Doing Business In... 2019 Comparisons

Last Updated July 15, 2019

Law and Practice

Authors



Gorrissen Federspiel Advokatpartnerselskab is recognised as one of Denmark’s leading law firms. Its strong national and international practice benefits from long-term close relationships with a number of the world’s leading law firms in other jurisdictions. It is a full-service law firm covering all relevant aspects of business law, with approximately 460 employees of whom more than 260 are lawyers, divided into 12 practice groups. Furthermore, cross-practice groups are established focusing on identified business sectors or specific business areas. The firm’s clients include many of the most prestigious and respected companies and organisations in Denmark and abroad. Its experts have acted on behalf of clients in many of Denmark’s largest and most complex transactions. Furthermore, they have litigated in some of the most high-profile and complex lawsuits in recent years. In 2018, the firm advised more than half of the most traded companies on the Copenhagen Stock Exchange.

The applicable legal system in Denmark is civil law. The Constitutional Act of 1953 represents the highest national legal authority, regulating relations between the highest state organs and, in principle, providing for an even distribution of power among three branches of government: the executive, the legislative and the judicial.

The executive power is formally vested with the King, as Denmark has been a constitutional monarchy since 1849. However, in practice, the monarch no longer has political influence. References to the King in the Constitution are instead interpreted to refer to the Government. The executive power therefore lies with the Government. Some local tasks are, however, delegated to local municipalities. The extent and circumstances of these delegations is defined by statutory law, and the local municipalities exist under the supervision of state authority.

The Government depends on retaining the confidence of the majority in the Parliament. According to the Constitution, the Government must resign if the majority of the Parliament issues a vote of no confidence. The remedy for the Government is that the Prime Minister has the right to dissolve the Parliament and thus call an election at any time.

The legislative power is shared between the Government and a single chamber called 'Folketinget' (the Parliament). Generally, the Government introduces bills to the Parliament, where the bills are read three times before being passed.

The Parliament consists of 179 members elected by the public, four of whom are elected outside Denmark – two in Greenland and two in the Faroe Islands. The candidates are elected on the basis of proportional representation. The Parliament is elected for a period of four years. Apart from the Parliament's legislative function, it exercises control of the administration through a number of standing committees in budgetary and administrative matters. 

The judicial power is vested in the courts of law. The court system of Denmark is comprised of 24 country courts, the Maritime and Commercial Court of Copenhagen, the Eastern and the Western High Courts and the Supreme Court. The country courts have country jurisdiction, the two high courts have regional jurisdiction and the Supreme Court has national jurisdiction. The courts (other than the Maritime and Commercial Court) hear all matters, including criminal matters, civil matters, administrative matters and constitutional matters. Actions concerning international commercial matters, most intellectual property rights, the Marketing Practices Act and the Competition Act can be brought before the Maritime and Commercial Court as the court of first instance.

Judges are appointed for life by the Danish Court Administration, which was established in 1999. Formally, the administration is independent from the executive power and is governed by an executive committee. Further, judges enjoy personal independence as they are guaranteed absolute independence from the Government and the Parliament. They cannot be removed against their will and they may only be dismissed by order of the Special Court of Indictment and Revision.

Foreign investments as such are not presently subject to approval by the Danish authorities. However, as described in 6 Competition Law, below, there are Danish merger control rules which apply equally to Danish and foreign investors. Other sector specific restrictions also apply, including for manufacturers of weapons and certain equipment designed for warfare as well as for investments in financial institutions.

In addition to the EU foreign investment screening regulation, which will take effect in Denmark in October 2020, the former Danish Government had announced its intention to introduce a bill concerning Danish rules on investment screenings before the end of 2019. However, as a general election was held at the beginning of June 2019, there will now be a new Government in Denmark, and the outcome of this process is thus currently uncertain.

If a Danish bill on investment screening is adopted as planned by the former Government, the nature of the investments requiring approval will be those made by foreign investors with 'close ties' to a foreign state seeking to invest in 'critical infrastructure' or 'sensitive data' in Denmark. It has yet to be defined what is meant by 'close ties' to a foreign state. However, the screening requirement is expected to include foreign companies wholly or partly owned by a foreign state as well as companies owned or managed by a party related to the foreign state. The definition of 'critical infrastructure' is expected to be very broad and include a wide range of sectors and investment projects. 

It is the intention that the screening mechanism shall make it possible to either prohibit the investment generally or to establish certain requirements and conditions to the investment in order to secure that the activity does not constitute a threat to maintaining public order and security.

There are several industries in which approval requirements are applicable prior to completing the investment. For example, to invest in Danish financial undertakings (banks, mortgage-credit institutions, investment firms, investment management companies and insurance companies) will require the prior approval of the Danish Financial Supervisory Authority if the investment exceeds certain thresholds (lowest threshold is 10% of the capital or voting rights or another controlling influence). However, these rules apply equally to investments made by Danish investors and foreign investors.

Businesses manufacturing weapons and certain other equipment designed for warfare must obtain an approval from the Danish Minister of Justice prior to initiating business in Denmark (see Section 2 of the Danish Munitions Act).

