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Country profile, Denmark

April 02, 2019
1. Constitution, legal culture and regulatory regime

The Kingdom of Denmark is a constitutional monarchy. As stipulated in the Danish constitution, the monarch is not answerable for its actions, the monarch is sacrosanct. The monarch formally appoints and dismisses the Prime Minister and other members of the cabinet.

While executive authority formally is exercised by the monarch (as head of state), legislative authority is vested in the monarch and the Danish parliament jointly. Judicial authority lies with the courts.

The government is answerable to the Danish Parliament (Folketinget), the national legislative body, which is traditionally considered to be supreme (i.e. able to legislate on any matter and not bound by previous decisions).

The Danish public administration is instrumental in making the services of the welfare state available to the citizens. It also levies taxes and duties, and is responsible for the detailed legal regulation that is of central importance to the Danish society.

Danish jurisprudence operates on the basis of a basic division into public law and civil law. In contrast to for instance German and French law, commercial law in the Danish legal system is not a distinct area of jurisprudence.

The main body of statutes of relevance to business relationships are the Danish Sale of Goods Act, the Contracts Act and the Consumer Contracts Act. The latter imposes a number of duties and rules on commercial parties when dealing with consumers.

Historically, the law has been developed by the courts by means of case law in areas where there has been no or little statutory legislation.

It is appropriate to note that in common law systems the courts generally have far greater law-making influence than in civil law systems such as the Danish.

Denmark is a net exporter of food, energy, pharmaceuticals and enzymes. The country’s main trade partners are Germany, Sweden, the United Kingdom, the Netherlands and the United States.

Denmark is also leading within green energy and sustainability according to the World Bank[1].

2. Investment incentives and climate

The Danish economy is rated AAA by all major agencies including Standard & Poor’s, Moody’s and Fitch.

There is a great deal of focus on foreign investment initiatives in Denmark and the Danish government actively encourages foreign investments. A wide range of sources of finance exists in Denmark, from public incentives and private investors to banks, venture capitalists and institutional investors.

For the sixth year in a row, Denmark ranks number one in Europe for ease of Doing business, and third in the world[2].

According to Bloomberg, Denmark is ranked 8th as one of the world’s most innovative countries[3].

In terms of corruption Denmark has consistently been ranked one of the least corrupt countries in the world[4].

Copenhagen has recently been named the world’s “smartest city” by Future Today Institute[5].

3. Structuring activities

Which corporate form is most suitable will depend on the type of business activities to be performed in Denmark. The main consideration for a foreign investor is often whether to establish a subsidiary (datterselskab) or a branch office (filial).  Generally, the advantages and disadvantages of each form of legal entity will depend on the individual circumstances. However, by setting up a subsidiary you will have ring-fenced the risk to the investment in the subsidiary.

The two main types of companies with limited liability are:

  • The Public Limited Company (Aktieselskab or A/S); and
  • The Private Limited Company (Anpartsselskab or ApS).

The minimum share capital for an A/S is DKK500,000 of which 25% or DKK125,000 must be fully paid up at the time of incorporation. The minimum share capital for an ApS is DKK50,000 of which 25% or minimum DKK50,000 must be fully paid up on incorporation together with any formation costs. The share capital may be contributed to in the form of non-cash assets if the value of these assets has been independently certified by a publicly certified or chartered accountant.

A foreign company may establish an un-registered representative office (repræsentationskontor) in Denmark; typically in order to obtain an initial physical presence in the Danish market place without the commitments and administrative requirements, in the initial stages of an establishment. The un-registered representative office is not a recognised form of business entity and, as such, cannot carry out business activities.

As regards business start-up costs, Denmark is ranked fifth in the world[6].

4. Board responsibilities, directors’ duties, stakeholder relations

An A/S is required to have a board of directors (bestyrelse) or a supervisory board (tilsynsråd) with a minimum of three members. The members are appointed by the shareholders. The board of directors is the supervisory body of the firm, responsible for organising the affairs of the company including employing the executive directors. The role of the supervisory board is to hire and supervise the executive directors. Likewise, there are no nationality or residence requirements applying to the members.

The A/S must also have an executive board (direktion) which typically consists of one to three members unless the Articles of Association stipulate otherwise. The executive directors (direktører) may also sit on the board of directors but they cannot constitute more than half of the Board. There are no applicable nationality or residence requirements.

There is no statutory requirement for an ApS to have a board of directors or supervisory board but such may be stipulated in the Articles of Association. There are no requirements as to the nationality or residence of the directors or board.

The ApS is normally managed by one or more executive directors in accordance with its Articles of Association. There are no requirements as to the nationality or residence of executive directors of an ApS.

5. Tax treatment / tax liability

The corporate tax rate in Denmark is 22% placing Denmark roughly on the average EU level.

Uniquely among the Nordic countries, Denmark has no double taxation for Danish companies with branches abroad

Taxable entities are:

  • Companies registered in Denmark as a public limited liability company (A/S) or as a private limited liability company (ApS);
  • a European Company (SE company);
  • branch offices;
  • corporate entities with limited liability; and
  • associations that carry on business activities.

Partnerships are transparent for tax purposes.

