Structure and process, legal regulation and consents

Structure

How are acquisitions and disposals of privately owned companies, businesses or assets structured in your jurisdiction? What might a typical transaction process involve and how long does it usually take?

Private M&A transactions are typically effected by way of share deals, which are generally more tax efficient. Asset acquisitions are sometimes used in smaller transactions, for carve-outs or in connection with restructurings. Statutory mergers or demergers, which generally allow for succession in obligations without third-party consents, are mostly used for pre-M&A reorganisations.

Transactions processes in Denmark are usually structured as bilateral processes (typically strategic deals) or as auction processes divided into two or more phases to narrow down the field of bidders.

The time required to complete a transaction depends largely on the complexity of the deal, required regulatory and third-party consents as well as the number of parties involved. Bilateral transactions without regulatory consent can often be completed within one or two months’ time, while auction processes typically take from three to six months to execute.

Legal regulation

Which laws regulate private acquisitions and disposals in your jurisdiction? Must the acquisition of shares in a company, a business or assets be governed by local law?

Private M&A transactions are largely unregulated in Danish law and are instead subject to general principles of Danish law. Depending on the nature and structure of the transaction, a number of different acts and orders may, however, be of relevance. Often this is the case for the Danish Companies Act, the Danish Competition Act, the Danish Act on Transfers of Undertakings and the EU General Data Protection Regulation, as well as various tax regulations.

There is no requirement under Danish law for an acquisition to be governed by Danish law. Danish legal formalities for the transfer of shares or assets should, however, still be observed by the parties, inter alia, to ensure an effective transfer of title.

Legal title

What legal title to shares in a company, a business or assets does a buyer acquire? Is this legal title prescribed by law or can the level of assurance be negotiated by a buyer? Does legal title to shares in a company, a business or assets transfer automatically by operation of law? Is there a difference between legal and beneficial title?

Danish law does not distinguish between legal and beneficial title. Accordingly, upon a transfer of shares in a company, a business or assets, a buyer acting in good faith will obtain full and unrestricted legal title, subject, inter alia, to any encumbrances that follow by law or contract (provided security has been perfected).

Legal title follows by law and the seller will as a main rule be strictly liable towards a buyer for any deficiencies in the title to the shares, business or assets being transferred.

To be protected from the seller’s creditors and third-party beneficiaries acting in good faith, the buyer should perform the necessary acts of perfection under Danish law in respect of the acquired shares, business or assets. In respect of shares, this entails notification to the company of the transfer of title to the shares in order for the transfer of shares to be recorded in the company’s share register. If the company has issued share certificates, the buyer should furthermore take possession of the share certificates.

Multiple sellers

Specifically in relation to the acquisition or disposal of shares in a company, where there are multiple sellers, must everyone agree to sell for the buyer to acquire all shares? If not, how can minority sellers that refuse to sell be squeezed out or dragged along by a buyer?

As a starting point, each seller must consent to a sale of its shares in a company and cannot be forced to sell its shares.

Pursuant to the Companies Act, a shareholder holding more than 9/10ths of the shares and voting rights of a company will be able to squeeze out minority shareholders. The minority shareholders may dispute the price offered for the shares in a squeeze out, but will not be able to prevent the squeeze out. Statutory mergers and demergers can be effected with two-thirds majority of votes cast and shares represented at the general meeting adopting the transaction.

It is common that minority shareholders undertake contractual obligations, such as drag-along obligations, obliging them to co-sell their shares to a buyer.

Exclusion of assets or liabilities

Specifically in relation to the acquisition or disposal of a business, are there any assets or liabilities that cannot be excluded from the transaction by agreement between the parties? Are there any consents commonly required to be obtained or notifications to be made in order to effect the transfer of assets or liabilities in a business transfer?

Danish law recognises the fundamental principle of freedom of contract, and parties are therefore able to contractually exclude assets and liabilities from a transaction.

As a main rule, the buyer cannot without consent of the relevant counterparty assume the liabilities of the seller in connection with a transfer of a business or assets. Certain exceptions apply, inter alia, with respect to registered encumbrances and taxes on real property, certain rights of tenants and environmental orders known to the buyer.

In the case of an asset transfer that constitutes a transfer of a business or part of a business, the Act on Transfers of Undertakings will apply, entailing that all employees exclusively or mainly working within the target business automatically transfer to the buyer in which case the seller is released from its obligations towards the employees.

For contracts, general principles under Danish law prescribe that rights, but not obligations, can be assigned without the consent of the counterparty. Accordingly, the consent of the beneficiary will be required for an assignment of contractual obligations of the seller as part of a business or asset transfer unless otherwise specifically permitted, for example, by the terms of the contract in question.

Consents

Are there any legal, regulatory or governmental restrictions on the transfer of shares in a company, a business or assets in your jurisdiction? Do transactions in particular industries require consent from specific regulators or a governmental body? Are transactions commonly subject to any public or national interest considerations?

