Partial commencement of the Danish Companies Act on 1 March 2010

Date 5 mar. 2010

On 24 February 2010, the Danish Ministry of Economy and Business Affairs published an executive order regarding the partial commencement of the Danish Companies Act (the “DCA”). As the executive order states, only parts of the DCA will enter into force on 1 March 2010. As regards the areas where the DCA will not enter into force now, the current rules will continue to apply.


For practicians as well as those subject to the DCA, it is important to become acquainted with which rules will not enter into force yet. Thus, below is a short summary of the rules and their contents.


The prevailing part of the DCA, which will enter into force on 1 March 2010, will be reviewed in this article, wherefore knowledge of the Danish Public Companies Act and the Danish Private Companies Act is a prerequisite. In this connection, we refer to our news of 17 November 2009: “The Commencement of the New Companies Act”.


Record of owners

The rules prescribing that the companies registered in the Danish Commerce and Companies Agency’s it-system must keep public record of owners, including all capital owners who own more than 5% of the share capital, have not entered into force yet. These rules are further described in DCA Sections 5(9) and 58, cf. Section 55.


Incorporation of a company with a proactive effective date

The rules on incorporation with a proactive effective date, as described in Sections 26, 40(2)-(6) and 41(2), will not enter into force yet. Thus, it is not possible to establish a company with a proactive effective date. As a consequence thereof, a number of rules on the content of incorporation documents will not enter into force either.


Partial payment of share capital

The DCA introduces the opportunity for companies to establish a company and only pay 25% of the share capital, cf. Sections 33 and 34. However, these rules will not enter into force yet, so it is still a requirement that the share capital in capital companies is paid in full. In relation thereto, neither the rules on debt conversion in Section 171 nor the rule on registration of capital increase in Section 174(1) will enter into force. The current rules on payment for debt conversion in Section 33(a) of Danish Public Companies Act and Section 40 of the Danish Private Companies Act are, thus, still applicable.

 

Valuation report

The rules stating that a valuation report may be omitted at non-cash contributions of registered securities or of an existing company which has recently presented financial statements will not enter into force at the present time. These rules are described more thoroughly in Section 38 of the DCA. Correspondingly, the rules on a founder’s contribution of this type of assets have not yet entered into force.


The rules regarding the drafting of a valuation report in connection with the disbursement of non-cash dividends, cf. Sections 181 and 183(5) of the DCA, will not enter into force, but since no substantial changes are comtemplated in this area it is not of material importance that Section 110(4) of the Danish Public Companies Act and Section 45(5) of the Danish Private Companies Act continue to apply.


Financial assistance

The new rules regarding relaxation of the prohibition of financial assistance applying at present, cf. Sections 206-209 and 210(2) of the DCA, do not come into force on 1 March 2010. The prohibition against financial assistance as stated in Section 115(2) of the Danish Public Companies Act and Section 49(2) of the Danish Private Companies Act, respectively, thus still apply.


Mergers and demergers

A large part of the simplified rules on mergers and demergers in chapter 15 of the DCA will not enter into force now. Thus, the present rules of chapter 15 of the Danish Public Companies Act and chapter 10 of the Danish Private Companies Act continue to apply. Thus, the simplified merger or demerger, where many of the merger and demerger documents are deselected, is not yet available.

 

Transformation of a company

Generally, the rules on transformation into a private company do not come into force. Among others, this concerns Section 325 of the DCA according to which another capital company may be transformed into a private company without the consent of the creditors, the deadline for drafting of the valuation report in Section 329(3) of the DCA and the formal requirements for the completion of the transformation in Section 334(1) of the DCA.


However, the rules on transformation from a private company to another legal person will come into force on 1 March 2010, cf. Sections 321-323. The rules which do not enter into force at present are not significantly different from the rules in Section 134 n of the Danish Public Companies Act and Section 66 of the Danish Private Companies Act which apply today.


Other provisions

The above only reviews important, selected changes which do not come into force. A number of other provisions do not enter into force on 1 March 2010 either. Among other things, this applies to the rules concerning the last date for introduction of items for the agenda of the general meeting, cf. Section 90(2) of the DCA, and rules on the branches’ names, cf. Section 347(1) of the DCA. 

 

 

If you have questions regarding the above or require additional information about the 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 consideration.