New Bill to Modernise the Danish Companies Act
The bill, which was introduced on 29 January 2003 after having been submitted to a large number of organisations and authorities for consultation, will become effective on 1 October 2003 if everything goes as planned.
The purpose of the bill is to create a better framework for the corporate sector and to adjust the legislation to the increasing internationalisation. The bill is a consequence of the government's action plan for a simplification of rules and an eased administration and of the government's wish to strengthen shareholder participation ("active ownership"). Finally, the bill is an attempt at modernising company law, among other things to adapt the legislation to the technical development.
The bill contains a number of changes, including:
Limitations on blank proxies for the boards of directors of limited liability companies.
The shareholders' access to the register of shareholders.
Use of electronic media for holding general meetings in limited liability companies (electronic general meeting).
According to the current rules in the Danish Companies Act, the shareholders are entitled to participate in the general meeting by proxy and to participate together with an advisor. The proxy must be given in writing and it may not be effective for more than 12 months. According to the current rules, there are no regulations concerning the contents of the proxy. In some companies it is common practice that once a year the board of directors include a proxy form when the notice convening the general meeting is sent out. The shareholders can then use the proxy form to authorise the board of directors to vote on their behalf for up to 12 months. Such proxies do not allow for a detailed statement about the shareholder's position on the items on the agenda (so-called blank proxies).
Thus, according to the current rules, a proxy may also be given to the board of directors of the company. This typically means that the board is authorised to vote in favour of its own proposals and that the board will often be in the majority, which is not advisable, especially when the interests of the shareholders or a majority of the shareholders differ from those of the board of directors in a specific situation. In such cases the fact that the board uses blank proxies may result in a situation where the composition of the board of directors does not reflect the interests of the majority of the shareholders. The proposed change is an attempt to limit the use of blank proxies so that a proxy for the company's board of directors may only be given for a certain general meeting with an agenda that has been announced in advance. This will ensure that the shareholder based on the specific agenda decides whether it is appropriate to give the board a proxy. The bill does not alter the shareholders' option to give blank proxies to others that are not board members.
In practice, the bill proposes complete openness about the ownership of listed companies. According to the current rules in the Companies Act, the register of shareholders is only available to the company's management, public authorities and a representative of the employees in companies where no employee board member has been elected. The proposed changes will make it possible to state in the Articles of Association that the register of shareholders must be available to the shareholders.
Thus, the shareholders will be able to check the ownership of registered shareholdings that are smaller than those that appear from the company's register of large shareholders (which is available to the public). It may be very important to the shareholders to know about the current ownership of the company, especially in case of shareholders or groups of shareholders that are able to strongly influence the company's decisions, for example by organising votes prior to a general meeting. The proposal to change the Articles of Association to the effect that the register of shareholders must be available to the shareholders must be adopted by the general meeting by a majority of 2/3 or the majority specified in the Articles of Association.
With a view to adapting the company law to the technological development, the bill contains authority to use electronic media for holding general meetings. Both the board of directors and the shareholders may submit a proposal to use electronic media. Thus, an electronic general meeting is an option, which the shareholders are free to use if a sufficient majority finds that it would be expedient. Electronic media mean that the shareholders exercise their rights at the general meeting by using e.g. a phone, the Internet or another medium with a similar function. The bill does not contain directions about the forms of electronic media or how to use them, as the provision is meant to comply with the wishes and needs of the shareholders in different types of companies in the best possible way now and in the future.
The provisions about amendment of the Companies Act as a consequence of the technological development and other amendments for promotion of active ownership (electronic general meetings etc.) do not contain aspects relating to EU law. The provisions about the technological development are in compliance with the report published on 4 November 2002 by the High Level Group of Company Law Experts set up by the European Commission (see the article Modernisation of the EU Company Law on the News site).
By Helle Reedtz-Thott, junior associate