Danish Parliament passes amendments to the rules on commercial foundations
The purpose of the amending act is to make the rules governing commercial foundations clearer, remove unnecessary regulation, and reduce processing times at the authorities.
The changes bring a number of administrative simplifications for commercial foundations, but also a few stricter requirements that foundations should note.
Key elements of the amending act are described below:
Abolition of the Danish Civil Affairs Agency’s role as permutation authority
The Danish Civil Affairs Agency will no longer act as the permutation authority for commercial foundations. In future, only the Danish Business Authority will be required to approve amendments to a foundation's objects, changes to its dissolution provisions and the foundation's liquidation. This change is expected to reduce processing times.
Greater flexibility in relation to distributions and mergers
Distributions may now be made from the time the commercial foundation is established, and the board of directors may authorise a member of the executive management to decide on distributions up to a specified maximum amount.
The requirements for a valuation report in connection with distributions and capital reductions involving assets other than cash, and for an interim balance sheet in connection with distributions and mergers, have been abolished. It is now for the board of directors to determine whether such documentation is necessary.
Changes to the annual report
The requirement to disclose the commercial foundation’s relationships with other commercial enterprises in the annual report has been abolished. In addition, the auditor’s duty to report matters to the Danish Business Authority has been clarified and codified, so that it applies only to breaches of the Danish Commercial Foundations Act, rules issued pursuant to the Act, or the foundation’s articles that are not immaterial. Finally, the exemptions from the requirement to prepare consolidated financial statements have been expanded.
Related parties - a specific focus point for foundations
The amending act introduces a new provision (Section 59a) on a commercial foundation's "related parties", broadening the previous definition of "closely associated parties". The group now also includes management members' spouses/cohabiting partners and close relatives, as well as — subject to varying affiliation requirements — companies connected to these individuals through management, ownership or significant influence.
Commercial foundations must disclose in their annual report the nature of their relationship with related parties, along with relevant transaction and balance information. This disclosure requirement applies only to financial years beginning on or after 1 January 2027.
Given the wider scope, foundations should nonetheless start preparing now to ensure their internal recording and disclosure procedures can identify transactions with this broader group in good time.
Relaxation of the capital loss rule
The requirement to submit an annual report to the Danish Business Authority on the re-establishment of the base capital has been abolished. However, the board of directors and any executive management continue to bear a heightened responsibility for ensuring an adequate base capital in a capital loss situation..
Further information
If you have any questions, please contact Plesner's Corporate Law team.