With the adoption of new rules for ownership registration, most Danish legal entities are required to register the ultimate individuals owning them (their beneficial owners) in the Danish public register of shareholders before 1 December 2017.
In May 2017, new rules entered into force under which most Danish legal entities are required to collect, register and keep records of information on their ultimate, individual owners aka beneficial owners. The registered information will be accessible online at no cost.
The purpose of the new rules is to enhance transparency of the beneficial ownership of Danish legal entities and corporate structures.
Entities subject to the new rules
The new rules apply to most Danish legal entities, including:
- Private and public limited companies (A/S, ApS)
- Entrepreneurial companies (IVS)
- Limited partnership companies and limited partnerships (P/S, K/S)
- Partnerships (I/S) Foundations (commercial and non-commercial)
- Financial businesses
- Pension funds
- Trusts (commercial trusts, investment trusts)
One-man businesses, branches and listed companies are not subject to the rules.
A beneficial owner means a natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interests in that entity or through control via other means.
As the main rule, control or ownership of more than 25% of the shares or voting rights in a legal entity constitutes "a sufficient percentage". However, a smaller part of the shareholding or the voting rights may also constitute "a sufficient percentage" if the holder of such smaller part in fact controls the legal entity.
Consequently, a beneficial owner need not have controlling influence on the legal entity, which is otherwise normally defined by ownership or control of more than 50% of the votes. This means that a legal entity may have several beneficial owners, all of whom must be identified and registered.
Control exercised through other means may include rights granted under the legal entity's articles of association or agreements, such as a shareholders' agreement or a share pledge agreement, including:
- the right to appoint and dismiss members of the board of directors,
- the right to adopt the annual report with respect to payment of dividends, or
- the right to veto e.g. proposals for amendments to the articles of association or the like.
Duty of identification
Legal entities subject to the rules must make all reasonable efforts to identify their beneficial owners and they must keep records of the actions taken in order to identify the beneficial ownership.
No beneficial owners
If a legal entity does not have beneficial owners in the sense defined above, such as a foundation or a legal entity with multiple ultimate owners where no individual qualifies as a beneficial owner, or if a legal entity cannot identify its beneficial owners, the legal entity will have to register its management as beneficial owners. Management is, as a basic rule, to be understood as the day-today management.
By definition, listed companies do not have beneficial owners, and legal entities which are wholly owned, directly or indirectly, by a listed company, will therefore have to register its management as beneficial owners.
Information to be collected
Legal entities subject to the rules are under an obligation to collect information on their beneficial owners, including each owner's:
- Address and country of residence
- Civil registration number (CPR number) or passport or identification number, date of birth and copy of passport or ID card.
Further, the legal entity must collect information on its beneficial owner's rights in the legal entity, that is, information on the percentage of shares or votes held by the respective beneficial owner or on whether the beneficial ownership includes any rights pursuant to a shareholders' agreement, the entity's articles of association or the like.
If a natural person is an indirect beneficial owner of a legal entity, that is, if the natural person e.g. owns more than 25% of the shares through a chain of other legal entities, such information must also be collected and registered.
Duty to register, keep and disclose information
The legal entities must register information on their beneficial owners, including any changes to this information, in the Danish public register of shareholders as soon as possible after learning that a natural person has become a beneficial owner of the legal entity.
A legal entity is under an obligation to keep records of the information on its beneficial owners for a period of five years after the beneficial ownership ceased. Furthermore, the legal entity must keep records of its efforts and activities to identify its beneficial owners for five years.
The legal entity must, upon request, disclose information on its beneficial owners, including its efforts and activities to identify its beneficial owners, to the Danish Public Prosecutor for Special Economic Crimes or to other governmental authorities.
Non-compliance with these rules is punishable by a fine.
The new rules on the registration of beneficial ownership are extensive and may prove burdensome, especially for legal entities with complex ownership structures.