The Danish Government has recently proposed a new form of charge over the assets of businesses. In English terms, the virksomhedspant would be recognized as a form of a fixed and floating charge. If introduced, the proposal could benefit financial institutions and corporations by simplifying the structure for taking security over assets of businesses. The vehicle would be a special mortgage deed registered in a public registry with reference to the assets (or, in a restricted form, to the portfolio of trade receivables). Previously, in Denmark, the regime for taking security required that individual assets be recognized and identified and the security over them established with reference to those particular assets.
A report prepared by a special committee appointed in 2003 by the Ministry of Justice made favourable conclusions regarding the concept and contains a draft Bill. The report, published on 23 February 2005, is 350 pages long and falls short of the structure that the financial sector has requested for larger finance transactions. One negative factor is the imposition of a registration fee of 1.5% on the value of the debt secured. Given the current level of interest rates, this registration fee becomes almost prohibitive. On the administrative side, the need to keep the beneficiaries on record at the registry will be cumbersome.
The report will be subject to comments by the public and many industry specialists will be critical of a number of its features, which fall well short of the common law model. The Ministry of Justice expects that a Bill will be presented in parliament before mid-year.
Steen Halmind and Ian Tokley