Legislative changes: The minimum capital requirement for private limited companies (ApS) is reduced, public offering of shares (Equity Crowdfunding) is introduced, and corporate law rules on shareholder loans are repealed.

Legislative changes in corporate law: The minimum capital requirement for private limited companies (ApS) is reduced

The latest legislative amendment enables private limited companies (ApS) to offer shares to the public through equity crowdfunding. This provides private limited companies (ApS) with new opportunities to attract potential investors via an approved crowdfunding platform. Similarly, companies may offer their own shares to qualified investors without the use of a crowdfunding platform.

The amendment does not permit the admission of private limited companies’ (ApS) shares to trading on a regulated market.

Reduction of the minimum capital requirement for private limited companies (ApS)

The new Act also includes a halving of the minimum capital requirement for private limited companies (ApS). This means that the requirement is reduced from the previous amount of DKK 40,000 to DKK 20,000 this year. However, the implementation required a change in the Danish Business Authority’s IT systems before it could be enforced. The Danish Business Authority has now succeeded in bringing the change into force in practice

The change will result in new private limited companies (ApS) being able to establish a company with a share capital as low as DKK 20,000. Furthermore, existing private limited companies (ApS) can reduce their share capital down to the new minimum threshold of DKK 20,000. However, companies must still meet the other requirements of the Companies Act, including those related to maintaining a sound capital base. The legislative change provides small and medium-sized enterprises with better access to capital and support for business growth potential, which is expected to improve the conditions for Danish entrepreneurs and startups.

With the reduced requirement, more entrepreneurs can now benefit from the advantages that come with a private limited company, including limited liability and a more professional appearance to investors and business partners. Read more about establishing a private limited company here: Formation of a private limited company ApS and How to establish a private limited company ApS.

What is equity crowdfunding and how does it work for private limited companies (ApS)?

Equity crowdfunding is a form of financing where companies can raise capital from a large number of investors through digital platforms. In contrast to traditional crowdfunding, where contributions are typically made in exchange for a reward-based benefit, equity crowdfunding grants investors an ownership stake in the company. This creates a mutual interest between the investors and the company, as both parties have a vested interest in the company’s success

With the new legislation, private limited companies (ApS) can now use equity crowdfunding as part of their financing strategy, if it is done through one of the approved crowdfunding platforms. The platform provider must be authorized as a provider of crowdfunding services by the Danish Financial Supervisory Authority (Finanstilsynet). This opens a more flexible approach to raising capital and can be particularly advantageous for startups and smaller businesses, which often struggle to attract traditional financing from banks or institutional investors.

While the legislative change offers many advantages, it is also important to consider the potential challenges. Equity crowdfunding can be an effective way to raise capital, but it simultaneously requires a clear strategy and a transparent business plan. Investors expect detailed insight into the company’s finances, goals, and risks, which imposes requirements on the company’s management and the level of documentation provided.

In addition to the possibility of equity crowdfunding, it is also possible to offer ownership shares to investors to a greater extent than has previously been possible.

These changes are now reflected in Section 1, Subsection 3 of the Companies Act

The Danish Companies Act’s rules on shareholder loans are repealed

The new repeal of the specific provisions on shareholder loans in the Companies Act means that a company will be able to provide loans or other financial assistance to members of the management and shareholders in the company, as well as in the company’s parent company. There is no longer a requirement for the conditions in Section 210, Subsection 2 of the Companies Act to be met, nor is it necessary for the company’s general meeting to make this decision.

However, the provisions on self-financing and the general protective rules in the Companies Act still apply and will continue to impose limitations on access to loans for shareholders and members of the management. Loans for shareholders, etc., must therefore still be in the company’s interest, and management still has an obligation to ensure that it is justifiable considering the company’s financial situation. Furthermore, shareholder loans must not be structured in a way that would confer an undue advantage to certain shareholders or management members at the expense of the company or other shareholders. Loan agreements must also continue to be documented in order to be valid in situations involving loan agreements between a sole shareholder and a company, as is already required under the Companies Act.

With the repeal of the Companies Act’s rules on shareholder loans, companies gain greater flexibility in providing such loans. However, the assessment of whether financial assistance to shareholders or management is lawful remains challenging in practice due to the discretionary nature of the evaluation.

If you have any questions regarding the above, please feel free to contact Business Lawyer and Partner, Thomas Hvid Kjær from Raadgiver.dk ApS at +45 71 99 06 10 or thomas@raadgiver.dk.

This article does not constitute and cannot replace legal advice. Raadgiver.dk ApS assumes no liability for any damage or loss, directly or indirectly, attributable to the use of the information provided in the article.