Warrants as Tools

Warrants are a popular incentive tool used by many companies to attract and retain key employees. In short, a warrant is a subscription right that allows the employee to purchase shares in the company later at a price agreed in advance. It is important to emphasize that a warrant is not a share, but a right – not an obligation – to subscribe for shares under certain conditions, which are specified in a warrant program.

How does a Warrant Work?

A warrant is a right to new shares or stocks in a company, whereas options relate to existing shares or stock. The exercise of one or more warrants is therefore linked to a decision on a capital increase in the company.

A warrant is typically subject to a vesting period. During this period, the employee cannot exercise their subscription right. Only when the vesting period has expired does the exercise period begin, during which the employee can choose to subscribe for shares at the agreed price. The exercise period is also called the exercise date. When a company issues warrants, a subscription price is set at which the employee can buy shares if the right is exercised. This price must be at least at par, as it is not permitted to subscribe for shares at a discount. Warrants may entitle the employee to subscribe for shares in the company where they are employed or in an affiliated company.

What Conditions Apply?

The rules governing warrants are set out in sections 167-170 of the Danish Companies Act. There are two ways to issue warrants:

Resolution at the general meeting

The general meeting may decide to allocate warrants by the majority vote required for an amendment to the articles of association. This also requires a resolution on a corresponding capital increase in the company, which must comply with the formal requirements in Chapter 10 of the Danish Companies Act. You can read more about the process for capital increases here.

Authorization to the management

The general meeting may adopt a provision in the articles of association authorizing the management to issue warrants and carry out the associated capital increase, see section 155(2) of the Danish Companies Act, cf. section 169. This also requires a majority vote, as for an amendment to the articles of association.

The resolution must contain several details, as outlined in section 169(2) of the Danish Companies Act. The list is exhaustive:

1. The maximum amount of capital increase that may be affected through the exercise of warrants,
2. The class to which the new capital shares belong,
3. Deadlines for subscribing for capital shares and a deadline of at least two weeks from the date of dispatch of the notice to the shareholders within which the shareholders must exercise their subscription rights,
4. The date on which the rights take effect,
5. The deadline for payment, and
6. The subscription price and the number or size of the shares.

The resolution must also address situations where a warrant holder has not exercised his or her warrant. These situations are listed in section 167(3) of the Danish Companies Act. The list is exhaustive:

• Capital increase,
• Capital reduction,
• Issue of new warrants,
• Issue of new convertible debentures,
• Dissolution,
• Mergers, or
• Splits.

Common to both situations is that the decision must be included in the articles of association. The terms and conditions must be communicated to the warrant holder. When the employee exercises his or her subscription right, the payment must be made to the company, and the capital increase must be registered with the Danish Business Authority. This involves both amending the articles of association and submitting corporate law documents.

Practical Considerations

It is advisable to determine what will happen to the warrants issued if the employee resigns or if the employment relationship is terminated for other reasons. In this regard, attention should be paid to the rules in the Stock Option Act, which protect employees against unreasonable terms and conditions.

Warrants are flexible incentive tools, but they require careful planning and proper legal handling. It is also important to consider the tax implications associated with an incentive program. This is usually done by a tax-savvy auditor to ensure a correct process that complies with applicable rules. In addition to a decision at the general meeting or authorization to management, clear agreements and amendments to the articles of association must be prepared.

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.

Published January 2026