Local banks, international banks, direct lenders and debt funds each play a crucial role in shaping the acquisition finance landscape. The Danish market remains robust, competitive and capable of supporting acquisitions, business activities and growth opportunities.

Local Banks

The acquisition finance market for domestic companies and SMEs is dominated by local banks and Nordic banks, with the three largest banks playing a predominant role, especially in private equity-backed transactions. Clubs of domestic banks are capable of handling most transactions in the Danish market.

Regional banks are also active in the acquisition finance market, which is pivotal for SME bilateral transactions. They leverage their deep relationships and local market knowledge to provide flexible and accessible financing solutions.

International Banks

In addition to the Nordic banks, international banks are present (a small handful even with physical presence). They support a strong base of corporate clients, including their acquisition financing needs. For larger transactions, international banks play an important role by offering substantial capital, including other currencies and global expertise.

Direct Lenders

Direct lenders and debt funds, most of which are non-domestic, have become increasingly significant, particularly in providing alternative financing options when traditional bank financing is less accessible. They offer competitive terms and innovative financing structures, catering to the diverse needs of borrowers.

Direct lending from Danish institutional investors for acquisition finance purposes has been scarce for many years.

Other Players

The Nordic high-yield bond market has occasionally been utilised as an acquisition finance tool, with a small number of arrangers active in the Danish market. Issuances are typically under Norwegian or Swedish international securities identification numbers (ISINs).

Peer-to-peer structures or similar are not considered part of the acquisition finance market.

Impact of Global Events on Denmark’s Economic Stability

Denmark, like other European countries, has been significantly affected by international uncertainty and market fluctuations, which have affected investor confidence and business investments. Unfortunately, this trend has continued into 2025.

Market sentiment affects the valuation of risk, leading to prolonged times required for negotiating M&A transactions as well as arranging financing and negotiating financing terms. This situation has opened doors for private debt providers, who are able to evaluate and benchmark risk in a different way.

Increased M&A Activity

The Danish market experienced an increase in M&A activity in 2024 but transaction volumes remained well below 2021 levels. M&A transactions in 2024 included large and high-profile transactions involving Danish buyers or targets evidencing a qualitative increase in deal value over the previous year. The average quarterly transaction value rose by nearly 15% in 2024 compared to 2023. This was primarily driven by corporate M&A activity where there were record-breaking transactions, both in terms of deal value and the ability to bridge debt capital markets and equity capital markets.

The market for large private equity transactions remained quiet.

Additionally, small transactions showed a quantitative increase in the number of deals compared to 2023. These deals did not require significant debt financing and were managed bilaterally with relationship banks and/or with the use of alternative financing structures.

There is no mandatory Danish law requirement for facility agreement documents to be governed by Danish law, subject to customary public order qualifications. The governing law of security documents will be determined applying Danish international private law (and agreed security principles).

For domestic transactions, including those involving foreign subsidiaries or targets where the parent company is Danish, the finance documents are typically governed by Danish law. Acquisition financing through Danish regional banks is almost exclusively governed by Danish law.

Danish corporates often have diverse financing structures and are accustomed to certain products being governed by non-Danish law and they are generally open to accepting foreign law. However, there is a tendency to push for Danish law in facility agreements, especially in bilateral deals or club deals involving a majority of Danish lenders. This preference is based on several factors, including:

• precedent argumentation: the use of Danish law is often justified by previous transactions and alignment of terms between financiers;
• jurisdiction argumentation: Danish law is preferred for its familiarity and the convenience of local jurisdiction; and
• enforceability: following Brexit, there are enforceability of English judgments concerns that make Danish law more attractive.

Danish private equity funds are typically successful in pushing for Danish law. In contrast, non-Danish private equity funds tend to use precedent documentation, which is rarely governed by Danish law.

Loan Market Association (LMA) agreements are commonly utilised for acquisition financing, particularly in cross-border transactions or club deals involving non-Danish lenders.

Most treasury functions in large corporates and private equity funds are familiar with the LMA suite of documents.

There is no LMA standard documentation under Danish law. However, in bilateral transactions involving domestic lenders, reference is often made to a “Nordic Light” version of the LMA. While the content of the “Nordic Light” version tends to differ from transaction to transaction, the general structure of the LMA is followed, but with boilerplate provisions regulating the multi-lender structure being deleted. Representations, undertakings and events of default may follow the same structure and scope as the LMA or may be drafted in a manner reflecting the relationship banking basis of these bilateral agreements.

Updates to the LMA are monitored in the Danish market to mitigate risk and align with international best practices while accommodating Danish regulatory and market-specific requirements.

Active banks have a preferred template corresponding to a “Nordic Light” version, whereas Danish regional banks active in the SME segment tend to use standard (short-form, not acquisition finance-specific) documentation. The choice of documentation may also be affected by precedent documentation or sponsor preference, particularly non-Danish sponsors who are not familiar with Danish short-form documentation, which is largely based on Danish law principles like fallback and may not be familiar with the “Nordic Light” version of the LMA.

