This content is from: Local Insights

Denmark

The Danish Companies Act contains a procedure in Section 20b that allows a majority shareholder holding more than 90% of the shares and the votes and the board of the company to decide that the minority shareholders' shares must be compulsory redeemed. But this process takes seven to eight months due to certain notice periods.

According to the Danish Companies Act, it is possible to amend a company's articles of association - provided that the inserted provision fulfils certain requirements - so that a shareholder may redeem other shareholders' shares. Ninety percent of the votes and the represented share capital at the general meeting must be in favour of the amendment. In 1999 the first compulsory redemption pursuant to a change in the articles of association was introduced to complete a public takeover.

The new procedure is quick and cost efficient. The compulsory redemption can be completed within three months.

In 2001 a minority shareholder in a listed company challenged the new procedure. One argument was that the compulsory redemption was invalid because it infringed the principle of equality of shareholders.

A Danish High Court's judgment of March 8 2004 establishes that a majority shareholder who wishes to make a compulsory redemption to obtain 100% ownership of a company can do so by including the redemption provision in the company's articles of association. The acquiror/majority shareholder thereby saves valuable time carrying out the compulsory redemption and gains full control more expediently.

Regina Schou

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