Further, it follows from Section 3 of the Danish Munitions Act that changes in ownership or management of businesses manufacturing weapons and certain other equipment designed for warfare require a separate approval from the Danish Minister of Justice, if:

  • a personally operated company intends to include an owner who is not a Danish citizen;
  • the domicile of the company changes so that it is outside of Denmark;
  • the CEO or employees authorised to sign for the company changes to a person or persons who are not Danish citizens;
  • the proportion of the company's board members who are Danish citizens is reduced to less than 80%;
  • the share of Danish-owned share capital is reduced to less than 60%;
  • foreigners represent or will represent, through ownership of the share capital, more than 20% of the votes; or
  • foreigners will have control over the company, through possession of capital or in any other manner.

A company that already has more than 20% foreign board members must also apply for permission to both expand the share of foreign board members and to replace one foreign board member with another foreign board member.

The Minister of Justice will grant authorisation pursuant to Section 3 of the Danish Munitions Act, unless contrary to foreign policy or security matters.

An application for a licence to produce products governed by the Danish Munitions Act must be submitted to the Danish Minister of Justice, who will present the application to the Ministry of Defence and the national police chief for an assessment of the security aspects of the case. The Danish Minister of Justice may revoke a licence if the company violates the conditions set for the licence or if the company is experiencing significant financial problems. Furthermore, considerations such as those regarding foreign policy may also justify the withdrawal of an approval. Non-compliance with the Danish Munitions Act will be subject to fines or prison if committed by a natural person.

Foreign investors who are interested in an investment in a company manufacturing weapons and certain other equipment designed for warfare are, if the investment results in changes to the target company requiring separate approval as further described in 2.1 Approval of Foreign Investments, above, required to provide the information related to the investment to the Ministry of Justice.

All decisions made by the Minister of Justice under the Danish Munitions Act may be brought before the Danish courts of law. There is no administrative appeal.

Limited Liability Companies

The most common types of corporate vehicles are limited liability companies, which exist in two forms; public limited companies (aktieselskaber or A/S) and private limited liability companies (anpartsselskaber or ApS), both governed by the Danish Companies Act. The shares of public limited liability companies can both be publicly listed or privately held. Both public and private limited companies can be founded by one or more founders (physical and legal entities, which can be Danish or foreign).

The Danish Companies Act sets out differentiated minimum share capital requirements for public limited companies and private limited companies. The minimum share capital of a public limited company has recently been reduced from DKK500,000 to DKK400,000 and the minimum share capital of a private limited company has recently been reduced from DKK50,000 to DKK40,000. A company cannot be registered unless an amount equal to 25% of the share capital, as long as this is not less than DKK40,000, has been paid up. In situations where the entire share capital is paid by way of non-cash contributions, the entire share capital must be paid up.

Public limited liability companies must have at least one auditor who must be either a state-authorised public accountant or a registered public accountant. Small companies may decide not to have their financial statements audited under the Danish Financial Statements Act and thus not appoint an auditor if the company's balance sheet total, turnover and/or number of employees are below certain limits.

In some cases, Danish law requires that a company has to be structured as a public limited company. This is the case, for instance, with banking activities and publicly listed and/or traded companies.   

Partnerships with Personal Liability of Partners and Limited Partnerships

Partnerships with personal liability of the partners (interessentselskaber or I/S) must have at least two owners, who by default are personally liable for the debts of the partnership.

Limited partnerships (kommanditselskaber or K/S) must consist of at least one general partner with personal liability and, consequently, at least one limited partner. Both partnership forms are regulated by partnership agreements.

The partnership may be registered with the Danish Business Authority. A registration of a partnership with personal liability is, however, only required if all owners of the partnership are companies with limited liability or if needed due to taxation obligations. A registration of a limited partnership is only required if the general partners of the limited partnership are companies with limited liability or if needed due to taxation obligations.

There are no capital requirements for either type of company.

The decision to establish a limited liability company is made in a constituent general meeting. The founders must sign a Memorandum of Association with information on, inter alia, the founders, the day of legal effect, size and timing of the subscription, whether the share capital is paid in assets or cash, decisions giving special rights or advantages, etc.

The Articles of Association must be appended to the Memorandum of Association and shall contain information about the name and the purpose of the company, the nominal value and number of the share capital, any restrictions on the transfer of shares, number of directors, the auditor (certain exceptions apply), rules governing the general meetings, rules of signature, etc. 

The management must either be elected by the general meeting or stated directly in the Memorandum of Association.

A company does not have legal effect until it is registered with the Danish Business Authority. The registration can be carried out online through the Danish Business Authority’s IT system, virk.dk, and can therefore typically be carried out rather swiftly (ie, within a couple of hours) unless the Danish Business Authority decides to apply a manual registration procedure in the specific case.

A company’s Articles of Association and any changes herein must be registered and filed with the Danish Business Authority through the Danish Business Authority’s IT system, virk.dk. The Articles of Association can be ordered online at cvr.dk by anyone, for a small fee. 

Following approval by the company’s general meeting the annual report of a company must be filed with the Danish Business Authority and will also be publicly available at cvr.dk.

The identity of the members of the board of directors and executive management shall be filed with the Danish Business Authority. The names and addresses of board members and executive managers are, with limited exceptions, publicly available at cvr.dk.

All shares must be entered in a share register and available for inspection by public authorities in any event and also by the shareholders if so provided in the Articles of Association. For companies where employees are entitled to elect employee representatives to the board of directors/supervisory board and where this right has not been utilised, the share register must also be open for inspection by a representative of the employees.