Apart from merger control, there are generally no regulatory or governmental restrictions on a transfer of shares in a company, a business or assets in Denmark, except for such restrictions in regulated industries applying to both Danish and foreign investors.

Transfers of shares in a company, a business or assets in certain industries require specific consent from or filings with the Danish authorities. Such industries notably include the financial sector, certain energy businesses, residential real estate, national security and the weapon industry.

Except for the aforementioned, acquisitions of companies, businesses or assets are not commonly subject to public or national interest considerations in Denmark.

In recent years, Danish pensions funds have played a more active role in M&A taking up minority investments alongside, for example, private equity investors (eg, within infrastructure). While there is no formal requirement of domestic investors, such investors may benefit public perception of larger private equity driven acquisitions in some sectors.

Are any other third-party consents commonly required?

Shares in Danish companies are freely transferable unless otherwise stipulated in the articles of association, agreed between shareholders or restricted by third parties such as lenders or pledgees. Any such restrictions on the transfer of shares will often appear from the company’s articles of association or shareholders’ register.

Shareholders and third-party stakeholders may hold pre-emption rights to acquire the shares or assets. A selling shareholder may also have to observe any contractual tag-along rights of other shareholders entitling other shareholders to co-sell their shares to the buyer subject to certain terms and conditions.

The prevailing view under Danish law is that the directors or offices of a company, as applicable, may decide to sell all or a substantial amount of the assets of a company without obtaining the consent of the shareholders unless an amendment is required of the company’s objects as codified in the articles of association. However, in practice, the consent of the shareholders is often sought to avoid any uncertainty about the authority (and potential liability) of the directors or officers.

Regulatory filings

Must regulatory filings be made or registration (or other official) fees paid to acquire shares in a company, a business or assets in your jurisdiction?

Aside from merger control filings where applicable thresholds are exceeded, no regulatory filings are required to acquire shares in a Danish company. However, both the shareholder and the company subsequently have to observe certain registration and notification requirements.

A shareholder whose shareholding exceeds or falls below thresholds of 5, 10, 15, 20, 25, 50, 90 or 100 per cent or one- or two-thirds of the share capital or voting rights of a company must notify the company thereof. Furthermore, holders of bearer shares constituting less than 5 per cent of the share capital or voting rights of an unlisted public limited company must register their shareholding with the Danish Business Authority.

Danish companies are obliged to register and continuously update information on ultimate owners as well as on shareholders holding more than 5 per cent of the share capital in the Public Shareholders’ Register kept by the Danish Business Authority.

In the case of a statutory merger or demerger involving a Danish company, the merger or demerger plan as well as the decision to effect a merger or demerger must be filed with the Danish Business Authority. Certain exceptions to the requirement to file a merger or demerger plan apply in mergers and demergers involving private limited companies only.

Ownership interests in certain groups of assets are registered in Danish public registers. Such registrations are typically not required for the transfer to be valid inter partes, but may be required for the buyer to protect its interest in and to the assets against the seller’s creditors and third-party beneficiaries acting in good faith.

The Danish merger control regime applies to all transactions whereby:

  • two or more previously independent undertakings merge into one undertaking;
  • one or more persons who already control at least one undertaking, or one or more undertakings - by an agreement to purchase shares, assets, or by any other means - acquires direct or indirect control in whole or in part of one or more other undertakings; or
  • a full-function joint venture is formed.

A transaction subject to the Danish merger control regime must be notified to the Danish Competition and Consumer Authority (DCCA) if the following thresholds are met:

  • the aggregate annual turnover of the undertakings involved is at least 900 million Danish kroner and the total annual turnover in Denmark of at least two of the undertakings concerned is at least 100 million Danish kroner; or
  • the total annual turnover in Denmark of at least one of the undertakings concerned is at least 3.8 billion Danish kroner and the total worldwide annual turnover of at least one of the other undertakings is at least 3.8 billion Danish kroner.

Special thresholds apply to transactions in the telecommunications sector.

If the transaction meets the turnover thresholds set out in the EC Merger Regulation, the transaction must be notified to the European Commission instead.

A transaction triggering a notification requirement may not be implemented prior to clearance from the DCCA or the expiry of the applicable waiting periods unless a derogation is applied for and obtained.

Notification to the DCCA can be made either as a standard notification or a simplified notification. The latter is aimed at transactions that are deemed unproblematic and generally allows for less information to be submitted to the DCCA.

After the DCCA’s receipt of a complete notification and the filing fee, the DCCA has up to 25 working days (extendable to 35 working days in cases where the parties offer commitments) to clear the transaction or to initiate a second phase. The second phase can last up to 90 working days (with a possibility under certain circumstances for the DCCA to extend the second phase by up to two times 20 working days).

The filing fee to the DCCA is 0.015 per cent of the parties’ turnover in Denmark (however, not exceeding 1.5 million Danish kroner) for a standard notification and 50,000 Danish kroner for a simplified notification.