There are no statutory requirements mandating that financial documentation, including facility agreements, must be in Danish. Parties generally have the freedom to agree on the language of their agreements and English is widely accepted. This is particularly true for corporate and institutional transactions, private equity-backed transactions and cross-border transactions, where LMA standard documentation is often used.

Smaller regional banks prefer their own standardised documentation which is often in Danish.

However, certain practical and regulatory considerations apply, especially regarding the registration of security interests in the Danish Land Register (Tingbogen) and Personal Property Register (Personbogen). Danish is the language used in courts and for enforcement purposes finance documents may need to be translated into Danish if so ordered by the court at its discretion. This requirement can sometimes lead to limitations on cross-references between documents to mitigate the risk of being required to translate cross-referenced documents as well.

Legal opinions are considered standard documents in acquisition finance transactions. In almost all cases, they will be a condition precedent to the first utilisation.

Market Practice for Legal Opinions

Full opinion by lender’s counsel

Counsel for the lender or agent (as applicable) typically provides the full legal opinion. This opinion covers power, capacity and the authority of the Danish obligors to enter into the finance documents and perform their obligations under them, as well as the legality, validity and enforceability of the finance documentation and provisions of the finance documents, such as governing law and jurisdiction.

Split opinions

In some cases, split opinions are issued. Here, counsel for the lender will issue an opinion on the legality, validity and enforceability of the finance documentation and counsel to the borrower will issue an opinion regarding the power, capacity and authority of the Danish obligors to enter into the finance documents and perform their obligations under them.

Borrower’s counsel providing full opinion

It is rare for the borrower’s counsel to provide the full opinion. This is usually limited to instances involving a Danish obligor and non-Danish law governed finance documents. In these cases, the “enforceability” opinion is limited to matters such as governing law and jurisdiction.

Multi-Jurisdictional Transactions

In multi-jurisdictional transactions, counsel from each jurisdiction where an obligor is incorporated and/or security is granted will be expected to issue an opinion to ensure that all legal aspects across different jurisdictions are adequately covered.

In an acquisition finance scenario, the standard structure typically involves a term loan to finance the acquisition and refinance existing indebtedness. When Danish banks are involved, this often includes an amortising term loan and a bullet term loan. Alternatively, when private credit providers are involved, a unitranche loan may be used. In each case, a revolving credit facility is provided for working capital purposes and may be utilised as an ancillary facility.

Additionally, the target may assume a term loan to refinance a portion of the acquisition finance facility via a dividend distribution to the acquiring entity (debt pushdown) subject to compliance with corporate law.

Uncommitted accordion facilities are sometimes incorporated from the outset for add-ons and other potential future financing needs, mostly to ensure that they are included as part of the security package without the need to amend the security package.

Private credit providers sometimes offer delayed draw term loans in the form of committed CAPEX or acquisition facilities, which may be drawn subject to certain conditions.

Second lien facilities are rare in the Danish market.

Danish M&A and acquisition finance transactions are typically structured to include a string of holding companies to ensure an effective capitalisation or exit structure. To avoid structural subordination, the acquisition debt is often obtained at the level of the acquiring company. Layered financing at various levels in the acquisition structure does occur, but it is not common and is usually only seen in large transactions where private debt is involved.

Mezzanine Facilities and Subordinated Instruments in Danish Acquisition Finance

Mezzanine facilities or other subordinated instruments (whether contractual or structural) are rare in the Danish acquisition finance market. They are typically used in situations where the senior lender requires additional support in the form of equity-like instruments or where the transaction is of a size or complexity that senior debt alone cannot bridge the gap to equity.

Characteristics of Subordinated Loans

Structure

Mezzanine facilities are often within the same borrower entity as the senior debt.

Subordination

Both mezzanine facilities and other subordinated facilities (being a lender in a guarantee and/or security providing entity under the senior debt) are contractually subordinated to the senior debt under the intercreditor agreement.

Security

The security is limited to the borrower’s assets, including target shares, but always second ranking (a financial assistance prohibition will often prevent security provided by subsidiaries).

Payment-in-kind (PIK) loans

PIK loans are often structurally subordinated to the senior facilities and raised by a holding company higher up in the acquisition structure but are still subject to the provisions of an intercreditor agreement.

Features of Subordinated Loans

Equity kickers

Subordinated loans may come with equity kickers, such as warrants.

Cash interest

There is often a limited option to pay cash interest on these loans. Under Danish law, unrestricted cash payments of interest and/or instalments may jeopardise the subordination of the facility.

Vendor Loans

Vendor loans have played an important role in M&A transactions in recent years to bridge the valuation gap. They typically have both a subordinated element and a PIK element, providing flexibility in financing structures.

Typical Structures Used for Bridge Loans in the Danish Market

Bridge loans are structured to provide short-term financing solutions that bridge the gap until more permanent financing can be secured. These loans are typically used in situations such as acquisitions, refinancing or capital raising, allowing borrowers to quickly access capital while arranging long-term financing.