Shareholders (being legal or physical entities) directly holding 5% or more of the capital or of the votes ('legal owners') must register their holdings with the company within two weeks. Any further changes which increase or reduce the holding above or below the thresholds of 5, 10, 15, 20, 25, 50, 90 or 100%, or 1/3 or 2/3, must also be registered within two weeks. The company must as soon as possible hereafter report and register such information with the public share register held by the Danish Business Authority. Details of the name and address of the legal owners as well as the ownership percentage (registered in an interval) is, with limited exceptions, publicly available to anyone online.

In addition, companies are required to register their beneficial owners and under an obligation to take the necessary measures to determine who in fact owns or controls the entity. Beneficial owners are natural persons who ultimately, whether directly or indirectly, own or control a sufficient part of the shares or the voting rights (more than 25% provides an indication), or who exercise control through other means (ie, right to appoint or dismiss a majority of board members, approval rights in respect of annual report or in relation to payment of dividend, veto rights, etc). Details of the names and addresses of the beneficial owners as well as any information on the person’s actual ownership, including the exact ownership percentage or other rights, is with limited exceptions publicly available online at the Danish Business Authority.

Separate notification requirements apply for shareholdings in Danish listed companies. Furthermore, shareholders are required to obtain prior authority approval when acquiring interests in for example regulated financial undertakings.

The Companies Act operates with both a one-tier and a two-tier management structure, of which the latter comes in two forms.

In the traditional two-tier management structure, the overall and strategic management is handled by a board of directors elected by the general meeting. The board of directors appoints an executive management to handle the day-to-day management whom the board of directors also supervises. This is the most common choice and available for both Danish public and private limited liability companies.

The less commonly used option for a two-tier management structure is to have an executive management that is both responsible for the daily management as well as the overall and strategic management. If the public or private limited company chooses the latter, the executive management must be appointed by a supervisory board elected by the general meeting, which oversees the executive management. 

In addition, the shareholders of a private limited liability company may choose a one-tier management structure whereby the company is managed by an executive management alone.

The employees of limited liability companies, which in the last three years have on average employed at least 35 employees, are entitled to elect a number of employee representatives to the board of directors/supervisory board corresponding to half the number of the other members of the board of directors/supervisory board elected by the general meeting or appointed in the Articles of Association.

Founders and members of the board of directors or executive management who, in the performance of their duties, have intentionally or negligently caused damage to the limited liability company, shareholders or a third party may become liable to pay damages. If more than one person is liable, these persons will be jointly and severally liable to pay the damages.

Shareholders are liable for losses that the person in question intentionally or negligently causes to the company, other shareholders or third parties. If the risk of abuse has not ceased, the court can order the abusing party to redeem the non-abusing party’s shares or sell its shares to the other shareholders or the company in both situations at a price which is to be set based on the company’s economic situation and what is deemed reasonable.

The Danish legislation does not provide a general concept of piercing the corporate veil, except for in the case of criminal offences. There are also, to a limited extent, other special cases for exceptions, including for instance in the case of direct unlawful conduct or involvement, in particular in insolvency scenarios.

Blue-collar employees are often members of a trade union. Accordingly, the employment of blue-collar employees is mainly regulated by collective bargaining agreements which contain provisions on, eg, salary, shop stewards, working hours, holidays, maternity/paternity leave, notice periods, unfair dismissal and pension. The collective agreements cannot be deviated from to the detriment of the employees.

The employment of salaried employees is regulated by the Danish Salaried Employees Act (funktionærloven). A salaried employee is typically a shop assistant or an office worker who is employed for more than eight hours a week on average and occupies a position in which he/she works under the instructions of the employer.

The Salaried Employees Act contains mandatory provisions on, eg, notice periods, severance pay and maternity leave.

There is no statutory minimum salary for salaried employees or blue-collar employees. However, if the employee is covered by a collective bargaining agreement, this often includes provisions on minimum salary.

The Danish Act on Employment Certificates (ansættelsesbevisloven) implementing the underlying EU Directive provides that the employer is obliged to draw up an employment certificate containing the most important terms and conditions of the employment. This obligation applies to all employees employed with a weekly working time exceeding eight hours, provided that the duration of the employment exceeds one month.

The certificate must include information regarding, inter alia, bonus, overtime pay, time off in lieu of payment for overtime and salary during maternity/paternity leave. This information is usually provided through an employment contract.

It is the responsibility of the employer to ensure that the information provided is accurate, up to date and not misleading. Non-compliance with the Act may entitle the employee to compensation.

Regardless of the Danish Act on Employment Certificates, an employment contract can be concluded verbally. However, in certain cases of burdensome provisions for the employee, including non-compete and/or non-solicitation of customers clauses, these can only be validly entered into on the basis of a written contract.

The Danish Act on Fixed-Term Employment (lov om tidsbegrænset ansættelse) implementing the underlying EU Directive provides that the employer cannot treat a fixed-term employee differently to a comparable permanent employee, unless justified by objective circumstances. Consequently, fixed-term employees are generally entitled to receive the same benefits as permanent employees. Danish law allows both fixed-term and permanent employments.

In general, agreements on a forced retirement age are invalid and may even constitute age discrimination.

The Danish Act on Working Hours (arbejdstidsdirektiv-gennemførelsesloven) provides that the average working hours in a period of seven days, as calculated over a period of four months, cannot exceed 48 hours, including overtime. The Act implements the underlying EU Directive.

