June 2009 THE DANISH ACT ON PUBLIC AND PRIVATE LIMITED LIABILITY COMPANIES AMENDMENTS

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1 June 2009 THE DANISH ACT ON PUBLIC AND PRIVATE LIMITED LIABILITY COMPANIES AMENDMENTS Gorrissen Federspiel Kierkegaard H.C. Andersens Boulevard DK-1553 Copenhagen V, Denmark

2 New act on limited liability companies (A/S and ApS 1 ) Overview of amendments On 29 May 2009, the Danish Parliament (the Folketing) adopted a new act on public and private limited liability companies. No date of entry into force is stated in the act as it is intended to take effect in stages as determined by the Ministry of Economic and Business Affairs. The gradual implementation is necessitated by the fact that the IT system of the Danish Commerce and Companies Agency calls for an upgrade in order to administer the new act, among other things. In reality, the two existing Danish companies acts are integrated into one act introducing a number of important liberalisations. This memo lists a number of the most important amendments contemplated by the act. Company formation Removal of the requirement that the shares in a private limited company shall be subscribed by the founders. Access to use official standardised articles of association with the addition of individual details. No requirement to state the registered office and auditor in the articles of association. Company capital The minimum capital requirement of DKK 125,000 for private limited companies is lowered to DKK 80,000. Requirement for the payment of a minimum of 25 % of the company capital plus any premium, however, not less than DKK 80,000 (applies to both private and public limited companies). The subscribed capital remains a personal claim on the subscriber and is payable on demand. Capital losses if the equity is lower than DKK 62, Public limited company (A/S) and private limited company (ApS)

3 Full voting rights on all shares even if the entire subscription amount has not been paid (provided that the balance remains uncalled). Contribution in kind may in certain situations take place without a valuation report. Formation with future effect is possible. However, the company may undertake no obligations during the period preceding the formation taking legal effect. Formation by contribution of a controlling interest in another company is possible with retrospective effect for accounting purposes. The provisions governing subsequent acquisitions (post formation) have been cancelled for private limited companies but apply to public limited companies in the event of acquisition from founders. Shares Access to issue shares with no voting rights. Cancellation of the requirement that voting rights attached to certain shares cannot exceed 10 times the voting rights attached to other shares with identical denomination. Possibility to issue individual shares ( stykkapitalandele ). Shareholders register publicly available in relation to ownership and voting rights exceeding 5 %. Obligation to notify is triggered when thresholds of 10, 15, 20, 25, 50, 90 or 100 % as well as 1/3 and 2/3 are reached (subject to fines). Possibility to issue ownership certificates in private limited companies. Compulsory redemption The rules have been extended to include private limited companies. Clarification of the difference between statutory compulsory redemption and compulsory redemption provided for in the articles of association. A resolution on compulsory redemption may be passed without involving the company s management.

4 General shareholders meetings The directive on shareholders rights will be implemented in the Act which will impact on companies with shares listed for trade on regulated markets. Capital owners may unanimously decide that resolutions relating to the company shall be passed otherwise than at a general meeting. The rule does not apply to governmental and listed companies etc. Shareholders agreements are not binding for the company and resolutions passed at general meetings. Non time limited proxies to attend general meetings may be issued to other proxy holders than the company s management. Proxies to the company s management may only be issued for the purpose of a specific general meeting with a specific agenda. Such proxies are valid for 12 months. A proxy holder may attend a general meeting together with an advisor. A registration date is introduced for companies whose shares are listed for trade on a regulated market. The date of registration determines when a shareholder is entitled to attend a general meeting and vote at the meeting. The date of registration is 1 week before the general meeting. In public limited companies shareholders who own 5 pct. of the capital of the company may in writing demand that an extraordinary general meeting is held. A shareholder is entitled to have a proposal included in the agenda for the annual general meeting of a public limited company provided that such proposal is submitted at least 6 weeks before the general meeting. Norwegian, Swedish or English may be used as the language on general meetings if resolved by a simple majority of votes. Other languages may be used if resolved by a 9/10 majority. Shareholders rejecting such language may demand that their shares are redeemed by the company. Documents may be filed with the Commerce and Companies Agency in Swedish, Norwegian or English without translation.

5 Shareholders may vote in writing prior to the general meeting. The management of the company Two different corporate management structures may be opted for in a public limited company: a management structure where the company is managed by a board of directors and a board of management; a management structure where the company is managed by a board of management that appoints a supervisory board to supervise the board of management. A private limited company may elect to have only a board of management. Norwegian, Swedish or English may be used as the board of director s language if resolved by a simple majority of votes provided that the said language is the corporate language of the group. Employee representation The employees are entitled to elect a number of company and group representatives and alternates being less than the number prescribed in the act. Companies with foreign subsidiaries may, for the purpose of electing group representatives, at a general meeting resolve to extend the group of eligible employees and employees entitled to vote with the employees in one or several foreign subsidiaries. Employees in Danish subsidiaries shall elect at least 1 representative. If such employees constitute more than 10 percent of the total number of employees entitled to vote, they shall be entitled to elect a minimum of 2 representatives. The rules of procedure may be deviated from if agreed between the management and the employees. Voluntary employee representation schemes may be established. Such schemes may continue even if the company becomes obliged to meet the statutory requirements governing employee representation, unless the employees object. Audit and scrutiny No longer a requirement that details concerning the company auditor shall be stated in the articles of association of companies subject to statutory audit. Minority shareholders in private limited companies may elect a supplementary auditor.

