Since 1 September 2021 a large number of foreign direct investments ("FDI") in Danish companies and agreements with Danish companies will require prior authorisation from the Danish Business Authority ("DBA"). This newly introduced Danish FDI regime will especially be necessary to consider in relation to M&A transactions and venture investments.
The Investment Screening Act provides for two separate
notification procedures in that (i) certain investments must be
authorised by the DBA before they can be implemented, and that (ii)
other investments may be voluntarily notified for
authorisation.
The Investment Screening Act is supplemented by three ministerial
orders, which primarily provide specific rules on the scope of the
Investment Screening Act, and the procedure for application of
authorisation.
The relevant investments
The Investment Screening Act introduces a mandatory authorisation requirement for investments that lead to decisive influence on decisions about managerial, financial, development and operational matters. Decisive influence can be obtained in several ways, including:
- Acquisitions of shares and/or voting rights;
- "Similar control by other means," e.g., acquisition
of assets; and
- "Special economic agreements," including joint ventures, supplier agreements, operating agreements and service agreements.
For shares and voting rights decisive influence is considered to be acquired if respectively 25% (under the voluntary notification scheme) or 10% (under the mandatory notification scheme) is acquired.
The investors
The Investment Screening Act applies to the following types of investors:
- companies not domiciled in Denmark, even if the foreign company
has a permanent location in Denmark,
- natural persons who are not Danish citizens,
- companies domiciled in Denmark which are subsidiaries or
branches of companies outside Denmark,
- companies domiciled in Denmark that are subject to control by a
foreign company or citizen,
- national authorities and government agencies of countries
outside the EU and EFTA, including public institutions and
state-owned investment funds,
- non-profit associations, non-profit organizations and similar legal entities outside the EU and EFTA.
The mandatory authorisation scheme
The mandatory requirement for prior authorisation applies to transactions involving companies active in particularly sensitive sectors including:
- the defence sector,
- IT security functions or the processing of classified
information,
- producers of so-called dual-use products, which can be used for
both civil and military purposes,
- other critical technology, which has a similar critical
potential to weapons and dual-use products,
- critical infrastructure, which supports functions essential to society.
The voluntary notification scheme
If an investment is suspected to pose a threat to national
security or public order, the DBA can decide to initiate an
investigation within five years after completion of the
transaction.
For this reason, a voluntary notification scheme has been
introduced for companies in sectors not falling under the above
mandatory authorization obligation, which enables companies to
clarify in advance if an investment may be considered to pose a
threat and thereby avoid the risk of a later divestment order. A
voluntary notification may be requested if at least 25% of the
shares or voting rights of a company are acquired.
The application/notification procedure
To apply for authorisation or notify a foreign transaction, an
application or notification must be submitted to the DBA.
A completed application in the DBA's notification form must be
uploaded together with all relevant documents through the
application portal. Furthermore, certain questions must be answered
regarding the respective investment or agreement, including, among
others, the nature of the transaction, the ownership structure or
the acquiror and the description of the target company's
business.
In its review, the DBA will consider whether the investment is
considered to pose a threat to national security or public
order.
The DBA issues its decision no later than 60 working days after the
notification, with a possible extension of up to 90 working
days.
If the DBA assesses that the investment may constitute a threat to
national security or public order, the foreign company can
undertake to comply with agreed-upon conditions in order to
alleviate the DBA's concerns.
Consequences of a failure to notify
If an investment covered by the mandatory authorisation scheme
has been completed without authorisation, or if the conditions
agreed upon are breached, the DBA may order the investment to be
divested. If the divestment order is not complied with, the
authority may revoke the foreign company's voting rights in the
Danish company.
More information on the Investment Screening Act along with forms
and guidance to be used in connection with applications can be
accessed here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.