The Danish Act on Working Environment (arbejdsmiljøloven) stipulates that, within a period of seven days, employees are entitled to a weekly day off. The weekly day off should, as far as is possible, be a Sunday. Furthermore, the working hours should be arranged in such a way that the employees are given a time of rest of at least 11 consecutive hours within each period of 24 hours.

Special regulations apply to night work and work carried out by employees below the age of 18.

The Danish Act on Part-Time Work (deltidsloven) implementing the underlying EU Directive provides that an employer cannot treat a part-time employee differently to a full-time employee, unless justified by objective circumstances. Consequently, part-time employees are generally entitled to receive the same benefits as comparable full-time employees.

Part-time employees enjoy special protection in connection with termination of employment. Non-compliance with the Act may entitle the employee to compensation.

In general, salaried employees are only entitled to overtime if this is agreed with the employer. The salaried employee is under a duty to perform overtime if instructed by the employer to do so with a reasonable notice and within a reasonable number of hours. Blue-collar employees will be entitled to overtime pay based on collective bargaining agreements.

The Salaried Employees Act stipulates the following notice periods based on the individual employee’s length of service:

  • less than five months of employment – one month's notice effective as of the end of a month;
  • less than two years and nine months of employment – three months' notice effective as of the end of a month;
  • less than five years and eight months of employment – four months' notice effective as of the end of a month;
  • less than eight years and seven months of employment – five months' notice effective as of the end of a month; and
  • at least eight years and seven months of employment – six months' notice effective as of the end of a month.

The employee may terminate the employment with one month’s notice regardless of seniority. It may be agreed in writing that a longer notice period shall apply, provided the notice to be given by the employer is extended correspondingly.

A salaried employee who has been continuously employed for at least 12 or 17 years is entitled to severance pay corresponding to one or three months’ salary, respectively, in the case of dismissal by the employer.

A salaried employee who is dismissed without just cause and has been employed for at least one year at the time of dismissal is entitled to compensation. The maximum amount payable is 50% of the salary payable in the statutory notice period. However, if the employee has reached the age of 30, the potential compensation is increased to an amount equalling three months’ salary. If the employee has been employed for at least ten years, the compensation may be increased to a maximum of four months’ salary. The amount payable is increased further to six months’ salary if the employee has been employed for at least 15 years.

The Danish Act on Collective Redundancies (lov om kollektive afskedigelser) implementing the underlying EU Directive obliges the employer to inform and negotiate with the employees (or the employees’ representatives) when the number of employees to be made redundant over a period of 30 days is expected to reach:

  • at least ten employees in businesses employing more than 20 and less than 100 employees;
  • at least 10% of the employees in businesses employing at least 100 and less than 300 employees; or
  • at least 30 employees in businesses employing at least 300 employees.

The obligation to inform and negotiate does not provide the employees with and possibility of blocking the decision-making or even postponing this.

The Danish Act on Information and Consultation of Employees (lov om information og høring af lønmodtagere) applies to employers with at least 35 employees. However, the Act is not applicable if the employees have access to the information and consultation by way of collective bargaining agreements.

The purpose of the Act is to ensure that the employees are informed at an appropriate point in time of issues which are of importance to the employment and that the employees are consulted on the basis of this information.

As a minimum requirement, the information and consultation must cover:

  • the recent and probable development of the employer’s activities and economic situation;
  • the structure and development of employment within the employer’s business, in particular measures which hold a threat to the employment; and
  • decisions likely to lead to substantial changes in the work organisation or in the contractual relations between the employer and the employees.

The information shall be given frequently, sufficiently often for the employees’ representatives to be up to date on the current situation of the employer, and with sufficient content for the employees’ representatives to be able to prepare for consultation.

Under special circumstances where information or consultation may cause serious harm to the business, the employer is exempt from providing such information and from consulting the employees’ representatives.

The employees’ representatives are protected against dismissal and other disparagement corresponding to the protection of shop stewards in the same or similar fields of work.

The Danish Tax at Source Act distinguishes between taxation of residents and non-residents. Residents are subject to full and unlimited tax liability on their worldwide income, whereas non-residents may be subject to limited tax liability, ie, on income derived from certain sources in Denmark.

In addition to the income taxes (ie, national tax, municipal tax and health contribution), individuals are subject to tax on dividends and capital gains.

Danish residents are subject to full tax liability on their worldwide income. When defining the term 'resident' the tax authorities will, inter alia, attach importance to whether the individual by his absence or presence has indicated an intention of having Denmark as the 'centre of his life'. If this is the case, tax liability commences from the date of arrival. An individual leaving the country will remain taxable in Denmark until the individual is considered to have given up residence in Denmark.

An individual remaining in Denmark for six months or longer is subject to tax liability as from their date of arrival, irrespective of whether he/she takes up residence or domicile. Foreign residents who serve or permanently stay on board vessels registered in Denmark can be considered Danish residents for tax purposes. Furthermore, Danish citizens employed by the Danish state serving abroad are also considered resident in Denmark for tax purposes.

The Danish tax rate on salary, whether the person has limited or full tax liability in Denmark, is up to 56.5% (2019 level). However, if certain conditions are met it is possible to be taxed with a gross tax of 27% plus labour market contribution (ie, an effective tax rate of approximately 32.84% (2019 level)), according to the tax scheme for foreign researchers and highly paid employees.