6. Repatriation of funds

No withholding tax is imposed on dividends distributed to a foreign corporate shareholder provided that the shareholder is domiciled in an EU country, or in a country with which Denmark has concluded an applicable double tax treaty (DTA). Furthermore, the foreign shareholder must hold a minimum of 10% of the shares for a minimum of 12 months during which period the dividends may be distributed. In other cases, withholding tax is imposed at 27%. Such withholding tax may be reduced by virtue of a DTA.

7. Employing people

Denmark offers Northern Europe’s most competitive salary levels. Wage progression is modest and employer’s social security contribution rates are the lowest in the world.

Denmark offers the foreign investor a well-organised labour market with generally good relationships between the various parties. In a benchmark study of employment laws in 8 EU countries, Denmark comes out as number 1 with respect to flexibility. The Danish flexicurity model has proven its strength. Add to this the fact that a Danish employer pays virtually no social security contribution, and that Denmark has a stable labour market, and you have a very competitive workforce in comparison with other European countries.

Contrary to many European countries, the Danish labour market is mainly based on collective agreements between the employers’ and the employees’ representative organisations, thus ensuring a high degree of consensus in the labour market. Most employment terms and conditions are negotiated at company level in accordance with each company’s specific needs. Together, employers and employees reach mutually binding agreements on employment issues and as a result, Denmark has a low frequency of industrial action. In Denmark, the majority of employees have unemployment protection insurance and are thereby guaranteed a high level of social security, which results in a relatively high degree of labour market flexibility. Compared to other European countries the Danish rules for termination of contracts are very liberal. Provided that the legal and agreed notices are respected, the employer is entitled to dismiss skilled and unskilled workers at any time, without incurring costs.

8. Property

The process of buying commercial property and residential property is generally straightforward. The default position is that all property is freehold so as a starting point there is no distinction between leasehold property and freehold property.

Within the European Union Denmark discriminates against non-residents in that non-residents can only own Danish (non-commercial) property if:

  • They have previously resided in Denmark for a minimum of five years;
  • they are EU nationals working in Denmark; or
  • they are non-EU nationals with a valid residence or business permit in Denmark.

Denmark has a mature mortgage financing system, which is characterised by efficiency, a good product mix, distribution channels and advisory, and information systems. Mortgages can be adjusted to match the individual needs of the business and may have terms to maturity of up to 30 years. In addition, interest-only mortgages have been introduced in recent years. There are no legal or administrative restrictions on foreign investors’ access to sources of local finance and mortgages.

9. Trading regulations, consumer law

The protection of the consumer under Danish law is fairly comprehensive. The main piece of legislation is the Marketing Practices Act but a number of other acts are relevant when selling goods or services to the consumer in Denmark. The following public bodies are involved:

  • The National Consumer Agency

The principal aims of the Agency are to create a foundation for a coordinated and active contribution in the field of consumer affairs and to contribute to the creation and maintenance of a high level of consumer protection by means of mediation and the exercise of influence.

  • The Consumer Ombudsman

The Consumer Ombudsman supervises and enforces the Marketing Practices Act. You can find information about his work, including guidelines, speeches, actions, articles and his involvement in

  • Consumer Complaints Board

The Consumer Complaints Board deals with complaints from private consumers concerning goods, labour or services provided by businesses.

As for the private side, the Consumer Council (Forbrugerrådet) represents the consumers – in councils, on boards and committees and in dealings with the Government and the Parliament. The Consumer Council is represented on more than 200 committees, boards and councils dealing with matters important to consumers.

10. E-commerce

The Danish e-commerce strategy is a highly ambitious effort to become the world’s leading IT nation. Denmark has pursued a demand-oriented approach focused on promoting the widespread adoption of e-commerce in the Danish society. So far, it appears that Denmark has been successful in promoting business-to-business (B2B) e-commerce, with a number of Danish companies being global leaders in the use of B2B applications.

11. Litigation and disputes

The ordinary courts deal with all types of actions; i.e. both civil cases and criminal cases, and are divided along hierarchical lines. The first instance is normally the district courts (byret), which are located in 24 different circuits; then two High Courts divided into the Western Division of the High Court of (Vestre Landsret) and the Eastern Division of the High Court (Østre Landsret), and finally the highest court in the country, the Supreme Court (Højesteret).

In addition to the ordinary courts, there are few courts that on a permanent basis deal with specific areas of law such as the Maritime and Commercial Court in Copenhagen.

Special ad hoc courts with the power to convict individuals are not allowed. On the other hand special investigative courts, so-called undersøgelsesretter), may be established by a decree of Parliament to determine, often to examine political hot topics.In Denmark, there is no separate constitutional court (unlike Germany, France or Spain). Likewise there is no separate administrative court (such as in Germany or France) or special divisions of the courts (such as in Spain). Such cases are dealt with by the ordinary courts. Historically laymen have been a part of the administration of justice in Denmark. In maritime and commercial cases specialist assistant judges take part, and in criminal cases, lay assessors usually play a role, while serious criminal cases are normally decided with the help of a jury.

The material contained in this profile is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

© Miller Rosenfalck LLP, March 2019

[1] The World Bank’s RISE (Regulatory Indicators for Sustainable Energy) 2017.

[2] World Bank Group’s “Doing Business 2018”.

[3] The 2018 Bloomberg Innovation Index.

[4] Transparency International’s corruption perception index 2018.

[5] Future Today Institute has compiled a Smart City index in its 2019 Tech Trends report.

[6] Best Countries for Business 2018, Forbes Rankings.

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