The commencement of the new companies act

Date 17 nov. 2009
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Introduction

29 May 2009, the new Companies Act was passed by the Danish parliament, Folketinget. The purpose of the new Companies Act is particularly to make Danish company legislation internationally competitive, to equalise the rules for public limited companies and private limited companies and to create a considerable simplification for the companies. The new Companies Act will continue to apply by analogy to limited liability partnerships.

 

The central changes to the new Companies Act are:

 

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The paid capital in both public limited companies and private limited companies can under certain circumstances be only 25% of the capital share.

 

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For private limited companies the nominal share capital is now DKK 80,000, and for limited companies the nominal share capital is still DKK 500,000.

 

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The former limitations on share capitals’ voting rights are now lifted and it is  possible to introduce non-voting share capital.

 

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Both public limited companies and private limited companies can choose to make use of a new management structure, consisting of a supervisory board and a management board. The Supervisory board will only be supervising the management board and will not have any instruction authority.

 

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The authorisation to the central management to pay out extraordinary dividend will no longer have to be admitted in the articles of association and can happen once and for all.

 

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The former limit for acquiring own share capital (10% of the nominal share capital) will be lifted and the rules will be equalised for public limited companies and private limited companies.

 

 ·    It will be possible to self-finance a company’s purchase of own capital shares, given that certain formal requirements are met.

    

The enforcement in general

The new Companies Act, which will assemble the Public Companies Act and the Private Companies Act in one act, is expected to be enforced in three stages, out of which the first stage will be enforced 18 January 2010, and will be reviewed below. At this moment, it is still uncertain when the remaining stages of the Companies Act will be enforced. The postponement of the remaining stages is due to lack of operational computer systems, which are supposed to handle the new opportunities the new Companies Act provide.

 

Should a problem pertaining to company law occur, it can be necessary, from 18 January 2010 and until the remaining stages are enforced, partly to examine the new Companies Act,  and partly to examine the Public Companies Act and the Private Companies Act.

 

The first stage which will be enforced 18 January 2010

6 November 2009, the Danish Commerce and Companies Agency has released a statement with the excepted new enforced rules of the new Companies Act. Below the most essential of the excepted new rules, which will be enforced 18 January 2010 (hereinafter the “Enforcement date”), will be reviewed.

 

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Foundation, nominal share capital demands and share capital

From the Commencement Date, the foundation of a public limited company can happen through the same procedure that applies to a private limited company, which will create a substantially simplification in the field. The demand of subscription lists and statutory general meetings is lifted. From the Commencement Date, it will only be necessary to draft a foundation document, which shall contain the company’s articles of association.

The minimum share capital in private limited companies is reduced to DKK 80,000, and for public limited companies the minimum share capital is still DKK 500,000. There is still a demand on full payment for the share capital, because this change will be enforced at a later stage.

 

From the Commencement Date, it will be possible to differentiate without limit in the capital shares’ voting value, and capital shares can be made non-voting capital shares. It will be possible to issue capital share units, which have no nominal value, but will constitute an equal share of the share capital.

 
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General assembly and management

From the Commencement Date, owner agreements, which are shareholders agreements in either a public limited company or a private limited company, will no longer be binding for the company and the decisions made by the general assembly. This will constitute a sizeable change for all owner agreements, including owner agreements entered into before the Commencement Date. If a conflict between an owner agreement and the company’s articles of association or a general assembly decision should arise, the owner agreement will not be taking into consideration.

 

It will be possible to give unlimited proxy to others than the company’s management; however the current limitation of 12 months will still apply to proxies to the company’s management.

 

It will be possible to hold a general assembly in other languages than Danish. From the Commencement Date, the new Companies Act will specify which demands will apply when holding general assembly in another language than Danish.

 

From the Commencement Date, it will be possible to choose among new management structures. Both public limited companies and private limited companies will, apart from the current management structure, be able to choose a two-tier management structure, consisting of a supervisory board and a management board. The supervisory board has no direct managerial powers over the management board. The management board is in charge of the company, and a number of tasks, which normally would go to the board of directors, go to the management board instead, if the company chooses to have a supervisory board.

 

From the Commencement Date, the rules on employee representation can, to a certain extent, more easily be derogated from in agreement between the management and employees.

 

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Capital increase, capital reduction and own capital shares

From the Commencement Date, capital increase and reduction will be made more flexible, due to the possibility to opt out of certain documents in connection with the increase and reduction.

 

From the Commencement Date, the present limit of 10% for a public limited company’s acquisition of own shares is lifted. A capital company will hereafter be able to acquire own shares with the free reserves, which is the money that could be used to pay dividend. For private limited companies, it is now possible to acquire own shares, due to the lift on the prohibition of private limited companies’ acquirement of own shares.

 
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Mergers and demergers

From the Commencement Date, mergers and demergers will be made more flexible, as it will be possible to opt out of certain documents. It will be possible to complete the merger or demerger immediately, if all the participating companies are private limited companies, provided that the valuation report regarding the creditors’ positions concludes that the creditors are sufficiently secured. It is not clear whether mergers or demergers of public limited companies can be relieved by a previous transformation of the public limited companies to private limited companies. It is expected that the Danish Commerce and Companies Agency or the Commercial Appeals Board will make a decision on this in the following practice.

  

Final comments

The new Companies Act will result in considerable changes to the present state of the law. We urge that companies and share capital holders go through their articles of association, owner agreements and rule of procedure etc. before the Commencement Date with a view to updating these.

 

With the new Companies Act, the management’s responsibility will be specified in the act and the preparatory work, especially regarding the company’s share capital. It is therefore important that the management is aware of these changes, because it can lead to an aggravating management responsibility. The capital owners should be aware that from the Commencement Date, owner agreements will no longer have any validity for voting results, and it is therefore recommended to consider the need for changes in the owner agreements and articles of association.

 

 

If you have questions regarding the above or require additional information about the new Companies Act, please contact attorney Dan Moalem (dmo@mwblaw.dk), attorney Lennart Meyer Østenfjeld (lmo@mwblaw.dk) or junior associate Martin Dahlgaard (mda@mwblaw.dk).

 

The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions of considerations.