6 In companies subject to statutory audit, the auditor may only be removed prior to expiry of the election period, if reasoned circumstances occur. Capital increase In connection with extraordinary general meetings, the management report and accountant s statement may be omitted if agreed between the shareholders. Contribution in kind may in certain situations take place without a valuation report. Express right for private limited companies to issue warrants and convertible debt instruments. Capital decrease If a capital decrease shall be passed on an extraordinary general meeting, the management report and accountant s statement may be omitted if agreed between the shareholders It is still a requirement that public limited companies prepare a balance sheet when resolving to distribute extraordinary dividend. The balance sheet in the company s latest annual report may be applied, unless the decision is made more than 6 months after the day of balance in the annual report. It is no longer a requirement that the balance sheet is reviewed by the auditor. Extraordinary dividend may be adopted by the general meeting or by authorisation from the general meeting. It is no longer a requirement that the authorisation to pay extraordinary dividends is stipulated in the articles of association. A capital decrease by payout or transfer to the reserves is automatically effected upon 4 weeks, unless filed that the decrease should not be completed. The board of directors of a private limited company may be granted authorisation to reduce the capital. Treasury shares The rules are extended to comprise private limited companies.

7 Removal of the 10% limit on holding of treasury shares. Possibility to acquire treasury shares within the distributable reserves. Acquisition of treasury shares can only include fully paid shares. The general meeting may grant authorisation to acquire treasury shares for a period of up to 5 years. Shareholder loans and self-financing Self-financing within the distributable reserves is allowed on certain conditions. Loans to parent companies may be granted to companies within the EU/EEA as well as companies in countries considered low-risk countries by the OECD (Australia, Canada, Japan, South Korea, New Zealand, Singapore, Switzerland, USA, Hong Kong and Taiwan). It is prohibited to provide loans to the management in any parent company regardless of the nationality of the parent company. Winding-up The Bankruptcy Court may appoint an external accountant in connection with the compulsory windingup of a company. Possibility of distribution on account of liquidation proceeds. Merger and demerger In connection with a merger or a demerger between private limited companies, the shareholders may (if consensus) elect to disregard the merger and demerger plan. In connection with a merger, the group of owners of private limited companies may elect to disregard the board statement and the interim account. In connection with a demerger, the shareholders of public and private limited companies may elect to disregard the board statement and the interim accounts. The shareholders of public and private limited companies may agree not to obtain a valuation experts statement concerning the merger or demerger plan, including with respect to the price.

8 The shareholders of public and private limited companies may agree not to obtain valuation expert statement on the position of the creditors provided that the creditors are allowed to file their claims against the company. A merger and demerger may take effect for accounting purposes after the date of the resolution. In the event of a merger and demerger between private limited companies, the 4-week time-limit between the publication of the merger or demerger plan and the resolution to effect such merger or demerger may be deviated from (if consensus) provided that a positive creditor declaration has been submitted. Cross-border merger and demerger Public and private limited companies are still required to prepare a merger plan together with a merger statement. Furthermore, public and private limited companies are required to prepare a demerger plan as well as a demerger statement. A cross-border merger and demerger may take effect for accounting purposes after the date of the resolution. The shareholders of a private limited company may agree not to prepare an interim statement of accounts in the event of a cross-border merger. The shareholders of both public and private limited companies may agree to leave out the interim statement of accounts in connection with a crossborder demerger. The shareholders may agree to leave out the valuation experts statement concerning the position of the creditors in connection with a cross-border merger and demerger provided that the creditors are allowed to file their claims against the company. The merger and demerger statement must be available for inspection at the company s offices for employee representatives or the employees no later than 4 weeks before a decision is made to effect the merger or demerger. Conversion of a co-operative society into a public limited company Requirement for a conversion plan and a valuation report on non-cash contribution.

9 Conversion of a co-operative society 2 into a public limited company may take effect for accounting purposes after the date of the resolution. The members of a co-operative society may agree to leave out the conversion statement, interim account, valuation expert s statement concerning the conversion plan and the creditors position. The members of a co-operative society may in their decision concerning the conversion agree that it shall be effected earlier than 4 weeks after the publication by the Commerce and Companies Agency of receipt of the conversion plan and the valuation expert s statement provided that a positive statement concerning the position of the creditors has been submitted by the valuation expert. Takeover bid in relation to public limited companies with shares listed for trade on a regulated market The Act shall also apply to public limited companies whose shares are listed for trade in an alternative market place. Branch offices Access to re-registration of struck-off branch offices with the same CVR no. Governmental public limited liability companies Subsidiaries of governmental public limited liability companies are no longer covered by the provisions governing government public limited liability companies. By virtue of their duty to disclose information to the Danish Commerce and Companies Agency, governmental public limited liability companies that are parent companies must include information on material facts concerning the group and that can be assumed to have an impact on the future of the group, its employees, shareholders or creditors. If a governmental public company is listed on the stock exchange, only the rules on the publication of information directed aimed at listed companies apply. 2 A.M.B.A.

10 Liability in damages In the event that a shareholder inflicts a loss intentionally or gross negligently on the company, other shareholders or a third party, and there is a risk of continued misuse, the Court may order such shareholder to sell its shares to the other shareholders or the company. --o0o-- Please address queries or questions to: Niels Bang Sørensen: Tel nbs@gfklaw.dk Henrik Thouber: Tel ht@gfklaw.dk