Generally, companies resident in Denmark for tax purposes are taxed on their worldwide income. However, income from foreign permanent establishments and foreign real estate are excluded. Companies resident outside Denmark for tax purposes are taxed on income derived from a permanent establishment (PE) in Denmark as well as income from certain sources in Denmark.

A company is considered tax-resident in Denmark if it is incorporated and registered in Denmark. Further, a non-domestic company is considered tax-resident in Denmark if it has its place of effective management in Denmark. Non-resident companies can be subject to limited tax liability either through a PE in Denmark, Danish real estate or through withholding taxes on income from certain Danish sources.

The corporate income tax rate in Denmark is 22%. The most important indirect tax is VAT, which is at a rate of 25%. Other indirect taxes are energy duties, real estate taxes and stamp duties.

Dividends on subsidiary shares and group shares are tax-exempt, whereas dividends on portfolio shares are subject to taxation. Capital gains on subsidiary shares, group shares and unlisted portfolio shares are tax-exempt, whereas capital gains on listed portfolio shares are subject to taxation.

Royalty payments from Danish sources to non-resident recipients are subject to Danish withholding tax at a rate of 22%.

Denmark grants credit for any foreign taxes paid. However, the credit is limited to the amount of Danish tax payable on the foreign net income calculated according to Danish principles.

Further, Denmark has concluded double taxation treaties with approximately 85 jurisdictions. Generally, the treaties are based on the OECD Model Convention and they provide a reduction in the withholding tax rate on outbound dividends, interest and royalty payments.

There are two types of consolidated tax grouping in Denmark. First, there is mandatory joint taxation, which applies to all Danish companies and Danish PEs under common control. Second, there is voluntary international joint taxation, under which all foreign companies and foreign PEs (downstream as well as upstream) may opt for joint taxation with Danish entities. An election of international joint taxation is binding for ten years.

Various different limitation rules exist under Danish law. First, the thin capitalisation test in Denmark limits the deductibility of Danish company and PE interest expenses and capital losses on ‘controlled debt’. If the Danish debtor has controlled debt which exceeds a minimum threshold of DKK10 million, the Danish debtor’s debt-to-equity ratio exceeds 4:1 and the Danish debtor fails to demonstrate that a similar loan could have been obtained from an unrelated third party, interest expenses and capital losses relating to debt in excess of the 4:1 ratio cannot be deducted (however, only for the part of the excess debt that would need to be qualified as equity in order for the 4:1 ratio to be complied with).

Second, Denmark has implemented a new EBITDA rule, according to which the deduction of net financial expenses exceeding DKK22,300,000 is limited to an amount equal to 30% of the company’s EBITDA. The rule provides, inter alia, that deduction for exceeding borrowing costs will be reduced to 30% of EBITDA, while the exceeding borrowing costs up to DKK23 million can, as a general rule, be fully deducted. Excess borrowing costs can be carried forward indefinitely, whereas unutilised interest deduction capacity can be carried forward for the five following income years.

Third, under the asset test, net financial costs exceeding a cap calculated as the standard rate of return (2.7% for 2019) multiplied by the tax base of the company’s qualifying assets (ie, on group basis) cannot be deducted. Shares held in foreign subsidiaries will be included in the asset loss. Net finance costs reduced according to the rules on thin capitalisation will not be included in the net finance costs when assessing a reduction according to the asset test.

Transactions made between affiliated companies must be carried out on arm’s-length terms. Generally, companies are regarded as affiliated if:

  • one of the companies directly or indirectly owns more than 50% of the share capital or the voting rights in the other company;
  • the same group of shareholders directly or indirectly owns more than 50% of the share capital or the voting rights in each of the companies; or
  • the company exercises joint control over the other company in conjunction with one or more other shareholders (eg, by a shareholders’ agreement on voting rights and management).

Related companies must prepare and file transfer pricing documentation showing how the companies have set the prices for inter-company transactions and Denmark generally follows the OECD transfer pricing guidelines. If the prices agreed by the companies are different from what would have been negotiated in an arm’s-length transaction between independent parties, the tax authorities are authorised to adjust the prices. In addition, the tax authorities may determine the prices based on an assessment if the transfer pricing documentation is defective or submitted too late.

Denmark has implemented a general anti-avoidance rule (GAAR) in accordance with Article 6 of the EU Anti-Tax Avoidance Directive, which will apply to both resident and non-resident companies. Under GAAR, the benefits of an arrangement or a series of arrangements shall be denied by the Danish Tax Authorities, if the arrangement or series of arrangements have been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of the applicable tax law.

Further, Denmark acceded to the Multilateral Convention to implement tax treaty related measures to prevent base erosion and profit shifting (the so-called BEPS rules). Consequently, under certain circumstances a permanent establishment can arise when a person is acting on behalf of an enterprise and, in doing so, habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise.

Denmark has had mandatory merger control rules since 2000. Mergers in excess of the monetary thresholds are notifiable to the Danish Competition and Consumer Authority.

