Denmark - Company Incorporation
Company registration
Every company in Denmark must be registered and acquire a CVR-number (Central Company Register Number). There are three main business entities: Public Limited Company (Aktieselskab or A/S), Private Limited Company (Anpartsselskab or ApS), and branch office (udenlandsk filial).
Tax authority registration
When setting up a company in Denmark, your company must be registered for taxation purposes with The Central Customs and Tax Administration (CCTA). The CCTA issues a proof of registration, which will serve as your company’s VAT registration.
Business Entities
A foreign investor may conduct business in Denmark through a Limited Liability company incorporated either as a Public Limited company (A/S) or a Private Limited company (ApS), a registered branch office.
A Limited Company
The Danish legislation provides for two types of companies. A company may be established either as an Aktieselskab (A/S - equivalent to a public limited company) or as an Anpartsselskab (ApS - equivalent to a private limited liability company). The Danish Companies Act and the Private Companies Act contain all major regulations with respect to formation of an A/S or and ApS. There are only minor differences between the two types of companies. Also, the tax status of an ApS and an A/S is the same, which makes it easy to change an ApS into and A/S and vice versa.
Aktieselskab (A/S)
Share Capital
The minimum share capital of an A/S is DKK 500,000. The minimum share capital or half the share capital, if it exceeds DKK 500,000, must be paid no later than 6months after signing of the formation agreement. The remaining share capital must be paid no later than 12 months after the formation date.
If an A/S is incorporated, at least three share certificates must be issued and an A/S can hold up to 10% of its own shares.
Founders
The number of founders need not be more than one and no requirements exist concerning the founders' place of residence or registered address.
Formation Procedures
The formation agreement, which is signed by the founders, must contain the Articles in draft, the subscription price for share issuing, name and location of the company, the Board of Directors etc.
In the first general meeting the formation of the company is formally decided by the founders, and then the Board of Directors can register the company.
While a company is not yet registered, the founders are personally liable for the activities of the company. When registered the company will, however, takeover the responsibility for the company's activities carried out from the date of foundation to the date of registration.
Management
An A/S must have a Board of Directors and the number of board members must be at least three. The Board must appoint at least one manager. The manager can be member of the Board but is not allowed to be the chairman.
Board members and managers must be registered with the Danish Commerce and Companies Agency, along with their signing powers as prescribed in the articles of the company.
The Board of Directors and the manager will be jointly responsible for the company's administration.
Anpartsselskab (ApS)
Share Capital
An ApS must have a share capital of at least DKK 125,000. After two months from the date of foundation, 50% of the capital or at least DKK 125,000 must be paid in. The possible remaining capital must be paid in no later than 12 months after formation of the company.
An ApS will not issue shares for its members, which is the major difference between an ApS and an A/S.
Founders
The number of founders need not be more than one and no requirements exist concerning the founders' place of residence or registered address.
The founders are required to subscribe to the entire share capital,although it is sufficient that only one founder subscribes.
The Private Companies Act contains a general clause to the effect that an ApS has the same legal status in all Danish legislation as an A/S.
Formation Procedures
The formation agreement, which is signed by the founders, must contain the articles in draft, the subscription price for share issuing, name and location of the company, the Board of Directors etc.
In the first general meeting the formation of the company is formally decided by the founders, and then the Board of Directors can register the company. The registration with the Danish Commerce and Companies Agency (see below) must take place within a period of two months. The Agency may take up to six months to register the company.
While a company is not yet registered, the founders are personally liable for the activities of the company. When registered the company will, however, takeover the responsibility for the company's activities carried out from the date of foundation to the date of registration.
Management
A board of directors is optional unless the capital exceeds DKK 300,000 or the number of employees exceeds 35. When this is the case, a Board of Directors of at least 3 members must be appointed. The rule is equivalent to the one pertaining to an A/S.
The Board of Directors and/or the manager registered with the Danish Commerce and Companies Agency will have a joint responsibility for the administration of the company.
Purchase of a ready-made company (A/S or ApS)
Due to the considerable time spent in connection with the incorporation of a new company, it is quite common to purchase the shares in a ready-made company. A ready-made company is a registered company, which has carried out no activities in its lifetime. With such a company business can start up almost immediately.
To change the articles, the name, and to elect a new board etc. an extraordinary shareholders' meeting must take place very soon after the acquisition of the shares in the shelf company. Subsequently these changes must be registered with the Danish Commerce and Companies Agency.
Branch Office
A foreign company may establish a branch in Denmark, provided that the foreign company is registered in its home country. Companies resident outside the EU are a must obtain permission from the Minister of Industry. Permission is normally granted if Danish companies can obtain permission to set up branches in the corresponding foreign country (reciprocity).
Formation Procedures
A branch office must be registered with the Danish Commerce and Companies Agency, and the operation of the branch can only start when the registration has been filed, provided that the branch manager accepts responsibility. Upon registration with the Agency the branch office must submit the following documents:
- A copy of the Articles of the head office.
- The Incorporation certificate of the head office.
- A commitment in writing from the head office to abide Danish laws and rulings by Danish courts of law in all legal matters pertaining to the branch office.
- A certified power of attorney to a branch manager with documentation that the branch manager meets the requirements as to residency and citizenship.
The documents must be prepared in Danish. However, the Danish Commerce and Companies Agency can grant exemption from this requirement.
Management
The head office must appoint one or more branch managers of age of whom at least one must be a Danish resident or a EU national with residence within the EU. An exemption from this rule can, however, be granted from the Ministry of Business & Industry.
Subsidiary or Branch?
Generally, the advantages and disadvantages of each form of legal entity must be considered on a case-by-case basis. However, the choice of a subsidiary is often motivated by the limitation of the risk of the investment.
Branch
Payments by a Danish branch to its foreign head office for items such as royalties and interest are not deductible for tax purposes. Profits of a branch may be remitted to the head office free of with holding tax. In principle, there are no restrictions on the remittance of the profits of a branch to its head office. Foreign investors will often have the possibility to setoff a loss in a Danish branch against taxable income in the home country.
A branch must file the audited annual accounts of its parent company instead of the branch accounts.
Subsidiary
Dividends remitted by a subsidiary to its foreign parent company are subject to a 25% withholding tax (or a reduced rate as is provided for in the tax treaty).
A Danish parent or holding company may apply for joint taxation with its wholly owned Danish and foreign subsidiaries. The joint taxation system makes it possible to set off tax losses in Danish and foreign subsidiaries against profits of the Danish parent company and/or profitable subsidiaries.
A subsidiary must file its own audited annual accounts with the Danish company's registry.