How to establish a subsidiary in Denmark
Denmark encourages innovation, entrepreneurship and offers an attractive business environment with its well-qualified workforce. For these reasons many foreign companies have expanded their businesses to Denmark.
The purpose of this article is to briefly describe the possibilities of forming a subsidiary in Denmark and the requirements associated herewith.
A subsidiary and a branch are two different entities since a subsidiary is a separate legal entity according to Danish legislation. A subsidiary is therefore treated like any other locally registered company and is not the subject of the parent company. A branch, on the other hand, is a part of and reliant on the parent company and does not form an independent legal entity. It must be registered.
The establishment of a Danish subsidiary will often be the preferred choice by a foreign parent company if the aim is to limit liability on the part of the parent company.
Shareholders who wish to form a company in Denmark can choose between different forms of legal entities, but the limited companies are the ones most frequently used as Danish subsidiaries to foreign parent companies. Otherwise, the most suitable entity depends on a variety of factors, such as nature of the business, the expected activity level, the extent of liability and tax matters.
This article will focus on the limited companies.
The Danish Company Act regulates two types of limited companies in Denmark:
- Anpartsselskabet (“ApS”)
- Aktieselskabet (“A/S”)
The ApS (also known as the Private Limited Company) is a private limited liability company, typical for small and middle-sized companies, which requires a minimum share capital of DKK 40,000. Many holding entities are formed as an ApS. The ApS is governed by Danish Laws regarding company structure, reporting, and accounting and tax.
The “A/S” (also known as the Public Limited Company) is better suited for larger companies and requires a minimum share capital of DKK 400,000. Compared to the ApS, the A/S is subject to more complex requirements with regards to leadership structure, reporting requirements, accounting duties etc.
Both the ApS and the A/S are subjected to a 22 % corporate tax, and both entities must be registered with the Danish Business Authority (“Erhvervsstyrelsen”) in order to assume obligations and obtain rights.
Both the ApS and the A/S are due to the fully digitalized registration system in Denmark relatively quick and informal to set up.
If the shareholders decide to form a limited company e.g., the ApS, it can be advantageous at the same time to form a holding company due to tax benefits associated with the company structure. Furthermore, the capital used to form the holding company, can be used again to establish the operating company.
If the shareholders of a foreign company decide to form a subsidiary, then the shareholders must decide on the following matters:
- Legal structure of the subsidiary
- The size of the minimum share capital
- Share rights
- Company structure
- Management structure
- Fiscal and accounting year
- Drafting of mandatory company documents (Memorandum of Association, Articles of Association, register of shareholders etc.)
- Home office of the subsidiary
All companies must be registered at The Danish Business Authority, after which the new company will receive a unique company register number or “CVR”. A small registration fee applies, but the forming of a subsidiary is an easy and smooth process compared to other European jurisdictions. A new company can basically be incorporated and ready for business within only a few hours of the registration.
DAHL has extensive experience in the forming and counselling of international shareholders seeking to expand their business to Denmark. For further information, please contact our experts.