Mergers and acquisitions

 

Most rules regulating mergers and acquisitions in Denmark are found in the Danish Public Companies Act (Aktieselskabsloven) and the Danish Private Companies Act (Anpartsselskabsloven). In addition companies with securities listed on OMX Nordic Exchange Copenhagen A/S (former the Copenhagen Stock Exchange), Dansk AMP or First North are subject to additional regulation in the Danish Securities Trading Act and the relevant regulation issued by each stock exchange/market.

 

The Danish rules on mergers, demergers, and acquisitions conform to the relevant EU-regulation. Thus mergers and acquisitions can be effected in a number of ways including the sale of the target company’s assets and by a merger of the target company with a new or an existing company. Payment for either method is unregulated, and can as such be in the form of cash, assets, shares etc. It is also possible to acquire individual branches or divisions of a company.

 

In addition to regulating mergers and demergers of Danish companies and certain aspects relating to the acquisition of shares in such companies, the Danish Companies Acts also contain provisions allowing cross-border mergers and demergers.

 

The first part of this part of the guide will focus on the acquisition of shares while the last part will focus on the acquisition of assets.

 

 

In general the Danish rules regulating mergers and acquisitions offer many possibilities for structuring a takeover. However, the Danish Companies Acts allow companies to take a number of precautions in order to avoid a takeover including the following:

 

 

Notification to the company as requirement for exercising votes: The articles of association of companies may require a shareholder to apply for registration of shares acquired in the company’s register of shareholders in order for such shareholder to be entitled to exercise the voting rights carried by the shares. 

 

Limits to ownership and voting rights: Both the maximum number of shares a shareholder may own and the maximum number of votes a shareholder may exercise may be regulated in a company’s articles of association thereby preventing a potential buyer from acquiring a majority or the control of a company.

 

Right of first refusal: Both the articles of association of a company and agreements between the shareholders may entitle existing shareholders to purchase shares offered for sale, before such shares are sold to a third party. This may be combined with provisions stipulating that any share transfer must be approved by the Board of Directors of the relevant company.

 

In addition to the above, any shareholder acquiring shares in a public limited company representing 5 % or more of the voting rights or 5 % of the nominal share capital – however, at least DKK 100,000 – shall inform the company hereof.

 

If changes occur to the shareholders’ shareholding of the company, the shareholder must notify the company again once the shareholder in question owns or no longer owns respectively 5, 10, 15, 20, 25, 90, or 100 % of the voting rights or 1/3 or 2/3 of the share capital.

 

Similar obligations exist for shareholders owning listed shares. However, if the shares are listed, notice must in general be given to both the company and the relevant stock exchange etc., and the information must be given as soon as possible.

 

If such listed shares are acquired, the acquirer may be required to issue a takeover bid for the rest of the shares.

 

3. Financing a takeover

 

Danish public and private limited companies are prohibited from granting loans to finance the acquisition of shares in themselves or shares in their parent company. Further, such companies are prohibited from making assets available or providing assets as security in connection with such acquisition.

 

As a consequence “bridge loans” requiring the target company to pledge its assets to a lender financing the acquisition of the company is usually not possible.

 

These prohibitions do not apply to the acquisition of assets.

 

 

A shareholder holding more than 90 % of the shares in the target company and holding a corresponding proportion of the voting rights, may require the company’s remaining shareholders to sell their shares to such shareholder provided the board of directors of the target company agrees. The decision to require the minority shareholders to sell their shares is then made as a joint decision by the majority shareholder and the board of directors.

 

If the majority shareholder has acquired 90 % of the shares and votes following a takeover bid on shares listed within the EU the consent of the board of directors is generally not necessary.

 

In addition, if such majority of shares and votes has been acquired, each of the remaining shareholders may request the majority shareholder to acquire his or her shares.

 

 

When acquiring shares in a company, both liabilities and assets are generally acquired automatically. Further, it is usually not necessary to obtain the consent of customers etc., unless specific “change of control provisions” exist in the relevant contracts.

 

When acquiring assets only the assets and liabilities agreed on between the contracting parties are usually transferred. Further, it is usually necessary to obtain consent from customers and contracting parties in order to transfer the sellers’ liabilities towards them to the purchaser.

 

Certain exemptions apply to these general principles. For instance liabilities towards employees are automatically taken over by a purchaser when acquiring a company through the acquisition of assets, and in general employees enjoy certain rights in connection with a takeover, whether this occurs as an acquisition of assets, shares or otherwise.

 

In addition to the above, the rules on tax and accounting in connection with a transfer of assets are different from the rules regulating the transfer of shares in a number of ways.