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Cross-Border Mergers pp 275–293Cite as

Cross-Border Mergers: The Danish Experience

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Part of the book series: Studies in European Economic Law and Regulation ((SEELR,volume 17))

Abstract

Traditionally, Danish company law has been open to international relations and cross-border activities. However, cross-border mergers were not possible prior to the development at EU level initiated by the CJEU (C-411/03) and the adoption in 2004 of the 10th Company Law Directive on Cross-border Mergers (2005/56/EC). The Danish implementation of the Directive includes Danish public limited companies (A/S) as well as private limited companies (ApS). Following a brief presentation of the state of Danish law prior to implementation, the chapter discusses the implementation of the Directive into the Danish companies and the Danish experience in relation to both types of companies. The discussion opens with some remarks on the regulatory design of the Directive’s implementing provisions and the scope of the Danish rules. The following discussion on the substantial rules focuses mainly on the Danish rules that provide protection for creditors and minority shareholders in the non-surviving limited company. The Danish provisions on cross-border mergers make up the basis for the Danish provision on transfer of the seat, and consequently the chapter closes with a short presentation of the Danish rules on cross-border relocation of the registered office and their links with the Directive. In the concluding remarks it is mentioned that cross-border mergers—as well as transfer of the seat—seem to play a relatively small role in cross-border restructuring in Denmark despite a seemingly favorable regulatory framework.

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Notes

  1. 1.

    Bech-Bruun & Lexidale (2013), pp. 9 ff.

  2. 2.

    The Danish rules on the protection of the employee’s right to co-determination in CA §§ 311–317 are not discussed in this chapter.

  3. 3.

    Birkmose (2019).

  4. 4.

    See for an overview: Siems (2005), pp. 169 f. See also: Bech-Bruun & Lexidale (2013), p. 7.

  5. 5.

    Rønfeldt and Werlauff (2006), p. 125.

  6. 6.

    The Directive has been replaced by Directive 2011/35/EU.

  7. 7.

    The 3rd Company Law Directive only apply to Danish public limited companies, cf. Art. 1, but the directive was implemented in the Danish Public Companies Act as well as in the Danish Private Companies Act. Act No. 282 of 9 June 1982 and Act No. 283 of 9 June 1982.

  8. 8.

    Sørensen (2006b), p. 76; Hansen (2006), p. 50. Both with further references.

  9. 9.

    There were few exceptions for other forms of limited companies. Thus, domestic mergers between industrial foundations as well as domestic mergers between limited co-operatives were regulated by law. See Consolidation Act No. 651 of 15 June 2006 and Executive Order No. 249 of 23 March 2006.

  10. 10.

    TfS 1998, 797LR and Erhvervsankenævnets ruling of 4 April 2001.

  11. 11.

    Council Regulation No 2157/2001 of 8 October 2001 on the Statute for a European company (SE). In Denmark implemented by Lov om det europæiske selskab (SE-loven). Act No. 363 of 19 May 2004.

  12. 12.

    Regulation 2157/2001, Art. 2(1).

  13. 13.

    Proposal for a Directive of the European parliament and of the Council on cross-border mergers of companies with share capital. COM (2003) 703 final.

  14. 14.

    See for a historical account of the directive: Siems (2005), pp. 171 f.

  15. 15.

    The Directive had to be implemented by December 2007, cf. Art. 19 of the Directive.

  16. 16.

    ECJ, Case C-411/03 SEVIC Systems AG (2005) ECT I-10805.

  17. 17.

    Article 49 and 54 TFEU.

  18. 18.

    Rønfeldt and Werlauff (2006), p. 125.

  19. 19.

    Rønfeldt and Werlauff (2006), pp. 126 f.; Sørensen (2006a), p. 3. See also: Siems (2007), pp. 314 ff.

  20. 20.

    Siems (2007), pp. 308 f.; Schindler (2006), p. 117.

  21. 21.

    In favour of a wide interpretation, see Hansen (2006), p. 194; Sørensen (2006b), pp. 80 ff.; Hansen (2006), pp. 55 ff.; Schindler (2006), pp. 116 f. See for a more narrow interpretation: Sørensen (2006a), p. 3.

  22. 22.

    Now ‘Erhvervsstyrelsen’.

  23. 23.

    Statement of 14 march 2006 (case 2006-0005219).

  24. 24.

    Sørensen (2006b), pp. 78 ff.

  25. 25.

    Weatherill and Beaumont (1999), p. 351 f.

  26. 26.

    This was for the first time established in the Defrenne-case (43/75, ECR 455, 1976).

  27. 27.

    Bunch et al. (2006), p. 44.

  28. 28.