The typical features include:

• short-term maturity: bridge loans are characterised by their short-term nature, usually with maturities ranging from a few months to a year;
• high interest rates: due to their short-term and urgent nature, bridge loans often come with higher interest rates compared to traditional loans;
• bullet repayment: bridge loans typically feature bullet repayment structures, where the entire principal amount is repaid at the end of the loan term; and
• secured or unsecured: bridge loans can be either secured or unsecured, depending on the borrower’s creditworthiness and the nature of the long-term financing that will replace the bridge loan.

Common Bridge Loan Structures in Acquisition Finance

Interim facilities agreement

This is used to document certain funds and provide a temporary financing solution until long-term financing is arranged.

Bridge-to-capital markets

This structure involves using the bridge loan to finance an acquisition until the borrower can issue bonds, other debt instruments and/or a public offering or private placement in the capital markets.

The Nordic high-yield corporate bond market has occasionally been utilised as an acquisition finance tool but Denmark continues to be a small market. When used, issuances are typically under Norwegian or Swedish ISINs. The Nordic high-yield bond documentation and market provides flexibility for a bond to be issued to fund the acquisition upfront, even without a bridge loan.

Non-Nordic high-yield bonds may also be used to finance acquisitions. These bonds are usually employed in combination with an initial bridge loan, which will subsequently be refinanced out of the proceeds of the bond issue on or after the completion of the acquisition. These high-yield bonds are not often used and are typically reserved for large transactions and complex capital structures. However, private equity players, especially in “buy-and-build” portfolio companies, are successfully refinancing into the bond market.

Danish corporates may also utilise the investment grade debt capital markets, including via the Euro Medium Term Note (EMTN) programmes. A bridge facility will frequently be used as additional funding support for a borrower if required, even though it is not drawn down in most instances.

Private Placements Notes

Private placement notes can be used by issuers to fund acquisitions partially or fully. However, they are not frequently used in the Danish market for Danish acquisitions. Danish corporates may look to private placements for foreign acquisitions, either to access certain currencies or to secure longer maturities. As with bonds, these products are commonly used in conjunction with a bridge facility.

Vendor Loans

See 3.2 Mezzanine/Payment-in-Kind (PIK) Loans.

Asset-Based Financing

Asset-based financing is not a common part of acquisition financing but may be used to refinance existing debt in the target or in connection with a debt pushdown. Asset-based financing is structured to provide companies with flexible funding solutions by leveraging their assets as collateral.

The typical structures include the following.

Accounts receivable financing

Companies can use their accounts receivable as collateral to secure funding. This allows businesses to access cash based on the value of their outstanding invoices.

Inventory financing

Businesses can leverage their inventory to obtain financing. This type of financing is based on the value of the company’s stock of goods.

Machinery and equipment financing

Companies can use their machinery and equipment as collateral to secure loans. This provides businesses with the necessary capital to purchase or upgrade their equipment.

Real estate holdings financing

Businesses can leverage their real estate holdings to obtain financing. This type of financing is based on the value of the company’s property assets. Denmark has a ubiquitous and competitive mortgage financing regime based on covered bonds, making real estate a popular choice for long-term asset-based financing, especially where they can be registered without incurring stamp duties (see 5.1 Types of Security Commonly Used and 8.1 Stamp Taxes).

NAV Financing

In other jurisdictions, net asset value (NAV) financing is utilised when undrawn investor commitments are low or when the fund’s investment phase has concluded. NAV facilities have proven to be a strategic tool for investment funds, offering several advantages:

• liquidity needs: NAV facilities can provide the necessary liquidity to distribute returns to investors, make additional investments or support the financial stability of distressed portfolio companies; and
• gap filling: these facilities can fill the gap when financing at the portfolio company level does not yield the desired outcomes.

While NAV financing remains relatively rare in the Danish market, its relevance may increase depending on the development of the M&A market. As the market evolves, NAV financing could become a more integrated part of acquisition financing.

Subordination

Subordination can be established through:

• structural subordination: the senior lender lends to a company within a group of companies that is positioned lower in the group structure (closer to the operational profit base) than the company to which the junior lender lends; and
• contractual subordination: the senior lender and the junior lender enter into an agreement where the junior lender agrees that the senior debt will be paid in full before any payments are made to the junior lender.

These options may be combined but contractual subordination is not usually a requirement when the junior lender is structurally subordinated.

Intercreditor Agreements

In each case, intercreditor agreements are common and are drafted to the specifics of each transaction. Acquisition finance transactions often involve multiple sources of funding, such as equity, senior debt, shareholder loans, vendor loans and intra-group loans, where the interests are not aligned.

Intercreditor agreements are often based on the LMA standard form, modified to fit the capital structure of the deal and simplified to reflect the simpler structures prevailing in the Danish market. In simpler transactions, a short-form subordination agreement is often used.

A key purpose of the intercreditor agreement is to set out the position on:

• priorities: the order of their claims and the distribution of repayment and security enforcement proceeds;
• restrictions on junior lenders: including standstill periods, limits on accepting payments (or payments above a certain threshold) and restrictions on amending the subordinated debt; and
• turnover: establishing how the junior lender must return any payments received in violation of the intercreditor agreement.

