New bill to amend the Danish Companies' Act, the Danish Financial Statements Act etc sent out for consultation
The bill will strengthen the requirements for target figures and policies for the under-represented gender, increase the possibility for foreign shareholders in Danish listed companies to exercise active ownership and allow easy access to set up branches in Denmark for foreign limited liability companies outside EU or EEA countries.
Tightened requirements for target figures and policies for the under-represented gender
The requirements for target figures and policies for the under-represented gender apply to state-owned public limited companies, listed companies and large limited liability companies.
The bill involves a number of proposed amendments and tightening of the following requirements:
- A requirement to set specific target figures in terms of the share of the under-represented sex at the other management levels of the companies is introduced.
- The concept "other management levels" will be defined in the Danish Companies Act. Accordingly, "Other management levels" should be understood as the two management levels under the central management body and the supreme management body respectively.
- Companies will be under an obligation to set a new and higher target figure when they have reached their previously set target figure, or to set a new target figure when the deadline for the expected fulfilment of the target figures has expired.
- It is pointed out that the requirements for target figures for the under-represented gender may be left out if the distribution of men and women is even at the relevant management level. According to the explanatory notes, it should be understood as a 40/60 distribution.
- It is proposed to remove the possibility for parent companies preparing consolidated financial statements to set target figures and issue a policy for the group as a whole. Likewise, the possibility for a subsidiary being part of a group not to have to be required to set target figures and issue a policy if the parent company sets target figures and issue a policy for the group as a whole is removed.
- Information about target figures for the under-represented gender and the current figures for the gender composition of management must be provided in a summary specifying figures for the current year and the four previous years in the same way as when providing information about key financial figures.
- The account of the status of the fulfilment of target figures set and the company's policy for increasing the share of the under-represented sex is to be included in the management's review. This requirement can no longer be fulfilled by referring to the company's website, a supplementary statement or the consolidated financial statements prepared by the parent company.
Active ownership for foreign shareholders in Danish listed companies
Foreign shareholders in Danish listed companies typically avail themselves of a nominee arrangement where a nominee (for example a depositary bank) is listed in the register of shareholders instead of the foreign shareholder. The nominee has permission to act on behalf of the shareholder but must only exercise shareholder rights under express authorisation and instructions from the shareholder.
Under the current section 80 of the Danish Companies' Act, a proxy, including a nominee, must show a written and dated instrument of proxy before being allowed to attend the general meeting on behalf of a shareholder. In practice, this involves risks and according to the Danish Business Authority a third of such voting instructions is refused due to errors in the formal requirements as a result.
On that background, it is proposed that section 104(3) of the Companies Act is amended to the effect that it appears expressly that a nominee is entitled to exercise the voting rights attaching to the shares listed in the name of the nominee.
Further, it is proposed that it be specified that a nominee is not considered a proxy under section 80 of the Companies Act. Instead, it is proposed that a nominee according to section 104 of the Companies Act must guarantee that the nominee is exercising the voting rights under express authorisation and instructions from the owner of the share, and that the nominee must be able to prove this at the request of the company.
Foreign companies' establishment of Danish branches
Under section 345(2) of the Companies Act reciprocity is required if foreign limited liability companies, limited partnership companies, private limited companies and companies with a similar corporate form that are not based in an EU or EAA country wish to establish branches in Denmark. If a general reciprocity agreement with the country in question is not available, the foreign company is obliged to submit a specific reciprocity agreement in connection with the registration of the branch.
In the draft amendment to the Act it is proposed that this claim for reciprocity be abolished so that companies domiciled in an EU or EEA country and companies not domiciled in an EU or EEA country have the same access to establish a branch in Denmark.
It is proposed that the Act take effect as of 1 January 2023. The deadline for interested parties to comment on the bill expires on 17 December 2021.