As an entrepreneur with an interest in a company in Demark, and you want to buy it, here is a guide. You need to know what you are buying, and how to buy it.
What are you buying? The Danish regulation varies, depending on the type of company you have an interest in. Be it public, private companies, listed, or unlisted.
How can you acquire the entity? This is important, to know the processes of purchasing if you are buying the shares of an entity or the assets. Will it be direct ownership? (For the foreign buyer) or will you act like a buyer establishing the entity as Danish based? Here is an overview and guide on the acquisition of the company in Denmark.
Buying a company in Denmark
There is no specific regulation for merging and acquisition of private, non-listed companies in Denmark. The Danish Companies Act, Danish Sale of Goods Act, and other special regulations are responsible for regulating the merging and acquisition of companies in the country. There is a high level of freedom contract in Denmark.
Buying an already incorporated entity means it is legal and credible, starting trading activities and operation is faster and you are required to ensure everything is due and there is no debt.
Acquiring a business can be through the purchase of shares or assets of the business. In the case of shares, all the business liabilities and assets remain with the target business. So, there is no need to receive consent from business suppliers, customers, etc.
On the other hand, the acquisition of assets transfers all the rights and liabilities to the buyer. Consent in this situation is obtained from the suppliers, customers, etc. where the purchase takes place.
Involvement of legal or authorized personnel
The legal and authorized representatives of both parties involved should sign the purchase agreement. No other formal requirements for the purchase agreement I s legally binding, therefore, there is no need for a notarial stamp.
During the pre-negotiation phase, there is a need for non-disclosure to protect the confidentiality of the information exchanged during the negotiation. Another pre-contractual document to reach each party’s understanding can also be used, such as a letter of understanding, a memorandum of understanding, or a letter of intent. The wording in the pre-contractual is important. The seller can be held liable for any misleading statement under Danish law.
Representation and warranties are negotiated on a deal-to-deal basis. The buyer before the purchase will perform the duty of the “caveat emptor” principle. The buyer seeks express contractual protection in form of warranties and indemnities. The seller on the hand obligation will provide a guarantee from the parent company or a third party.
Procedure of purchase
To purchase a company in Denmark, the transaction can be done physically or through the mail after signing the agreement.
It is best to verify the company, which is the buyer’s duty to carry out due diligence on the company from the Danish official website by obtaining basic corporate information like the annual reports of the company to check the debt status of the company you intend to buy. Note that buying a company in debt exempts the seller generally from all liability.
The transaction to acquire a company is completed through a sale-purchase agreement, after the purchase, the general meeting of shareholders votes for the changes to the article of association, and appoints the new owner, board of directors, and auditor. The changes must be filed in the Danish companies register, and all licenses or permits required to start operation should be gotten, though these are post-application steps.