Senior debt payments, including scheduled principal payments and voluntary or mandatory prepayments, are typically allowed according to the terms of the senior debt. Junior lenders are usually entitled to payments of interest, fees and indemnity payments but their rights to receive principal payments are restricted.

Standstill

One of the most important parts of an intercreditor agreement is the standstill provision. This provision stops the junior lender from taking action against the collateral after a default on the junior debt for a set period after informing the senior lender. The standstill period gives the senior lender a specific time to evaluate and possibly enforce its rights against the collateral without interference from the junior lender.

Senior Lender Amendments

An intercreditor agreement may also include promises from senior lenders not to make significant changes to, or grant waivers for, important matters in the senior finance documents without the junior lenders’ consent.

Security Agent

It is not unusual for the intercreditor agreement to also include the appointment of a security agent to represent all financiers in enforcement. The agreement outlines the enforcement process and restricts all lenders from seeking enforcement in their own right. See 5.2 Form Requirements.

Limitation Language

Subordination may constitute quasi security comprised in the Danish financial assistance regime and the limitation language is often drafted to comprise subordination obligations. See 5.5. Financial Assistance and 5.6 Other Restrictions.

In bank/bond structures, the bank often provides a super-senior revolving credit facility. The assumed structure under the LMA standard form typically involves super-senior bank debt and bonds ranking pari passu regarding payment and the shared security package.

The waterfall in this structure gives super-senior bank lenders priority in relation to the proceeds from the disposal or enforcement of security.

However, it is not uncommon for transactions to deviate from the type assumed by the LMA documents. The super-senior lender will often negotiate alternative positions depending on the structure of the deal and the circumstances surrounding the transaction, including standstill provisions.

Hedging Requirements in Facility Agreements

Under the facility agreement, the borrower may be required to enter into hedging arrangements for leveraged transactions. These hedging arrangements are designed to mitigate risks associated with interest rate fluctuations and exchange rate fluctuations. The borrower may incur payment obligations to the hedge counterparties under these hedging agreements.

Intercreditor Agreement

Where there are multiple lenders, the hedge counterparties will be included as parties to the intercreditor agreement governing the relationship between the various creditors. The approach adopted by the LMA precedent intercreditor agreement for leveraged acquisition finance transactions is often mirrored in Danish intercreditor agreements. However, it is not uncommon for transactions to deviate from the type assumed by the LMA documents.

Ranking and Security Package

Hedging liabilities rank pari passu with the facilities being hedged, meaning they have equal standing in terms of repayment priority. Additionally, hedging liabilities share in the security package provided under the facility agreement.

Ordinary Payments and Enforcement

Ordinary payments under the hedging arrangements are usually permitted until the senior creditors enforce their rights or an insolvency event occurs. This ensures that the borrower can continue to manage interest rate and exchange rate risks effectively until the enforcement or insolvency event.

While the security package (or the “agreed security principles” outlining the security sought and the factors to be considered) is always subject to negotiations, in secured acquisition finance transactions the security package will typically provide one or more of the following:

• share pledges;
• account pledges;
• assignment of intercompany receivables; and
• assignment of share purchase agreement rights and/or warranty and indemnity insurance claims.

Security in the form of mortgages over: real property; movables (including Danish intellectual property rights (IPR)); vehicles; and floating charges (comprising trade receivables, stock (inventory), “straight from the factory” vehicles, operating equipment and machinery, propellants and consumables, livestock, goodwill and Danish IPR) are subject to the registration fees referred to in 8.1 Stamp Taxes. These are often omitted due to cost/benefit considerations unless existing mortgages are in place and can be re-used without incurring a registration fee.

It is possible to register negative pledges for a nominal cost, preventing the registration of mortgages over real property and movables as well as floating charges without the consent of the lender/security agent.

In acquisition finance transactions, the security package is typically implemented as follows.

• Prior to closing, security is granted over the shares in the acquisition vehicle and its rights under the acquisition agreements.
• After closing, the acquisition vehicle grants security over the shares of the target.
• The remaining security to be provided (eg, security granted over the shares and all the assets of each company within the acquired group) is entered into within an agreed timeframe from the closing date.

Security Interests in Acquisition Finance Transactions

In acquisition finance transactions, the security interest is created under a pledge agreement or assignment agreement. These agreements govern various aspects, including the creation of the security interest, undertakings required to ensure the enforceability of the security and enforceability provisions. There are no specific form requirements, except in respect of perfection. For more details see 5.3 Registration Process.

Multiple Lenders

In cases involving multiple (and changing) lenders, the concept of trust or parallel debt is not recognised. The security rights are therefore held individually by the lenders and managed by an agent in an “agent” capacity. The agent must name all parties they are acting for in case of enforcement.

To mitigate these practical challenges, rules were introduced a decade ago allowing the appointment of a security agent to act as both agent and representative (fuldmægtig og repræsentant). The security agent is entitled to exercise all rights and remedies under and in line with the agreement, either in its own name or in the name of any of the lenders.