The definition of a merger follows that under the EC Merger Regulation. This means that a merger encompasses three different types of concentrations. First, the merger of two or more previously independent undertakings or parts of undertakings. Second, the acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, of direct or indirect control of the whole or parts of one or more other undertakings. Control encompasses both positive and negative control as well as sole control and joint control. Control means the ability to exercise decisive influence over another company, eg, by having a majority of the votes or veto rights in strategic matters such as appointment of management, business plan, budget, or important investments. Third, the creation of a full-function joint venture. The latter encompasses greenfield operations as well as the transformation of a previously solely controlled company to a joint venture. It does not encompass the acquisition of control from a third party, which instead falls within the scope of the second type of merger. Minority investments that do not give control fall outside the merger control rules.

The thresholds are:

  • the parties realising an aggregate Danish turnover of at least DKK900 million (approximately EUR120.8 million) and at least two of the parties each realised a Danish turnover of at least DKK100 million (approximately EUR13.4 million);
  • one of the parties realising a Danish turnover of at least DKK3.8 billion (approximately EUR509.9 million) and one of the other parties realised a world-wide turnover of at least DKK3.8 billion (approximately EUR509.9 million); or
  • a merger between two or more commercial providers of electronic communications networks in Denmark in which one of the parties realises a Danish turnover of at least DKK100 million (approximately EUR13.4 million)

The calculation and geographical allocation of turnover generally follows that under the EC Merger Regulation, with special rules for state-owned companies.

Only mergers above the filing threshold are notifiable. The Danish Competition and Consumer Authority cannot review a merger below the thresholds. Nor can they review such a merger under the prohibition against anti-competitive agreements or the prohibition against abuse of dominance.

Denmark has had mandatory merger control rules since 2000. Mergers in excess of the monetary thresholds are notifiable to the Danish Competition and Consumer Authority, with a filing fee of up to DKK1.5 million. It is illegal to implement the transaction before notification and before clearance. Denmark applies the Significant Impediment to Effective Competition test.

The deadline for a decision in Phase I is 25 working days from a complete notification. If the parties offer remedies, the deadline is 35 working days. The deadline for a decision in Phase II is 90 working days from the initiation of Phase II. If the parties offer remedies between working day 70 and day 90, the deadline is 110 working days. It is also possible to extend this period by 20 working days following request or approval by the parties. It is not possible to submit remedies after working day 90 in Phase II. It is possible to 'stop the clock' in Denmark.

Section 6 of the Danish Act on Competition prohibits agreements, concerted practices and decisions within associations of undertakings which have as their object or effect the restriction of competition. The interpretation of this provision mirrors that of Article 101 TFEU. The prohibition applies to any conduct that has an effect in Denmark. There are no per se infringements in Danish law.

The prohibition extends to both horizontal and vertical agreements. 

As for horizontal agreements, it is generally illegal for competitors to agree on prices (including maximum prices), to share customers or markets between them, to agree to boycott customers or suppliers, or to exchange competitively sensitive information. There are block exemptions for research and development agreements, technology transfer agreements and specialisation agreements if the parties meet certain market share criteria and the agreement does not contain certain black-listed and grey-listed terms. 

As for vertical agreements, it is generally illegal to agree on binding resale prices or minimum resale prices (maximum resale prices or recommended resale prices are permissible), to restrict passive sales (ie, responding to unsolicited requests from customers), to restrict active sales except in certain instances (ie, actively seeking orders from customers), and long-term exclusivity requirements. There is a block exemption for vertical agreements if the parties meet certain market share criteria and the agreement does not contain certain black-listed and grey-listed terms. 

The prohibition does not apply if the agreement gives rise to efficiencies placing customers in no worse a situation than without the agreement.

Anti-competitive agreements are subject to, eg, fines. There is also prison sentence for cartel agreements.

Section 11 of the Danish Act on Competition prohibits the abuse of a dominant position. The interpretation of this provision generally mirrors that of Article 102 TFEU. The prohibition applies to any conduct that has an effect in Denmark. There are no per se infringements in Danish law.

A company is dominant if it holds such a strong market position that it can behave independently of its competitors, customers, suppliers and, ultimately, consumers. Market shares play an important role in the establishment of a dominant position. A company is not normally dominant with a market share below 40%, although it may be in certain circumstances. It is necessary to take additional elements such as competitors’ market shares, the development in market shares, barriers to entry and expansion, and buyer power into account.

It is not illegal to hold a dominant position. It is the abuse of a dominant position that is illegal. A company abuses a dominant position if it has recourse to methods different from those governing normal competition on the basis of the performance of commercial operators that has the effect, to the detriment of consumers, of hindering the maintenance of the degree of competition that exist in the market or the growth of that competition. Examples of abuse include too-high prices (excessive pricing), too-low prices (predatory pricing), selectively low prices, margin squeeze, exclusivity, exclusivity rebates and other loyalty-inducing rebates, refusal to supply, discrimination, bundling/tying and unfair business terms.

It is possible to objectively justify conduct that would otherwise amount to an abuse, eg, by showing efficiencies.

Danish intellectual property law is based on both domestic and EU legislation, as well as international treaties and conventions. The protection granted to the various intellectual property rights is regulated in national acts on patents, trade marks, designs and copyright. As Denmark is an EU member state, these acts have largely been harmonised with, and are similar to, those in the rest of the EU.

In general, disputes involving the alleged infringement of IP rights in Denmark are typically handled through the judicial system. The remedies available to IP rights holders are found in the Danish Administration of Justice Act, as well as in the independent acts on the various types of IP. The most commonly used remedies include preliminary and/or permanent injunctions and monetary compensation.

