and the size of the company.
All things considered, we are welcoming legislator’s focus on easing any unnecessary or disproportionate administrative burdens on the Danish companies.
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