For these rules to apply, provisions to this effect must be included in the facility agreement or intercreditor agreement that appoints the security agent.

Mortgages

Mortgages are created in the Danish Land Register (Tingbogen) and the Personal Property Register (Personbogen), which are national digital registers and are maintained and operated by the Registration Court (Tinglysningsretten).

Creation and signing

Mortgages are created and signed online in the system using a mandatory form document, which allows limited ability for special provisions.

Identification of movables

Movables mortgaged individually must be identified and described unambiguously in the mortgage deed to be registered and enforceable.

Process to Register or Perfect Security Interests in the Danish Market

There is no general requirement (or possibility) to register security interests created over Danish assets or by a Danish obligor. However, there are certain perfection steps that need to be completed. These are as follows:

• shares: notice must be sent to the pledged company;
• dematerialised shares: notice must be sent to the custodian bank;
• bank accounts: notice must be sent to the account bank;
• receivables (including rights under contracts and insurance policies): notice must be sent to the receivables debtor; and
• mortgages over real property, movables (including Danish IPR), vehicles and floating charges: a mortgage deed must be created in the relevant register, which is subsequently registered as pledged (underpantsat) to the lender/security agent.

The notice is effective upon delivery to the addressee and an acknowledgment is not a perfection requirement but advisable for evidence purposes. The purpose of the notice is to create a position similar to a possessory pledge, which leaves limited room for the obligor to deal with assets (including voting rights, dividends, payments under receivables and amounts credited to the bank account) without adversely affecting the status of perfection.

It is possible to create a security interest over movables by way of a possessory pledge, which is never used in acquisition financing.

In order to limit the post-consideration security risk described in 7.2 Claw-Back Risk, perfection should be completed (or in effective process) before utilisation, or in the case of accession, at the same time as accession.

Ongoing Filings and Procedures

If changing assets under a mortgage over movables (other than a floating charge), the list of mortgaged assets should be updated. A new variable registration fee is not necessarily payable on such an update.

Mortgages over movables need to be renewed every ten years. No new variable registration fee is payable upon renewal.

See 5.5 Financial Assistance and 5.6 Other Restrictions.

Prohibition on Financial Assistance

Danish law generally prohibits a company from providing loans, guarantees or security to third parties for the purpose of acquiring its own shares or those of its parent company.

In general, the lapse of time or refinancing does not constitute a “whitewash” and the prohibition will apply even following a refinancing as long as the debt utilised for the acquisition is being refinanced.

The prohibition also restricts a Danish target from merging with the acquirer while acquisition finance is outstanding.

According to rulings from the Danish Business Authority (Erhvervsstyrelsen), a Danish company will also be in breach of the prohibition if its foreign subsidiaries provide loans, guarantees or security for the acquisition debt.

Exemption

There is an exemption regime under which a Danish company can provide loans, guarantees or security for acquisition debt, subject to certain corporate formalities up to an amount of the distributable reserves (which are then blocked).

The exemption has very limited use in practice as the corporate formalities include making the purchase price public.

Breach of Regime

The consequence of acting in breach of the rules is inter alia that the amount must be returned to the company together with statutory interest (which is currently more than 12%). Where repayment is not possible, or where agreements for other financial assistance cannot be terminated, the persons who have agreed to or continued with transactions in contravention of the rules will be liable for any loss suffered by the company.

Upstream Loans

Until the end of 2024, there were additional restrictions on the provision of upstream loans to parents and shareholders. These restrictions are no longer applicable.

Limitation Language

Compliance with the financial assistance regime is typically ensured by incorporating limitation language. This language ensures that the guarantee and security do not extend to obligations that cannot be guaranteed or secured in compliance with the regime. This is usually done by referencing the relevant rules.

Adequate Capitalisation

The directors of a Danish limited company are under an obligation to ensure that the financial resources of the company are adequate at all times. This includes ensuring that the company has sufficient liquidity to meet its current and future liabilities as they fall due. The directors are therefore required to continuously assess the financial position and ensure that the existing capital resources are adequate.

In relation to the proposed provision of financial assistance, the directors must consider whether the risk assumed is proportionate to the financial capacity (also forward-looking) in light of its business operations and commercial and financial obligations.

“Corporate Benefit”

The directors must consider whether a “corporate benefit” will accrue to the company. The term “corporate benefit” is not well-defined under Danish law, but the main criterion is likely to be the risk of granting security and/or guarantees weighed against the benefit (financial, commercial, strategic or otherwise) the company obtains from the transaction.

Case law has confirmed that an obvious lack of benefit may render a guarantee void. A reference to the corporate benefit of the group as a whole without demonstrating any benefit to the company itself has no merit of substance.

Breach of Regime

Management and directors who, in the performance of their duties, have intentionally or negligently caused damage to the company are liable to pay damages. They also have to do so where damage is caused to shareholders or any third party.

Limitation Language

There are no “safe harbour” rules the directors can rely on in exercising their duties. However, it is market practice to mitigate the risk of personal liability by capping upstream and cross-stream guarantees, often by references to the higher of the equity of the company at the time of provision of the guarantee or security and enforcement.