    Act No. 573 of 6 June 2007.

  29. 29.

    Proposal for amendment of the Danish Public Limited Act and of the Danish Private Limited Act, LFF 2006–2007.1.153, Sec. 1.2.

  30. 30.

    These provisions will not be discussed any further, but generally speaking the provisions mirror the provisions on cross-border mergers. See the Companies Act §§ 291–310.

  31. 31.

    Proposal for amendment of the Danish Public Limited Act and of the Danish Private Limited Act, LFF 2006–2007.1.153, Sec. 1.2. This is also reflected in the CBM Directive, preamble 3.

  32. 32.

    Proposal for amendment of the Danish Public Limited Act and of the Danish Private Limited Act, LFF 2006–2007.1.153, Sec. 1.2.

  33. 33.

    See also: Siems (2007), pp. 314 f.

  34. 34.

    See LFF 2006–2007.1.153 § 1.

  35. 35.

    See LFF 2006–2007.1.153 § 2.

  36. 36.

    See also Danelius (2007), p. 49.

  37. 37.

    See § 65.

  38. 38.

    The Committee on the Modernisation of Company Laws was asked by the then Minister of Economic and Business Affairs to look at the current company regulation in order to revise both acts. White Paper No. 1498 published on 26 November 2008 by the Committee on the Modernisation of Company Laws, pp. 15 f.

  39. 39.

    White Paper No. 1498 published on 26 November 2008 by the Committee on the Modernisation of Company Laws, s. 31. See also Obling and Bunch (2011), pp. 26 ff.

  40. 40.

    Act 2009-06-12 No. 470.

  41. 41.

    The provisions are largely identical for both types of companies. Whenever, there are exemptions for private limited companies, these are clearly stated in the provisions.

  42. 42.

    In relation to mergers and divisions, see the White Paper No. 1498 published on 26 November 2008 by the Committee on the Modernisation of Company Laws, chapter 11. The flexibility is larger in relation to private limited companies.

  43. 43.

    See Art. 1 of the 1st Company Law Directive. Directive 2009/101/EC.

  44. 44.

    See Act No. 573 of 6 June 2007, §§ 3 and 4.

  45. 45.

    Proposal for amendment of the Danish Public Limited Act and of the Danish Private Limited Act, LFF 2006–2007.1.153, Sec. 2.1 and § 3 & 4.

  46. 46.

    Obling and Bunch (2011), pp. 26 ff. See also Bunch and Rosenberg (2014), p. 1102. Both authors were employed by the Danish Business Authority when their commentary was published.

  47. 47.

    Proposal for amendment of the Danish Public Limited Act and of the Danish Private Limited Act, LFF 2006–2007.1.153, comment on § 137 b.

  48. 48.

    Generally speaking, the provisions mirror the provisions on cross-border mergers. See the Companies Act §§ 291–310.

  49. 49.

    See Art. 1 of the 6th Company Law Directive. Directive 82/891/EEC.

  50. 50.

    Obling and Bunch (2011), pp. 26 ff.

  51. 51.

    Consolidated Act No. 1089 of 14 September 2015. However, in relation to some issues the 2009 Act resulted in a relaxation of the regulation on cross-border mergers. These are not the main focus of the discussion here.

  52. 52.

    See Thorup and Buskov (2010), p. 172; Obling and Bunch (2011), pp. 26 ff.; Bunch and Rosenberg (2014), pp. 1108 f.

  53. 53.

    A Danish limited company can choose between different governance structures, cf. CA § 111. However, in order to keep it simple the term board of directors will be used in the following to describe the superior governance body in the Danish system.

  54. 54.

    Madsen (2010), pp. 83 f. In particular § 135 (2): ‘The limited liability company is bound by agreements made on behalf of the company by the entire central governing body, by a member of the board of directors, or by a member of the executive board. Members of the supervisory board have no power to bind the limited liability company.’

  55. 55.

    Compare the Directive Art. 5(d).

  56. 56.

    Proposal for amendment of the Danish Public Limited Act and of the Danish Private Limited Act, LFF 2006–2007.1.153, Sec. 2.1 and 2.2.

  57. 57.

    Thorup and Buskov (2010), p. 172.

  58. 58.

    § 273 implements the CBM Directive Art. 7.

  59. 59.

    See LFF 2008.1.107. Neither does the initial implementation in the Public Limited Companies Act § 137 b mention it, cf. LFF 2006–2007.1.153 § 1, comment on § 137 b.

  60. 60.

    § 276 implements the CBM Directive Art. 8.

  61. 61.

    See LFF 2006–2007.1.153 § 1, comment on § 137c.

  62. 62.

