New Rules implemented - Unlimited employee shares, warrants and options

The changes represent the most significant expansion of Danish employee share incentive rules in years and make possible a range of new and commercially attractive possibilities for new and smaller companies.

Since 2021, it has been possible to grant employee shares, warrants and options in start-up companies for a value of up to 50% of the individual employee's gross annual salary within the special rules of section 7P of the Danish Tax Assessment Act. The introduction of the "50% limit" was a significant extension of the rules at the time, but in practice the scope and use of the extension has been subject to considerable limitations. 

With the amendment now in force, the 50% limit has been removed for qualified "new and smaller companies". The legislation contains these key amendments:

• Firstly, as the 50% limit is removed, there will no longer be a ceiling on the value of share-based remuneration granted to an employee and, consequently, no need for a separate valuation. Instead, the requirement is that the employee receives a fixed annual salary of at least DKK 265,300 (2026 level, subject to annual adjustment) at the time of the award.
• Secondly, the thresholds for when a company qualifies as "new and smaller" have been significantly expanded: 
  • the limit on the number of employees has been increased from 50 to 150, 
  • the maximum net turnover and balance sheet total have been increased from DKK 15 million to DKK 200 million, and 
  • the maximum period of market activity has been extended from 5 years to 10 years. 

Where the salary threshold is met and the company falls within the scope (including additional and unchanged thresholds and limitations), there is now no monetary ceiling on the share-based remuneration relative to the employee's annual salary. As long as the thresholds are met, the company may grant any amount of share-based remuneration to its employees. Companies will therefore no longer be required to carry out an independent valuation of the share-based remuneration granted, and the risk of the Danish Tax Agency subsequently challenging a valuation and reclassifying part of a grant as salary income is removed.

Perspectives for the new rules

The new rules primarily mitigate the need to prepare a valuation of the share-based consideration, as there is no cap on allocations. The removal of the separate valuation requirement can have significant practical implications. Valuation can be both costly and associated with uncertainty, making the new arrangement easier and less expensive to use in practice. 

Learn more about the new opportunities with regard to employee shares, warrants and options: Unlimited employee shares, warrants and options.