More flexibility in Danish company law

Some of the most significant proposals for amendments to the Companies Act are:

• A lower initial capital contribution on formation of a Danish private limited company (an ApS)
• Introduction of entrepreneurial companies (an IVK)
• Easier to move the registered office to another EU Member State

Lower initial capital contribution
In 2009, the initial capital contribution required to form an ApS was reduced from DKK 125,000 to DKK 80,000. The hope was that it would make more people form an ApS. However, this hope was not fulfilled, and therefore, the initial capital contribution is now reduced to DKK 50,000.

Entrepreneurial companies (IVK)

In Denmark, it has so far only been possible to form a limited liability company in the form of an A/S (a public limited company) or an ApS (a private limited company). This is considered a limitation for people who dream of becoming entrepreneurs, but do not have the minimum capital of DKK 80,000 required (changed to DKK 50,000).

It is now proposed that it should be possible to form a limited liability company with a capital of DKK 1 - a so-called entrepreneurial company.

It will not be possible to distribute dividends until the company has a capital of DKK 50,000. Consequently, the company is required to set aside at least 25 per cent of the company's annual profits to capital reserves to build up capital.

When the capital reaches DKK 50,000, the general meeting can choose to register the company as an ApS (a private limited company) or an A/S (a public limited company). A valuation expert must, however, decide whether the company has the capital required.

An entrepreneurial company is subject to the same rules as private limited companies under the Danish Companies Act.

Easier to move the registered office

It will be easier for a company to move its registered office to another EU/EEA Member State. The reason is that in several decisions, the ECJ has indicated that a relaxation of the rules was required.

The decision to move the registered office is to be adopted by a majority of two-thirds at the general meeting.

The registered office can be moved without consent from the company's creditors. It is, however, still necessary to safeguard the interests of the creditors, and therefore, a valuation expert is to prepare a statement on the creditors' legal position. It is possible to opt out of the valuation expert's statement provided that the shareholders agree. If the shareholders opt out of the valuation expert's statement, the creditors will be entitled to prove their claims in the company.

Regard must also be had to the protection of the company's employees. The registered office can only be moved if the recipient country has rules protecting workers' participation in management.

Regard must also be taken to the protection of minority shareholders. Shareholders who oppose the change of address of the registered office may claim redemption of their share of the company.

A moving plan and a moving statement must be prepared. The moving plan and the valuation expert's statement must be published in the IT system of the Danish Business Authority no later than four weeks from the decision.

Other conspicuous changes

• Companies with limited liability (S.M.B.A.) are phased out
• Partial contribution at a premium in an ApS is permitted
• The limit of DKK 62,500 to capital losses is removed
• Minor changes in national and cross-border mergers or divisions
• Own shares can be purchased on the basis of the ordinary dividends
• Voluntary opt outs/ins of deadlines for registrations and notifications at general meetings
• No longer any requirement for an opening balance in the valuation report on acquisition/distribution of controlling interest

IUNO's opinion

First and foremost, the amendments proposed by the Danish Parliament increase flexibility for both existing and new Danish companies.

The reduction of the initial capital contribution required to form a Danish private limited company from DKK 80,000 to DKK 50,000 will ease the burden associated with forming a limited liability company. The entrepreneurial company definitely removes this burden.

Also, IUNO is of the opinion that creditors might be reluctant to enter into agreements with entrepreneurial companies out of fear of the lack of capital. Generally, there is little faith in new forms of companies and confidence in the traditional company structures among Danish lawyers, which does not make it better. It is, however, worth remembering that the entrepreneurial company will be subject to the same rules as the private limited companies in the Companies Act. This forces the management to operate entrepreneurial companies with adequate capital reserves.

IUNO anticipates an increase in personal liability as we have seen in the two other types of companies limited by shares.

The fact that it has now become easier for companies to move their registered offices from Denmark to another EU Member State will increase flexibility for companies having most of their activities outside Denmark. Companies will also be able to exploit the more lucrative conditions for companies offered by other EU Member States.

IUNO will follow the bill and update you on its readings in Parliament. IUNO expects the bill to be finally adopted before June 2013.

[B 152 - Bill to amend the Companies Act, Act on Certain Business Enterprises, the Financial Statements Act and the Act on the Central Business Register]