Notice Requirement for Enforcement

The lender/security agent is generally required to give eight days’ notice by registered mail to the security provider, requesting that the provider fulfil the claim due before selling the collateral assigned or pledged. This requirement cannot be waived in advance of enforcement. However, in respect of shares over limited companies and bank accounts, they can be drafted in a way that they are considered “financial collateral” and can be enforced without notice, to the extent they are compliant with the facility agreement.

Enforcement of Security Rights

Enforcement of the security rights may require, in the absence of consent and agreement by the obligor, that the lender/security agent proves to the satisfaction of the Danish enforcement courts that a specific amount secured or an obligation to be performed is outstanding and due for payment or discharge. If issues in dispute or evidence produced are complex, the Danish enforcement courts may, at their discretion, order that the matter be presented to a competent court for ordinary trial before the Danish enforcement courts will assist in the enforcement procedure.

Discretion in Enforcement

The security documents often grant wide discretion to choose the most adequate means of enforcement. This allows the lender/security agent to independently enforce the security interest by means of private or public sale of the shares, withdrawal of the funds deposited in the bank accounts and collection or sale of the receivables and even to take over the collateral, subject to a valuation process. In exercising these rights, the lender/security agent is subject to a fiduciary duty towards the pledgor and other stakeholders to act fairly and to make efforts to ensure a sale on commercially acceptable terms in the given circumstances.

Bankruptcy

Enforcement of possessory pledges and similar security (which includes shares, bank accounts and receivables) is not affected by bankruptcy, whereas mortgages can only be enforced by the bankruptcy trustee.

Enforcement of Shares

In acquisition financing, it is unusual for enforcement to be made at an asset level. Instead, the lender/security agent exercises its voting rights under a share pledge to appoint directors or observers who can prepare the company for a sales process, often together with an investment bank. Examples of where the lender/security agent has taken over the shares or has initiated the sale of the shares through public auctions are rare.

Various types of guarantees are used in acquisition finance transactions, subject to financial assistance and “corporate benefit” restrictions. The common types of guarantees include the following.

Demand Guarantee

A demand guarantee (Anfordringsgaranti) is a type of guarantee where the guarantor commits to paying a specified amount to the beneficiary on demand.

The beneficiary does not need to prove that a loss or default has occurred to claim payment.

Suretyship Guarantee

A suretyship guarantee (Selskabskaution) is a form of guarantee where the guarantor assumes responsibility for another obligor’s debt as if it were their own.

The creditor can demand payment directly from the guarantor upon the default of the obligor.

Simple Guarantee

A simple guarantee (Simpel Kaution) is a type of guarantee where the guarantor is only liable for the debt if the principal debtor cannot pay.

The creditor must attempt to collect the debt from the principal debtor first. Only if this fails can they demand payment from the guarantor.

Loss Guarantee

A loss guarantee (Tabskaution) is a form of guarantee where the guarantor is only responsible for covering the loss that the creditor suffers if the principal debtor cannot pay.

The guarantor’s liability is limited to the actual loss incurred by the creditor.

Prevalence in Acquisition Finance Transactions

Suretyship guarantees are the most common (almost exclusive) type of guarantee used in acquisition finance transactions.

Guarantor Coverage

Guarantees will normally be required from all “material companies” within the acquired group as well as any group company that becomes a “material company” following completion. The target group will also be subject to an ongoing guarantor coverage test. This test is based on an aggregate and individual percentage of the group’s assets and/or earnings, ensuring that a significant portion of the group’s value is covered by guarantees and security.

Upstream guarantees are restricted by the prohibition against financial assistance. Upstream and cross-stream guarantees are also subject to the “corporate benefit” requirement.

See 5.5 Financial Assistance and 5.6 Other Restrictions for further details.

Guarantee fees are not a validity or enforceability requirement and are considered to be encompassed by transfer pricing policies. Guarantee fees are not commonly regulated within the guarantee itself and are instead addressed when calculating the taxable income.

Denmark is a civil law jurisdiction and does not have equitable subordination rules in its corporate laws or insolvency laws. However, preferential treatment of related parties is addressed under the voidance/claw back regime in insolvency law, where extended hardening periods may apply.

The company law provisions concerning the liability of directors and shareholders as well as general tort law may also apply and may result in damages in case of a loss.

There is a certain claw back or voidance risk if an obligor is affected by Danish insolvency proceedings. Voiding or claw back may particularly affect:

• payments, repayments and prepayments: significant amounts made within the last three months prior to the commencement of insolvency proceedings (or two years if made to a related party);
• post consideration security rights: security rights (whether by charge, guarantee, indemnity or otherwise) created within the last three months prior to the commencement of insolvency proceedings (or two years if made to a related party) if created or perfected post-creation of the indebtedness so secured; or
• fraudulent preferential treatment: preferential treatment of creditors without any time barring.

In these circumstances, certain defences may be available. These are as follows.

