How are Mergers and Acquisitions regulated in Denmark?
Mergers and acquisitions in Denmark are generally regulated by the Danish Companies Act (in Danish: “Selskabsloven”) along with special regulation on areas such as competition law, provisions on the rights of employees, intellectual property and tax etc. Furthermore, the acquisition of assets and shares is also covered by the Danish Sales of Goods Act.
Are there any special Requirements for listed Companies?
The Danish Securities Trading Act (in Danish: “Værdipapirhandelsloven”) stipulates a number of requirements that apply when one or more of the companies in question are publicly traded.
Furthermore, the Danish regulated markets and the alternative market places Nasdaq OMX Copenhagen A/S, Dansk AMP A/S and First North have issued a number of different rules which apply to companies with securities listed on the relevant market place along with the general legislation concerning such companies.
Do the Danish Regulations conform to the EU Regulations?
The Danish regulations conform to EU regulations.
Which Precautions may a Company take in order to avoid a Takeover?
The Danish Companies Act allows a company to take a number of precautions in order to avoid a takeover. This includes the following measures:
Limits to ownership and voting rights
A company’s articles of association may limit the maximum number of shares a shareholder may own or the maximum number of votes a shareholder may exercise. Furthermore, the company’s articles of association may contain provisions which raise the passing requirements and thereby impair the power of the existing or potential majority shareholder.
Right of first refusal:
A company’s articles of association and/or shareholders’ agreements entered into between shareholders may entitle existing shareholders to purchase shares offered for sale by other shareholders before such other shareholders may sell their shares to a third party.
Approval by the board of directors:
A company’s articles of association may stipulate that any share transfer must be approved by the company’s board of directors.
Different classes of shares with different rights attached may be issued. Among other things, these rights include preferential rights to dividend and/or liquidation proceeds, votes, etc.
Is a Shareholder required to notify the Company or the Danish Business Authority of his or her Shareholding?
Notification to the company as a requirement for exercising votes:
As long as the shareholder owns less than 5% of the shares or the votes, the shareholder may remain anonymous. However, in order for a shareholder to be entitled to exercise the voting rights carried by the company’s shares, the Danish Companies Act requires for the shareholder to apply for registration of his acquisition of shares in the company’s register of shareholders.
Notification when crossing thresholds:
Shareholders, whose shareholdings represent 5% or more of either (i) the voting rights or (ii) the nominal value of the share capital, must give notice to the company, and the company must keep a register hereof.
Shareholders are also obligated to give notice to the company when reaching, or when no longer holding, a minimum of 5%, 10%, 15%, 20%, 25%, 50%, 90%, or 100% or when reaching any limit of 1/3 or 2/3 of the voting rights or the share capital. Likewise, the company must keep a register hereof.
The register must be available to the public upon request.
It is expected that companies in 2013 will be required continuingly to report to the Danish Business Authority (hereinafter “DBA”) in Danish: “Erhvervsstyrelsen”) about every shareholder who provides information as described above. The DBA will maintain a register of this information, which is made public.
If the shares are listed on a Danish regulated market, an alternative market notice regarding the crossing of the abovementioned thresholds must be given to the relevant regulated market as well as to the company. The acquirer may be required to issue a takeover bid for the remaining outstanding shares when attaining decisive control over the company.
May a Majority Shareholder redeem the Shares of Minority Shareholders?
If a shareholder holds more than 90% of the shares and voting rights in a company, the shareholder may demand that the company’s remaining shareholders sell their shares to him.
May a Minority Shareholder demand to have his or her Shares redeemed by the Majority Shareholder?
If a shareholder acquires more than 90% of the shares and voting rights in a company, the remaining minority shareholders may demand that the majority shareholder acquire the minority shareholders’ shares.
How is a Merger or an Acquisition financed?
Payment regarding an acquisition may be in the form of cash, assets, shares, etc. and is generally not regulated under Danish law. The Danish Companies Act has a detailed set of rules regarding payment when merging two or more companies.
Except as set out below, Danish companies are prohibited from granting loans to finance the acquisition of shares issued by the company or shares in a parent company. In addition, Danish companies are not allowed to make assets available or provide assets as security in connection with the acquisition of the shares of the company.
Accordingly, “bridge loans” requiring the company to pledge its assets to an institution financing the acquisition are generally not possible in the event of an acquisition of shares, unless the procedure outlined below is used.
A Danish limited liability company may under certain conditions grant loans or provide security in connection with the acquisition of shares in the company or its parent company. The board of directors’ body must prepare a statement, and the loan must be granted on an arm’s length basis. The loan may only be granted with the company’s distributable reserves. The general meeting must approve this with the majority prescribed in the Danish Companies Act or the articles of association, and the loan or security must be reasonably related to the company’s financial position.
Furthermore, it is generally possible to grant loans to parent companies located within the EU or within certain other countries even if such loans are unrelated to the acquisition of shares in the subsidiary.
The acquisition of assets is not covered by the abovementioned prohibitions.
What is the Difference between Acquisition of Assets and Acquisition of Shares?
An acquisition of shares usually means that liabilities and assets remain with the company. Thus, it is generally not necessary to obtain consent from suppliers, customers etc. unless specific “change of control provisions” exist in the relevant contracts or are otherwise provided for.
An acquisition of assets usually means that only the rights and liabilities agreed upon between the parties are transferred. Thus, it is generally necessary to obtain consent from customers, suppliers, etc.
A number of exceptions apply to these general principles, particularly with regard to employees who enjoy certain rights in connection with a takeover, whether this occurs as an acquisition of assets, shares or otherwise. For instance, an acquirer of assets will take over the liabilities towards employees.
Please note that the transaction structure, asset purchase or share purchase may have different consequences from a tax or accounting perspective.
When merging two or more companies or acquiring another company, the deal will be scrutinized by the relevant authority if the companies’ turnovers and values are higher than the thresholds under Danish and EU merger control regulation. Before a deal can be finalized, the merger must be accepted by the relevant authority.
Mergers, acquisitions or joint ventures with a permanent function of an independent undertaking must be notified to the Competition Council when the below thresholds are met, cf. Section 12 of the Act:
the combined aggregate turnover of the participating undertakings in Denmark is minimum DKK 900 million and at least two of the participating undertakings separately generate an annual turnover in Denmark of a minimum of DKK 100 million or
at least one of the participating undertakings generate an annual turnover in Denmark of minimum DKK 3.8 billion, and at least one of the other participating undertakings generate an annual turnover on a worldwide basis of a minimum of DKK 3.8 billion.
For further information on merger control in Denmark, please see our description of Danish Competition Law
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.