Financing and loan agreements

As a general rule in Denmark parties can enter into a loan agreement on the terms which they can agree on. They have freedom to agree the specific terms and the agreement is not regulated by law.     

 

In Denmark as in most places loan agreements can be entered into between a single lender and a single borrower (a bilateral loan agreement). In cases involving larger amounts where there can be a need for more lenders to offer a joined loan or the lender will syndicate the loan. The lenders will then commonly appoint one lender to be responsible for the daily administration of the loan.  

 

 

Term loans are often used to finance acquisition of companies, larger assets etc. Term loans are characterized by being paid out in one or few sections and by having fixed repayments (one or more). Repayments cannot be loaned again.

 

Revolving loans are often used to finance the operation of a company and acquisition of assets that are often replaced. Revolving loans are characterized by being paid out when the borrower needs it. Typically there is a minimum requirement for a pay out on the loan. Furthermore each pay out has a certain fixed period where interests are added.

 

Bank overdrafts are similar to the revolving loans. They differ, however, because there are no minimum requirements for a withdrawal. Furthermore repayments can happen at any time. Bank overdrafts are more flexible than revolving loans.

 

Cash pools are loan arrangements for consolidated companies. The group of companies shares an account where they can withdraw or make payments. If the group of companies is not registered in the same countries, special attention should be paid to the rules that apply for each company in the different countries. Before entering into cash pooling arrangements the taxation issues involved should be carefully studied.

 

Depending on the borrower’s financial situation and the character of the loan the borrower may have to provide security for the repayment of the loan. Most often assets are provided as security. The act of perfection to be undertaken will depend on the asset provided as security.

 

If shares are provided as security the secured creditor has to make an announcement to the company. With listed shares as security it is necessary for the secured creditor to register with the VP Securities Services (Værdipapircentralen).

 

If a creditor is granted company charge he has to register his security right with the Danish register of chattel mortgages. Security granted in personal property also has to be registered with the Danish register of chattel mortgages and so does security in intangible assets.

 

If granted security in real property the secured creditor needs to register his right in the land register.

 

Failure to undertake the act of perfection required for the security granted may result in loss of rights or preferred position.