Adopted amendments to the Danish Companies Act
Reduction of capital requirement for private limited companies
For the purpose of lowering the barrier to entry for entrepreneurs, the Parliament on 19 December 2024 adopted an amendment to the Danish Companies Act (DCA) lowering the capital requirement for private limited companies (anpartsselskaber) from DKK 40,000 to DKK 20,000.
The lowered capital requirement for private limited companies requires an adjustment of the IT system of the Danish Business Authority (DBA) used for registrations. The lowered capital requirement is set to take effect following the necessary adjustments of the DBA's IT system. The DBA has not yet announced the final effective date of the lowered capital requirement.
Public offering of shares by private limited companies
Another key amendment to the DCA is the loosening of the current restrictions on the public offering of shares applicable to private limited companies. The change intends to make it easier for entrepreneurs to obtain financing.
The current rules prohibit private limited companies from offering shares to the public. The adopted amendment to the DCA allows private limited companies to engage in public offerings if such offering is made in accordance with the Regulation on European crowdfunding service providers for business.
Pursuant to the adopted amendment to the DCA, private limited companies may likewise engage in public offerings if:
- The offering is addressed solely to qualified investors.
- The offering is addressed to fewer than 150 natural or legal persons, who are non-qualified investors, within each country in the EU/EEA member states.
- The offering has a minimum denomination of EUR 100,000 per unit.
- The offering is addressed to investors who acquire shares for a total consideration of at least EUR 100,000 per investor for each separate offering.
It remains prohibited for private limited companies to admit their shares for trading on a regulated market or a multilateral trading facility.
The amendment to the DCA is set to take effect on 1 January 2025.
Shareholder loan rules repealed
On 19 December 2024 the Parliament also adopted another amendment to the DCA by repealing sections 210-212 governing shareholder loans. The repeal of these rules allows limited liability companies to provide loans or financial assistance to shareholders, board members, and similar parties without meeting the conditions in section 210(2), such as requiring approval by the general meeting.
In spite of the repeal of the shareholder loan rules in the DCA, various considerations must still be made if a limited liability company intends to issue a shareholder loan.
The rules on financial assistance
The prohibition in section 206 of the DCA on providing financial assistance for the acquisition of shares in the company itself or its parent company still applies. Consequently, any shareholder loans by the company must not conflict with the DCA's prohibition on financial assistance or must be issued in accordance with sections 207 - 209 of the DCA.
Fundamental Danish corporate law doctrines
The management of the company remain obligated to ensure that fundamental corporate law doctrines are observed if the company is to provide shareholder loans. This includes, but is not limited to, ensuring that:
- The transaction is in the interest of the company.
- That no transaction unfairly benefits certain shareholders or others at the expense of the company or other shareholders.
- The company maintains adequate financial resources and sufficient liquidity.
Tax treatment of shareholder loans
The adopted amendment does not affect the tax treatment of shareholder loans. Certain shareholder loans are taxed pursuant to the existing rules in section 16 E of the Danish Tax Assessment Act, which stipulates that loans to shareholders with controlling influence are taxed as either salary or dividends. However, section 16 E does not apply to loans granted to board members or shareholders without controlling influence. Consequently, taxation pursuant to section 16 E occurs regardless of whether the shareholder loan in question is lawful or unlawful pursuant to the DCA.
The amendment to the DCA is set to take effect on 1 January 2025.
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