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The new Danish corporation act(Taxwatch (Tax news in english)) 

On March 1, 2010 the new Danish corporation act came into force. However, not all the new rules in the act come into force on March 1. The rules in the new corporation act are implemented step by step. Over a transitional period certain temporary rules will be in force.

The new corporation act involves that the former acts on limited liable and public liable companies are repealed.

The following parts of the new corporation act came into force on March 1, and involve changes in a number of areas:

• The minimum capital requirement in private limited companies is reduced from DKK 125.000 to DKK 80.000. Private limited companies with a higher contributed capital than DKK 80.000 can therefore change their statutes and e.g. distribute the excess capital which will be taxed as dividends. No Danish withholding taxes are imposed on dividend distributions to parent companies (i.e. companies owning more than 10 % of the share capital) in EU/EEC/tax treaty countries. A reduction of a company’s share capital without distribution will have no adverse tax consequences.

• The rules on capital losses are changed so that they will apply only if the equity is less than DKK 62.500 – no matter the seize of the share capital.

• Liberty of choice between several management structures.

• Larger flexibility in the rules on representation of employees.

• Increased possibilities to acquire own shares.

• Simplified procedure when founding companies.

The changes regarding summoning and arranging the general assembly will come into force on May 1, 2010.

Some of the new rules will not come into force before the necessary changes in the IT systems of the Companies Register have been finalized, such as:

• The possibility of piecemeal payment of the share capital
• The possibility of omitting valuation report in connection with contribution or distribution of assets.
• The possibility of establishment with effect pointing forward. 
• The rules on establishment of an owner’s register available to the public.
• Changed requirements to documents in connection with mergers and splits.

Statutes 
In the transitional rules to the new corporation act it is stated that companies at the latest on the first coming general assembly must carry through the necessary changes to the statutes in order to bring them in pursuance with the new corporation act. This may have an impact on many statutes and general assembly’s in the spring of 2010.

Depending on the contents of a company’s statutes there may be a need for larger or smaller changes. Our recommendation is that the contents of the company’s statutes are reviewed in order to get an overview of possible changes.

In general, one has to pay attention to the following issues:

• If the statutes contain a shorter time limit than two weeks notice for summoning of the general assembly, the statutes must be changed in order to meet the requirement of the new corporate act being at least two weeks.
• If the statutes contain a shorter time limit than six weeks for putting topics on the agenda, changes to the statutes must be made in order to be conforming to the new act.
• Shareholders in companies who hold at least 5 % of the shares can in the future call for an extraordinary general assembly. Earlier at least 10 % shareholding was required in order to do so. Statutes where the limit is above 5 % must therefore be changed. However, in private limited companies each shareholder may demand that an extraordinary general assembly is held.
• Submitting documents in connection with a general assembly must in the future take place at least 2 weeks before the date of the general assembly according to the new act. Statutes with a shorter time limit must therefore be changed.

The new corporation act also contains some changes of concepts and gives some new opportunities. The new act e.g. no longer requires the statement of the home municipality. Electronic communication will now be accepted and non-physical general assemblies will be possible. It will therefore be wise to reconsider the statutes as a whole when adjusting them according to the new act.

Owner’s agreements 
Owner’s agreements are the new corporation acts denomination for shareholders agreements. Previously, shareholder’s agreements were binding for the company and the general assembly. The new corporations act has changed this. According to the new corporation act owner’s agreements are not binding for the company or for the general assembly.

Shareholders, who have had a shareholder’s agreement, should therefore consider their situation according to the new act.

Questions can be addressed to Hans-Henrik Nilausen  at hhn@bdo.dk