When setting up a business, choosing the proper corporate format and structure from the outset is important. Your choice of corporate format and structure has significant bearing on the financing options available, the level of risk incurred, taxation and a future transfer of undertaking, amongst others. ADVODAN offers expert analyses of your business needs and the options available. We take it upon us to ensure that your business has the best possible legal foundation – both at the outset and in the long term.
The most commonly applied corporate formats in Denmark are limited liability companies. This is a generic term for several types of companies, including private and public limited liability companies, private companies, entrepreneurial companies and limited liability partnerships. Other ownership options include European Companies (SE), limited partnerships, partnerships, branches of foreign enterprises, etc.
All businesses in Denmark must be registered with the Danish Business Authority. This is a prerequisite for doing business in Denmark. This also applies to European Companies (SE) domiciled in Denmark as per their articles of association.
As the above registration has legal consequences, ensuring from that the legal foundation for your incorporation is of paramount importance.
Limited liability companies
A limited liability company may be formed by one or more founders and a founder may be either a legal entity or a physical person.
Limited liability companies, such as private or public companies limited by shares (”A/S”), private companies (”ApS”), and entrepreneurial companies (”IVS”), are governed by the Danish Companies Act. Danish corporate law is highly influenced by EU regulations. For this reason, you may already be familiar with some of the requirements and provisions found in Danish corporate law. However, the area is also governed by Danish national legislation.
What is the cost of setting up a limited liability company?
Setting up a company in Denmark is in itself not very costly. The capital requirements vary depending on the type of company.
As a general rule, the Companies Act sets out more requirements for private companies limited by shares than it does for private companies and entrepreneurial companies; however, private companies limited by shares also enjoy a number of advantages; for example, when it comes financing.
In terms of management requirements, a private company limited by shares must be managed by a board of directors or a supervisory board consisting of at least three members and at least one director. Private companies and entrepreneurial companies, on the other hand, may be managed by just one director.
Private companies may be used as vessels in all business sectors, but is particularly used by small and medium-sized businesses. The entrepreneurial company is usually used for start-up companies, in which the capital base is not of interest to any third parties.
It is not possible to list private companies and entrepreneurial companies on the stock exchange. However, either one may later be converted into a private company limited by shares, which may be listed on the stock exchange.
If you wish to set up a private company limited by shares, you must subscribe to a share capital equivalent to at least DKK 500,000. A private company, however, only requires a share capital of at least DKK 50,000 and entrepreneurial companies a capital of only DKK 1.00 (less than EUR 1.00 or USD 1.00).
The share capital may be contributed in cash or by way of other valuables – i.e. contributions in kind. If you chose to contribute in kind, this contribution must be of a financial value. The contribution cannot be undertaking a duty to performing a piece of work or supplying a service. For the purposes of ensuring that the value is not overstated, a certified public accountant must prepare an estimate of the financial value of the contribution according to up-to-date accounting principles.
The share capital of an entrepreneurial company may only be contributed in cash.
If you set up your company using cash contributions only, you are required to only pay up to 25% of the share capital (however, a minimum of DKK 50,000). The remainder of the capital must be paid up within two weeks thereafter.
As a starting point, the capital shares of limited liability companies are freely negotiable, unless the articles of association state otherwise.
You will be able to set up your company quickly and get going
For certain types of companies, we will be able to have your company set up and have the documentation required for the company at hand within one to two business days. For other types, we will be able to set up your new company and have it ready for operation within one to two weeks.
We can assist you with the documents required
Setting up a limited liability company requires the preparation of a memorandum of association, articles of association and a register of shareholders. The Companies Act requires all three documents. If the articles of association are later amended or the shareholders change, you must remember to register these changes with the Danish Business Authority.
We will assist you in preparing the documents so that they meet the requirements set out in Danish corporate law and suit the specific needs of your company. We also offer to register the company with the Danish Business Authority.
You should be aware that a company in Denmark only takes legal effect once it has been registered with the Danish Business Authority. One consequence of this is that until the company is registered and has taken legal effect, persons acting on behalf of the company become liable for the obligations of the company, including any agreements or contracts which the company has entered into in the course of its formation.
If there are several owners of the company, you should consider entering into a shareholders’ agreement, which will regulate your relationship as shareholders. A shareholders’ agreement does not need to be registered with the Danish Business Authority and is therefore not a public document. The shareholders’ agreement does not bind the company itself but obligates the shareholders between themselves. If you wish to bind the company, the provisions of the shareholders’ agreement must be incorporated into the company’s articles of association.
The administration of companies in Denmark is public. The Danish Business Authority operates an online system, which makes a certain amount of information on your company publicly available. The memorandum of association and the articles of association are both to be submitted to the Danish Business Authority. Both documents will from then on be publicly available.
All businesses must register their legal as well as their actual ownership. This information is available to the public. The actual owners are the physical persons who either own or control a business. This ownership or control may take the form of capital shares, voting rights or another type of influence – e.g. the right to appoint a member of the management.
Apart from the above, the information publicly available includes registered capital, objective, management, and annual reports (this latter only applies to limited liability companies), amongst others.