• Related parties extended periods: for payments to related parties within these extended periods, if it can be proven that the payment transaction was or should be deemed to be an ordinary payment transaction.
• Fraudulent preferential treatment: if it can be proven that the obligor was not and did not become insolvent as a result of the transaction or that the beneficiary did not know or should not have known about the obligor’s insolvency and the circumstances causing the transaction to be fraudulent.

In case of voidance under these conditions:

• return of benefit: the beneficiary will return the benefit received, not exceeding the loss of the estate; or
• damages: in case of fraudulent preferential treatment, damages are payable in line with Danish law.

Stamp Tax in the Danish Market

In the Danish market, stamp tax is generally not applicable to most financial transactions, including loan agreements and other financing documents. However, there are specific instances where stamp tax or registration fees may be required.

Mortgages

For mortgage deeds, a registration fee is payable upon filing for registration. This fee consists of a fixed amount of DKK1,850 (movables and floating charge) or DKK1,825 (real property) deed and a variable fee of 1.50% (movables and floating charge) or 1.45% (real property) of the agreed secured amount.

Court Fees

In the event of legal proceedings for judgment or enforcement, a court fee will be payable at the applicable rates at the time.

Withholdings on Interest

In general, no deduction or withholding for or on account of taxes will be required to be made from the payment of interest.

Dividends

In respect of share pledges, the exemption of withholding tax on distributions of dividends, rights, redemption monies and liquidation proceeds is subject to a participation taxation regime requiring a minimum holding of 10% or more for foreign entities. For holdings below 10%, withholding tax may be reclaimed for a final tax rate of zero, provided the pledgee is a resident in a jurisdiction subject to a tax information exchange obligation (including those included in a double tax treaty with Denmark or a multilateral treaty on the information exchange) with Denmark.

“Qualifying Lender”

In certain circumstances, withholding taxes on interest payments may be required in relation to a lender if:

• the lender, directly or indirectly, and acting alone or together with others, has controlling power over the financial and operational affairs of the debtor of the interest;
• the lender is not entitled to claim reduction or elimination of Danish withholding tax on interest pursuant to a tax treaty with Denmark or the EU Interest and Royalty Directive (Council Directive 2003/49/EC); and
• the income is effectively subject to a tax rate of less than 75% of the Danish corporate income tax rate, which is currently 22% (including final, effective taxation in back-to-back type on-lending scenarios).

The definition of “qualifying lender” will often carve out these related lenders.

Restriction Rules on Deductibility of Interest Expenses

There are three main restriction rules on the deductibility of interest expenses (earnings stripping rules). These are as follows.

• The thin cap rule which is only applicable to internal group debt as defined in the rules.
• The interest ceiling rule (a Danish specialty, applicable to all financing expenses whether internal group or external).
• The earnings before interest, taxes, depreciation and amortisation (EBITDA) rule (the Anti-Tax Avoidance Directive (ATAD) rule known in all EU jurisdictions, applicable to all financing expenses whether internal group or external).

Thin Cap Rule

The main features of the thin cap rule are as follows:

• safe harbour ratio: 4:1 debt/equity ratio;
• asset valuation: assets are measured at market value (not book or tax value). Non-recognised internally generated goodwill is included at market value in the “safe harbour” calculation;
• threshold: lower threshold of DKK10 million (Danish tax consolidated level);
• interest restriction: only restricts interest relative to the portion of debt needed to be re-characterised as equity to meet the 4:1 “safe harbour” threshold;
• scope: restricts both interest expenses and capital losses relative to controlled debt. However, restricted capital losses may be carried forward for set-off in future capital gains on the same loan; and
• independent financing proof: does not apply if the taxpayer can prove that similar financing may be obtained between independent parties.

Interest Ceiling Rule

The main features of the interest ceiling rule are as follows:

• net financing expenses: deductibility of net financing expenses (subject to a highly technical definition) is restricted to the extent those expenses exceed the tax value of certain qualifying assets multiplied by a standard interest rate determined annually based on certain benchmarks in line with market development of interest rates;
• concept: the interest ceiling rule allows the deduction of expenses it would cost to debt finance the taxpayer’s (consolidated) relevant assets at their tax value. Financing expenses above this level are restricted;
• qualifying assets: shares in foreign subsidiaries are not qualifying assets (shares in Danish subsidiaries are irrelevant due to consolidation);
• threshold: lower threshold of DKK21.3 million (just under EUR3 million);
• standard interest rate: the standard interest rate applicable to the interest ceiling rule in 2025 is 5.8%; and
• permanent loss: save for a limited exception relative to certain capital losses, deductibility of net financing expenses disallowed under the interest ceiling rule is permanently lost.

EBITDA Rule

The main features of the EBITDA rule are as follows:

• implementation: constitutes the Danish implementation of the ATAD EBITDA-based earnings stripping rule and is therefore broadly similar to the rules in other EU jurisdictions;
• threshold: lower threshold of DKK22.3 million;
• deductibility cap: deductibility of net financing expenses capped at 30% of EBITDA;
• group ratio: the 30% ratio may be replaced by the actual EBITDA ratio of the consolidated worldwide group if the latter is more favourable to the taxpayer;
• carry forward: any net financing expenses restricted from deductibility under the EBITDA rule may be carried forward for tax deduction indefinitely; and
• unused capacity: unused deductibility capacity for net financing expenses may be carried forward for five years.