Patents are regulated in the Danish Patents Act, which states that patent protection can be granted for inventions that:

  • can be exploited industrially;
  • are new at the time of filing the application (global novelty); and
  • are significantly different from existing solutions and inventions (prior art).

In Denmark, an exclusive right to an invention may be obtained either by filing a patent application to the Danish Patent and Trademark Office (DKPTO), by designating Denmark in an international patent application under the Patent Cooperation Treaty (PCT) or on the basis of an application to the European Patent Office (EPO) in accordance with the European Patent Convention.

Upon receiving a patent application, the DKPTO performs a novelty search and an examination of patentability.

The Patents Act grants the patent holder the exclusive right to exploit the patent commercially (with a few exemptions). A patent is enforceable for 20 years from the date of the patent application.

As an alternative or in supplement to patents, inventors can file a utility model application. The concept of utility models typically covers smaller inventions that do not qualify for actual patent protection, since the requirements of inventive steps are lower. The DKPTO does not subject utility model applications to any tests or assessments regarding originality. Consequently, the registration process is more time- and cost-efficient than for patents.

Trade marks are regulated by the Danish Trademarks Act, which is, with a few exceptions, identical to the corresponding EU Directive.

In principle, therefore, all signs – including words, numbers, images, the shape of goods or the packaging, and even sounds and colours – may qualify as trade marks, provided that they are capable of distinguishing the goods or services of one undertaking from those of another.

Protection under the act may be obtained either through registration or by use in the course of trade. Both individuals and legal entities may register a trade mark or claim protection for an unregistered mark.

Trade mark registration may be obtained either via a national registration or an EU registration, or by designating Denmark in an international application filed via the Madrid system. However, it should be noted that EU registrations do not cover the Faroe Islands or Greenland.

Applications for a national registration must be filed with the DKPTO and can be filed in multiple classes at once. The holder of a foreign trade mark in a country that is a party to the Paris Convention, or a member of the World Trade Organization (WTO), may, when applying for a Danish trade mark, claim priority within six months of the filing of the first application for the foreign trade mark. The DKPTO does not refuse registration due to the existence of earlier rights, unless the individual rights holders act to enforce their rights.

Registrations are valid for ten years from the date of application, and may then be extended for additional periods of ten years. If the trade mark has not been used within five years of its registration, or if such use has been suspended during an uninterrupted period of five years, the mark may be subject to cancellation upon request from a third party.

Unregistered trade mark rights must be used continuously, and remain in force until the use permanently ceases.

A trade mark holder may prevent third parties from commercially using identical or similar marks, provided that the goods or services in question are identical or similar to those for which the trade mark is protected. Well-known or reputed trade marks may, however, under certain conditions enjoy a broader protection, which prevents the use also in relation to goods/services that are not similar.

Designs are regulated by the Danish Designs Act. In Denmark, designs are additionally protected by EU Regulation No 6/2002 on designs, which provides EU-wide protection for both registered and unregistered designs.

The Designs Act defines a 'design' as the appearance of a product or part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture or material of the product and its ornamentation. To qualify for registration, a design must be new and have individual character.

A design registration is effective for a period of five years from the date of application. Registrations can be renewed for further periods of five years, up to a total of 25 years. A holder of a registered design right enjoys an exclusive right to exploit/use such design.

Unregistered EU designs are protected for a period of three years from the date on which the design was first made available to the public within the EU (eg, published, exhibited, used in trade or otherwise disclosed).

Copyrights are regulated in the Danish Copyright Act, according to which copyright is established when a person (or group of persons) creates a literary or artistic work which is the result of the creator’s independent and creative effort (“own intellectual contribution”), irrespective of the form in which the work has been created.

Protection is granted from the moment of creation and does not require registration (nor is registration possible).

The protected works may, for instance, be literature – including maps, drawings and computer programs – or artistic works such as fictional or descriptive representation, musical works, cinematographic or photographic works, works of fine art, architecture or applied art.

The act grants the creator certain exclusive rights to the protected work. Overall, copyrights are protected 70 years from the death of the (last surviving) creator.

The act also protects so-called 'related rights' or 'neighbouring rights', such as sound performing artists, sound and moving picture recordings, radio and TV broadcasts, catalogues and databases. The protection of related rights is generally weaker than the protection of copyrights.

The abovementioned individual acts on the protection of various IP rights are supplemented by the Danish Marketing Practices Act, which sets out the framework within which businesses are obliged to conduct their affairs. The Marketing Practices Act provides a general clause prohibiting all acts which are in violation of good marketing practice. This general clause is often referenced in disputes regarding infringement of IP rights.

On 9 June 2018, the new Danish Trade Secrets Act entered into force (for more information on this, see the 'Trends & Developments' chapter of this guide).

Denmark is a member of the European Union (EU) and is therefore subject to the General Data Protection Regulation (EU) 2016/679 (GDPR), which became effective on 25 May 2018.

With the implementation of the GDPR, the former Danish Act on Processing of Personal Data is repealed and instead replaced by the Danish Data Protection Act, which supplements the GDPR. Although the GDPR is an EU Regulation and therefore directly applicable in member states, certain provisions of the GDPR allow for national derogations or supplementary provisions to those of the GDPR. Where the GDPR allows for such delegated competence to national legislators, Danish derogations or supplementary provisions have been implemented in the Danish Data Protection Act or in other sectoral laws, eg, within the area of public health.

