Danish law on taking securities does not permit floating
charges, or similar pledges or mortgages of an undetermined
plurality of assets.
Based on a report by the Danish Commerce and Companies
Agency, the Danish Ministry of Justice has introduced a Bill to
the Danish parliament allowing companies and other business
entities to establish a floating charge. It is anticipated that
the Bill will be passed in the summer session of parliament and
become law in 2006.
Under the Bill a company or a business entity can grant a
floating charge over all assets that the company owns and will
own. Floating charges will be limited to certain categories of
assets but will include all future assets within those
categories and not prevent or restrict a normal change or
renewal of the charged assets.
The chargeable categories of assets are receivables, goods,
raw material, equipment, inventory, livestock and IPR. Not
included in the floating charge are real estate with fixtures
and equipment, ships above five gross tonnages, aircraft, and
some other categories of assets for which Danish law already
provides a specific way of pledging or mortgaging.
A floating charge is established by registering an indemnity
bond with the Danish central registry office. The registration
fee is DKr1,400 ($238) plus 1.5% of the secured amount. The
level of this duty might impact the use of a floating charge in
When the floating charge is registered, the assets are
secured and protected against the claims of the company's
creditors or contractual rights to the assets established later
- regardless of whether the later claimant is in good faith or
not. This was not previously the case.
The Bill also creates a form of floating charge that relates
only to taking security over the receivables of the company or
business entity originating from sales of goods and services.
The proposed legislation on floating charge in receivables is
identical to the rules that apply to a general floating
It is not possible to establish a floating charge in favour
of a person or company closely related to the grantor of the
security. In case of insolvency, the floating charge
crystallizes so that the charge will be limited to the assets
included at the date of the bankruptcy notice. Assets acquired
afterwards are not covered by the floating charge.
Rasmus Skovsgaard Haugaard