Company types in Denmark
Selina Musa
Erhvervsjuridisk fuldmægtig
E: sm@hulgaardadvokater.dk
Peter Lund
Advokat
E: plund@hulgaardadvokater.dk
Are you running a business alone or with a good friend, and haven’t yet decided on a company structure? Then read on.
As an entrepreneur you need to decide under which type of company you want to operate your business. There are many different types of company structures, such as public limited company (A/S), private limited company (ApS), limited partnership (P/S), general partnership (I/S), foundation, and cooperative society. The choice of company structure depends on your needs and objectives for the business. Below, we explain the most common company types used by startups.
Why is it important to consider the company structure?
It is important to decide on the company form, as it has a significant impact on the legal and financial aspects of your business. The structure can affect, for example, your personal liability, capital requirements, tax matters, accounting obligations, and financing options.
Read more about financing options here.
We have prepared an overview of the most common company types for startups below:
Overview of company types in Denmark
|
Category |
Partnership (I/S) |
Private Limited Company (ApS) |
Public Limited Company (A/S) |
|
Abbreviation |
I/S |
ApS |
A/S |
|
Regulation |
No specific legislation. Follows partnership principles and case law. |
Danish Companies Act |
Danish Companies Act |
|
Minimum capital requirement |
No capital requirement |
DKK 40,000 |
DKK 400,000 (min. 25%, i.e., DKK 100,000 must be paid) |
|
Company participants |
Minimum of two partners, who can be individuals and/or companies. |
Shareholders who can be individuals and/or companies. |
Shareholders who can be individuals and/or companies. |
|
Management models |
One or more managing partners, with the option of a board or supervisory board. |
Three options: 1) Executive board only 2) Exec. board + board of directors 3) Exec. board + supervisory board. |
Two options: 1) Exec. board + board of directors 2) Exec. board + supervisory board. |
|
Decision-making authority |
Decisions made at partners’ meeting. Typically unanimous (veto right for each partner). Some minor decisions can be made individually. |
Decisions made at general meeting. Typically by simple majority. Important decisions may require 2/3 or 9/10 majority. |
Same as ApS: simple majority, but important decisions may require 2/3 or 9/10 majority. |
|
Liability |
Partners are personally and jointly liable for all company debt. Creditors can collect the full amount from one partner, who can then recover the relative share from others. |
Shareholder liability is limited to individual capital contribution. |
Shareholder liability is limited to individual capital contribution. |
Note that if you operate a business alone, it will not be considered a general partnership (I/S), but a sole proprietorship. However, similar rules apply to partnerships and sole proprietorships.
As shown, the choice of company form can be crucial for you as an entrepreneur. Capital companies (e.g., public or private limited companies) have a minimum capital requirement for the company to be established, whereas there is no such requirement for partnerships.
Capital companies are strictly regulated under the Danish Companies Act, while the regulation of partnerships depends to a much greater extent on whether a written agreement has been made between the partners—otherwise, the company will be governed by general partnership principles and case law.
What if you haven’t decided on a type of company?
If the owners have not decided on the company structure, and the requirements for other company types are not met, the business will be considered a general partnership (I/S). It is common that two friends start a collaboration—such as a carpentry business—without agreeing on the organizational structure or making any capital contributions. In this case, the owners—often without realizing it—have established a general partnership.
As an owner of a partnership, you should be aware that you are personally and jointly liable for the partnership’s debts, and that all decisions must generally be made unanimously.
You are also not protected by the provisions of the Danish Companies Act in case of disputes between you and the other partners.
Registration
The choice of company structure also determines how your business must be registered. As a general rule, a partnership does not need to be registered with the Danish Business Authority (Erhvervsstyrelsen), nor is there a requirement to prepare a memorandum of association, articles of association, or to make a capital contribution.
However, in some cases the business will be liable for VAT and require a CVR number, in which case it must be registered with the Danish Business Authority. In such cases, a partnership agreement must be prepared and submitted upon registration.
If you establish a capital company, it must be registered with the Danish Business Authority’s company register. The company is formed by signing a memorandum of association and adopting articles of association. Registration with the Danish Business Authority must take place no later than two weeks after the memorandum has been signed.
You must attach: i) the memorandum of association including articles of association, and
ii) documentation from your bank, lawyer, or accountant that the share capital has been paid If the share capital is contributed in assets other than cash (contribution in kind), you must also attach a valuation report prepared by an accountant.