Approval

Acquisitions of qualifying holdings (a direct or indirect holding which represents 10% or more of the capital or voting rights or which makes it possible to exercise a significant influence over the management) operating in the financial services sector must be notified to the Danish Financial Supervisory Authority (the “Danish FSA”) (Finanstilsynet) in advance for approval of the planned acquisition.

This requirement also applies to an increase in the qualifying holding which, after the acquisition, results in the interest equalling or exceeding 20%, 33% or 50% of the share capital or voting rights, results in the target company becoming a “subsidiary”, or otherwise results in a de facto controlling influence over the company, eg, via a shareholder’s agreement.

Assessment

The Danish FSA has an assessment period of 60 business days, which may be interrupted if additional information necessary for the assessment is requested. If, during the assessment period, the Danish FSA does not give a written refusal of the application for the intended acquisition, the acquisition will be considered approved.

The Danish FSA may stipulate a time limit for the completion of the acquisitions when approving them. The Danish FSA may also extend this time limit.

The purpose of the approval is for the Danish FSA to ensure that account is taken of the following.

• Sensible and proper management of the undertaking in which the acquisition is intended.
• The likely influence of the intended acquirer on the undertaking.
• The suitability and the financial soundness of the intended acquisition in relation to the following criteria.
1. The reputation of the intended acquirer.
2. The reputation and experience of the post-completion management (fit and proper).
3. The financial situation of the intended acquirer, particularly with respect to the nature of the business to be operated or intended to be operated post-completion.
4. Whether the undertaking can continue to comply with the supervision requirements in the legislation (in particular whether the group of which the undertaking may become a part has a structure that makes it possible to perform effective supervision and effective exchange of information between the competent authorities).
5. Whether, in connection with the intended acquisition, there are grounds to suspect money laundering or terrorist financing.

The Danish FSA may (and in certain instances will) suspend the voting rights associated with equity investments if the rules are not adhered to.

Facility Agreement

Approval from the Danish FSA will normally be a condition precedent to first utilisation, which is similar to merger control. Regulatory compliance and required authorisations are addressed in the representations, undertakings and events of default in the facility agreement.

Regime

The Danish takeover regimes comprises:

• the Danish Capital Markets Act;
• the Danish Executive Order on Takeover Bids;
• Guidance issued by the Danish FSA; and
• Rules for issuers on Nasdaq Copenhagen with respect to matters such as delisting.

These rules are supplemented by the Danish Companies Act.

Certain Funds Requirement

The takeover regime includes a certain funds requirement, which means:

• prior to notification of a mandatory offer or a voluntary offer, the offeror must be fully able to fulfil any claim in respect of cash consideration; and
• the offeror must also have taken all reasonable steps to ensure that any other form of consideration can be paid, such as shares.

The offer document must contain information on financing but there is no requirement to submit commitment documents or similar. In practice, the considerations and discussions are similar to those in respect of other “certain funds” requirements in acquisition financing.

Acquisition Finance Considerations

In acquisition finance, particular issues in relation to public-to-private transactions include:

• reaching required thresholds (normally 90% enabling squeeze-out and delisting) as a condition to utilisation;
• ability and conditions to accept lower levels of acceptance; and
• pre-funding, settlement process and ensuring shares are comprised by security.

Structuring Considerations

From a structuring point of view, it should be noted that if a debt pushdown is intended to be made within 12 months of completion, the offer document must contain information on the debt pushdown, including the amount.

Foreign Direct Investment Filing

The foreign direct investment (FDI) authorities in certain jurisdictions have determined that the granting of a pledge over shares of companies in strategic sectors triggers the filing requirement under the relevant FDI regime. This obligation to file arises not only at the time of enforcement but also at the time of the grant, extension and enforcement of the pledge.

In Denmark, the FDI regime not only covers the acquisition of shareholdings or voting rights in a company or entity but also situations where similar control is achieved by means other than acquiring voting rights. This includes achieving similar control or significant influence through agreement-based control and influence, purchasing assets in the Danish company or through long-term and irrevocable leases.

A foreign investor directly or indirectly gains control or significant influence in a Danish company or entity by:

• acquisition of assets: acquiring all the assets in the Danish company or entity or a significant part of the assets or gaining control over all or a significant part of the assets as a result of long-term and irrevocable leases; and
• potential voting rights: the existence and effect of potential voting rights, including warrants and call options on shares, must be considered when assessing whether a foreign investor obtains similar control by other means.

However, the grant of a pledge over shares of companies in strategic sectors does not in itself trigger the filing requirement under the Danish FDI regime if the granting of the pledge does not entail any transfer of control over the company’s assets or voting rights. At the time of enforcement, the situation may be different and should be re-evaluated.