When the adopted amendments to the Danish Companies Act enter into force on 1 January 2014, the rules on cross-border transfers of companies without consent from creditors will be introduced in Denmark. The rules require attention when drafting contracts.
From 1 January 2014, the Danish Companies Act will contain rules on the possibility to transfer a Danish company to another EU member state without consent by the company’s creditors.
The amendment of the Danish Companies Act is a result of decisions by the Court of Justice of the European Union, which states that the restriction of cross-border transfer is in conflict with the rules on freedom of establishment.
A counterparty moving to another EU member state would – without any clauses in the contract – potentially cause that this member state’s law and courts apply in case of a dispute. In addition, a cross-border transfer will not be considered a conveyance of the contractual terms, including conveyance of privileges and obligations. A supplier can therefore suddenly be obliged to deliver a service in another member state and in accordance with this member state’s legislation. This may for example have implications for software licenses, supplier relationships and Service Level Agreements that cannot be delivered anymore. It needs to be specifically considered what impact a counterparty’s cross-border transfer would have on the contractual relationship.
Bird & Bird therefore recommends to consider the following adjustments in your contracts:
- A provision stating that the applicable law is Danish law and that the Danish courts is the venue, even though both of the parties have registered offices in Denmark at the time of the signing the agreement.
- A provision stating that it is a precondition for the completion of the agreement that the counterparty has registered office in Denmark and that the delivery takes place in Denmark.
- A clause on conveyance of privileges and obligations. The clause can be drafted as follows:
“X’s cross-border transfer outside Denmark is considered a conveyance and requires Y’s written, prior consent. Cross-border transfer without written, prior consent is considered a significant violation of the contract.”