On December 19, 2024, the Danish Parliament adopted legislation introducing new capital requirements for the establishment of private limited companies (ApS) and allowing the possibility of offering shares to the public.

On November 5, 2024, the Minister for Economic and Business Affairs submitted a bill to amend the Danish Companies Act. The bill was passed on December 19, 2024, and the amendments will come into effect on January 1, 2025.

The legislation introduces two primary changes: the reduction of the minimum capital requirement for private limited companies and the ability to offer shares to the public. The minimum share capital will be reduced from DKK 40,000 to DKK 20,000.

Introduction

Effective January 1, 2025, it will be possible to establish a private limited company in Denmark with a reduced capital requirement and the opportunity to offer shares to the public.

Background and Historical Context

Previously, the formation of companies in Denmark was limited to two main legal structures: private limited companies (ApS) and public limited companies (A/S). Due to its lower capital requirement of DKK 40,000, the private limited company structure was often the preferred choice for entrepreneurs.

However, private limited companies have faced challenges in raising additional capital due to limited avenues for external funding. Historically, raising capital through a broader investor base required the conversion of the private limited company into a public limited company, which entails a significantly higher minimum capital requirement of DKK 400,000. This requirement, combined with stricter regulations regarding audits and management for public limited companies, has posed significant barriers for smaller businesses.

The private limited company structure was initially designed for entities with a smaller, defined group of owners and lower financing needs than public limited companies. Accordingly, private limited companies traditionally have a closed ownership structure, and their shares are not regarded as negotiable securities.

Key Provisions of the Legislation

The legislation addresses two core areas:

1. Reduction of Capital Requirements

Section 4(2) of the Danish Companies Act currently requires private limited companies to maintain a minimum share capital of DKK 40,000. The new legislation reduces this requirement to DKK 20,000.

This change aligns with legislative initiatives outlined in the Agreement on the Entrepreneurship Package, signed on June 21, 2024, by the government and a majority of parliamentary parties. A key motivation for this amendment is the comparatively lower capital requirements for similar company types in neighboring countries. For instance, Finland has no minimum requirement, Sweden mandates SEK 25,000, and Norway requires NOK 30,000 (exchange rates as of October 10, 2024).

Lowering the capital requirement will make it financially more accessible for private individuals to establish private limited companies. It is recommended that individuals wishing to establish companies with a capital of less than DKK 40,000 wait until the Danish Business Authority has implemented the updated requirement.

2. Public Share Offerings

Under the current Companies Act, private limited companies cannot offer shares to the public, as such offerings are restricted to a defined group of investors. This limitation has made it difficult for private limited companies to attract investors and raise capital.

The new legislation eliminates this restriction, allowing private limited companies to raise capital through public share offerings. These offerings can be conducted in two ways:

Directed Offerings to Qualified Investors:

• • Shares may be offered to fewer than 150 natural or legal persons per EU/EEA country who are not qualified investors.
  • Shares may be offered in units with a minimum denomination of EUR 100,000.
  • Shares may be sold to investors who invest at least EUR 100,000 per offering.

These provisions mirror the rules applicable to public limited companies, allowing share offerings without the need for a prospectus. The minimum investment requirement of EUR 100,000 primarily targets professional investors, for whom the need for investor protection is less critical.

Equity Crowdfunding:

Private limited companies will also be allowed to offer shares to the public through equity crowdfunding platforms. Equity crowdfunding enables companies to raise capital by offering unlisted shares to a broad audience, typically through online platforms.

To ensure market stability and investor protection, platforms facilitating crowdfunding must comply with Chapter IV of the Crowdfunding Regulation (Articles 19-26). These rules include informing investors about the absence of deposit or investor guarantees and ensuring transparency regarding reflection periods and methods for calculating investment risks.

Implications for Private Limited Companies

The new legislation represents a significant shift for private limited companies, enabling them to be established with lower capital requirements and facilitating public share offerings. However, private limited companies will not have unrestricted access to offer shares directly to the public, such as via their own websites or social media platforms.

Instead, they must use approved crowdfunding platforms or comply with one of the exemptions from the prospectus requirement. These exemptions primarily apply to offerings targeting professional investors who require less regulatory oversight.

At LEAD Rödl & Partner, we have extensive experience in corporate law, including company formation. Our Corporate and Commercial team is ready to provide expert guidance on navigating these new legislative changes.

Your team Corporate/Commercial

Alexandra Huber
Attorney-at-law, partner
T. +45 51167494
E. Alexandra.huber@lead-roedl.dk

Sophie Amalie Drejer Jensen
Attorney-at-law
T. +45 2112 1082
E. Sophie.drejer@lead-roedl.dk