On the 29th of May 2009 the Danish Parliament enacted a new single Corporate Act as a replacement for the predecessors; the Limited Liability Companies Act and Public Limited Companies Act. After some initial hesitation the Danish Commerce and Companies Agency stated that a major part of the Corporate Act would be in place from the 1st of March.
The purpose of this new Corporate Act is partly to change the Danish corporate regulations so they match foreign countries’ regulations and partly to strengthen the Danish companies’ ability to compete with foreign competitors by lessening the amount of bureaucracy, thereby making it easier to run and maintain companies.
The new Corporate Act will have an influence on all existing companies which have been incorporated as limited liability companies and as public limited companies, which makes it necessary for the management to consider what it must do in order to adapt to these changes. The substantial changes compared to the existing corporate laws are inter alia.:
- It will be mandatory for all share holders and public shareholders with at least 5 per cent of the total amount of shares to register in a public owners’ registry.
- The minimum amount of share capital will be reduced to DKK 80.000,00. Thus the existing shared companies should consider reducing their share capital to minimize the risk of losing capital in a possible bankruptcy. The minimum amount of share capital in public limited companies will remain unchanged at DKK 500.000,00.
- At the incorporation of a new company the deposit of the shared capital can be postponed to a later date, however a prerequisite is that at least 25 per cent of the shared capital must be deposited as share capital at the time of the association – shared companies however must at least maintain a share capital of at least DKK 80.000,00.
- The current requirements of accountants’ valuation reports of non-cash contributions to the share capital will be lessened. The obligation to make a valuation report will be removed wholly if the assets can be subjected to a current and general applicable valuation.
- There will be more options for companies in choosing from different management structures, as shared- and public limited companies can either choose the current structure of a board of directors and a management board or as a new option they can have a management consisting of a management board and a supervisory board.
- There is no longer the prerequisite that it must be explicitly stated in companies’ articles of association if they wish to make an extraordinary distribution of profits.
- The articles of association need no longer expressly state the district location of the registered office. In effect this means that it will be possible for companies to change their registered office’s addresses without changing their articles of association.
- The current maximum limitation of 10 per cent in a company’s acquisition of its own stocks will be abated. In the future the company can acquirement as many of its own shares as long as is within the free reserves of the company’s equity.
- A more simplistic and less intense amount of bureaucracy in regard to mergers and demergers, if all the capital owners concur.
- Shared company- and public limited companies owners’ contracts are in the new Corporate Act declared void in regard to their influence on general assemblies and the management of the company, which is a move away from the current established case law.
- The “unofficial general assemblies”, where the general assemblies can be held in the management’s or the company lawyer’s office without the presence of the capital owners will be expressly allowed in the new Corporate Act. As a prerequisite it must however be explicitly stated in the articles of association.
- The current ban on self-financing will be abated as shared- and public limited companies will have the option of providing loans or security in assets in connection with the acquisition of the company’s capital share.
- The extent of the liability of the management has been clarified. Thus, the management must at any time evaluate the economical position of the company and acquire enough capital resources to warrant a sensible level.
As this article shows there will be some substantial changes in the governance of companies. Several of the new articles will make it necessary to readjust the company’s articles of association, which in turn means that it might possibly be a good time and opportunity to re-evaluate the structural and financial governance of the company.
For more information or assistance in regard to the impact of the Corporate Act please contact; attorney Thomas Torré-Christiansen or attorney Nicolai Platzer Funder.