The Danish Data Protection Act does not apply to processing of personal data carried out by or on behalf of the intelligence services of the police and the international defence agencies, as part of the parliamentary work of the Danish Parliament, or in information databases operated by the mass media. Instead, these processing activities are specifically regulated by a supplemental executive order, in sector-specific laws relating to the intelligence services of the police and international defence, by practice in respect of freedom of information and speech in Parliament and according to the Act on information databases operated by mass media, respectively.

Exceptions also apply to, eg, the processing of personal data for journalistic purposes and information databases covered by the Media Liability Act of Denmark, which is similarly regulated by other sectoral laws.

According to Article 3 of the GDPR, its geographical scope applies to processing of personal data of data subjects within the EU by an establishment of a controller or processor in the EU, regardless of whether or not the processing actually takes place in the EU.

At the same time, the GDPR also applies to any controller or processor not established in the EU, where the processing relates to either:

  • offering goods or services to data subjects in the EU; or
  • monitoring the behaviour of data subjects within the EU.

As for the Danish Data Protection Act and any rules issued by virtue of the Act, it applies to processing of personal data that is performed as part of activities carried out on behalf of a data controller or processor established in Denmark, regardless of whether the processing takes place in the EU. The Act also applies to processing carried out on behalf of Danish diplomatic representations.

As for processing of personal data carried out by a data controller or processor not established in the EU, if the processing relates to the situations mentioned above and is targeted at data subjects within Denmark, the Danish Data Protection Act will apply to that processing.

For foreign companies (not established in the EU) targeting Danish customers, the Danish Data Protection Act and any rules issued by virtue of the Act may therefore apply to the foreign company to the extent that it either:

  • offers goods or services to customers within Denmark; or
  • it monitors the behaviour of Danish customers in Denmark.

The competence to enforce data protection rules lies with the Danish Data Protection Agency and the Danish courts. The Data Protection Agency is the independent supervisory authority with respect to the rules on data protection in Denmark. The Agency is responsible for ensuring conformity with Chapters VI and VII of the GDPR and for monitoring compliance with rules set out in the Danish Data Protection Act, GDPR and any other legislation, which is covered by the scope of the GDPR in terms of special rules on the processing of personal data.

The primary role of the Agency is to supervise compliance with the rules on protection of personal data, which also entails handling complaints from data subjects and carrying out inspections of both public institutions and private companies. The Agency also provides guidance supplementary to the guidance provided by the European Data Protection Board and related to issues that are specific for Denmark, eg, guidance on encryption of e-mails.

Further, the Danish Data Protection Agency may ensure that any data processing operation that takes place in Denmark is lawful, regardless of whether the processing in question is (also) subject to legislation of another EU member state. In order to effectively enforce the mandate of the Agency, it is also, in its supervisory capacity, able to demand all information of importance to its assessment of the lawfulness of processing operations, and without any court warrant access the premises from where a processing operation is being carried out.

The decision-making authority vested in the Agency according to Part 10 of the Danish Data Protection Act, gives the Agency the mandate to bring issues concerning infringement of the Danish Data Protection Act and the GDPR before the courts of Denmark to be considered under the rules of the administration of civil justice under Danish law.

Supplementary to its decision-making authority under Part 10 of the Danish Data Protection Act, the Agency may indicate by a fixed penalty notice that the case may be settled without legal proceedings, if and to the extent that:

  • the infringement of the Data Protection Act is not estimated to result in a penalty higher than a fine; and
  • the party that committed the infringement admits to being guilty of that infringement, and declares to accept the fine as indicated in the fixed penalty notice.

If the fine is accepted by the infringing party, any further prosecution is discontinued.

The fixed penalty notice is, however, only relevant in situations where the facts of the matter are uncomplicated and undisputed, and where legal practice has been established with respect to the level of fines for the type of infringement in question. This legal practice has not yet been established, nor has the mandate of the Agency to issue a fixed penalty notice been enforced.

Decisions rendered by the Agency may not be brought before any other administrative authority and, as such, decisions by the Agency must ultimately be enforced by the courts.

Apart from decisions and fixed penalty notices, the Data Protection Agency may further issue (severe) criticism of a party that infringes the Data Protection Act or the GDPR.

Decisions and criticism issued by the Agency may be published on the Agency’s website. 

Gorrissen Federspiel Advokatpartnerselskab

Axel Towers
Axeltorv 2
1609 Copenhagen V

+45 33 41 41 41

contact@gorrissenfederspiel.com www.gorrissenfederspiel.com
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Law and Practice in Denmark

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Gorrissen Federspiel Advokatpartnerselskab is recognised as one of Denmark’s leading law firms. Its strong national and international practice benefits from long-term close relationships with a number of the world’s leading law firms in other jurisdictions. It is a full-service law firm covering all relevant aspects of business law, with approximately 460 employees of whom more than 260 are lawyers, divided into 12 practice groups. Furthermore, cross-practice groups are established focusing on identified business sectors or specific business areas. The firm’s clients include many of the most prestigious and respected companies and organisations in Denmark and abroad. Its experts have acted on behalf of clients in many of Denmark’s largest and most complex transactions. Furthermore, they have litigated in some of the most high-profile and complex lawsuits in recent years. In 2018, the firm advised more than half of the most traded companies on the Copenhagen Stock Exchange.