    The merger plan, not the merger statement, forms the basis of the report of the independent experts. See Bunch and Rosenberg (2014), p. 1135. Consequently, the independent experts must make assess the consideration independently of the governing body’s assessment.

  63. 63.

    Bunch and Rosenberg (2014), p. 1135.

  64. 64.

    Notice that the intended cross-border merger can proceed as planned even if the independent experts find that the creditors cannot be considered to be sufficiently protected after the merger. Thus, the negative declaration has no immediate procedural consequences. See Bunch and Rosenberg (2014), p. 1137.

  65. 65.

    See Thorup and Buskov (2010), p. 178.

  66. 66.

    The Danish Business Authority will include information on the rights of the creditors in the published notification of the intended merger if the shareholders have decided not to obtain an independent experts report or the experts have found that the creditors cannot be considered to be sufficiently protected after the merger, cf. CA § 279(4). See Bunch and Rosenberg (2014), p. 1140.

  67. 67.

    Due claims has to be paid while sufficient security has to be provided for claims that are not due yet.

  68. 68.

    See among others Andersen and Sørensen (2012), p. 251; Hansen (2014), p. 742. The rules are identical for domestic and cross-border mergers.

  69. 69.

    § 280(1) implements the CBM Directive Art. 6.

  70. 70.

    In addition, Art. 9(2) states that the general meeting of each of the merging companies may decide that that resolution is subject to its subsequent approval of the arrangements decided in with respect to the participation of employees. Art. 9(2) is implemented in CA § 284.

  71. 71.

    In a very limited number of situations the decision to amend the articles of association can be passed by the governing body of the company, see CA § 282(1).

  72. 72.

    See CA § 89.

  73. 73.

    This is interesting in a Nordic perspective, because the Danish and Swedish companies acts are similar in many aspects and historically have developed largely in parallel lines. However, the Swedish regulators found that the interests of the minority shareholders could not justify provisions that diverged from the provisions regulating domestic mergers. See Danelius (2007), p. 50.

  74. 74.

    See Thorup and Buskov (2010), p. 177.

  75. 75.

    The SE Act § 5, Act No. 363, 2004.

  76. 76.

    This was the main argument for the introduction of the right to be redeemed in the SE Act, see Proposal for the SE Act, LFF 142, 2003/1, sec. 2.2.1.

  77. 77.

    Proposal for amendment of the Danish Public Limited Act and of the Danish Private Limited Act, LFF 153, 2006–2007/1, comment on § 137 e.

  78. 78.

    Bunch and Rosenberg (2014), pp. 417 f.

  79. 79.

    Act 2009-06-12 No. 470. Prior to the 2009 Companies Act it was generally accepted that a reincorporation was not possible according to Danish law, see Birkmose (2004), p. 143; Hansen (2013), p. 73; Andersen and Sørensen (1999), p. 54.

  80. 80.

    White Paper No. 1498 published on 26 November 2008 by the Committee on the Modernisation of Company Laws, Chapter 11.5.

  81. 81.

    Lovforslag 2009-03-25, No. 170, Chapter 17.

  82. 82.

    See Hansen (2013), p. 87.

  83. 83.

    In the Commission Staff Working Document, Impact Assessment on the Directive on the cross-border transfer of registered office, Part I, the Commission concluded that it was appropriate not to proceed with any regulatory developments in relation to transfer of the seat. See SEC(2007) 1707. See also Hansen (2013), pp. 87 f.

  84. 84.

    Act 2013-06-12 No. 616.

  85. 85.

    See Hansen (2013), p. 90.

  86. 86.

    The requirements for the content of the plan and the report are very similar to that of the joint merger plan and the written statement in cross-border mergers.

  87. 87.

    Bunch and Rosenberg (2014), p. 1102.

  88. 88.

    The stated number of cross-border mergers in the 2013 Study was somewhat different. See Bech-Bruun & Lexidale (2013), p. 967.

  89. 89.

    See also Siems (2005), pp. 181 ff.

  90. 90.

    Bech-Bruun & Lexidale (2013), pp. 5 and 9 ff.

  91. 91.

    Including employees. See Storm (2010), pp. 76 f.

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  1. Department of Law, Aarhus University, Aarhus BSS, Aarhus, Denmark

    Hanne S. Birkmose

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  1. Department of Law, University of Cyprus, Nicosia, Cyprus

    Thomas Papadopoulos

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Birkmose, H.S. (2019). Cross-Border Mergers: The Danish Experience. In: Papadopoulos, T. (eds) Cross-Border Mergers. Studies in European Economic Law and Regulation, vol 17. Springer, Cham. https://doi.org/10.1007/978-3-030-22753-1_14

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