1) The document discusses various company structures for startups in Denmark including sole proprietorships, partnerships, entrepreneurial companies, private limited companies, and public limited companies. 2) It outlines key details for each structure such as minimum capital requirements, liability, management and governance rules, taxation, and annual reporting requirements. 3) The presentation emphasizes that while sole proprietorships and partnerships have few legal requirements, they provide unlimited liability, while entrepreneurial companies, private limited companies and public limited companies provide liability protection but have more legal obligations.

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Execution - from a legal perspective
LETT Law Firm P/S
Anders Erlandsen, Lawyer - LETT Law Firm
1
September 29, 2016

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Execution - from a legal perspective
Agenda
• Choosing the right company structure
• Legal pitfalls when dealing with outside investors
• Going international
2

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Choosing the right company structure
Start-up phase – why bother?
3
• If no registration à courts and/or Danish authorities may consider your
company as being either
• a sole proprietorship or
• a general partnership

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Choosing the right company structure
Start-up phase – why bother?
4
• Downsides of not addressing the issue of company
structure:
• Joint, unlimited and primary liability
• No internal allocation of responsibilities, profits/liabilities
or IPR
• Challenges regarding tax and VAT

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Choosing the right company structure
Start-up phase – why bother?
5
Upsides of having addressed the issue of company structure:
• Expansion – ready for new investors / partners
• Exits – who is in breach of contract (if any) à avoid dissolution of the
company
• Internal allocation of responsibilities, profits/liabilities and IPR in advance

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Choosing the right company structure
Company structures
6
• Sole proprietorship (one man business)
• Partnership (I/S)
• Entrepreneurial company (‘iværksætterselskab’; IVS)
• Private limited company (ApS)
• Public limited company (A/S)

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Choosing the right company structure
Sole proprietorship
7
Only relevant for one man businesses
• The enterprise is ‘identical to its owner’ from a creditors’ perspective
• No statutory minimum for initial capital à DKK 0
• No legal requirements regarding management structure
• Compulsory registration for VAT no. à voluntary if yearly revenue below DKK
50,000
• Taxed as personal income – up to 55.79% if above DKK 476,300 a year (2016)
• Publication of annual report is voluntary
▪ Required to prepare both annual report and tax accounts

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Choosing the right company structure
Partnership (I/S)
8
• Two partners (at least) à may be private individuals and/or legal entities
• Joint, unlimited and primary liability
• No statutory minimum for initial capital à DKK 0
• No legal requirements regarding management structure
• Compulsory registration for VAT no. à voluntary if revenue below DKK 50,000
• Required to prepare both annual report and tax accounts
• Publication of annual report is voluntary – if one or more partners are private
individuals
• Taxed as personal income – up to 55.79% if above DKK 476,300 a year (2016)

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Choosing the right company structure
Entrepreneurial company (IVS)
9
• A curious version of a private limited company (ApS) – introduced in 2014
• One or more owners - limited liability
• Statutory minimum of invested capital of DKK 1 – max DKK 49,999 à No non-cash contribution
• Executive board compulsory à board of directors and/or supervisory board voluntary
• Compulsory registration with Danish Business Authority
• Ownership interest of 5% and more à Public Register of Shareholders
• Bound to save up 25% of the profits – until reaching a company capital of DKK 50,000
• Above DKK 50,000 à distributable reserves à dividend payment
• After reaching DKK 50,000 à possible (voluntary) to convert into an ApS
• Public annual report and tax specifications required
• 22% corporation tax on company’s net income + 42% tax on dividends distributed from the company
to personal shareholder à 54.76% (2016)
• If the shares are held by a holding company holding 10% or more à dividends are tax free until
distributed to personal shareholder.

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Choosing the right company structure
Entrepreneurial company (IVS), cont.
10
• Differences from ApS and A/S:
• Less strict requirements regarding invested capital
• No non-cash contribution
• Bound to save up 25% of the profits
• Differences from sole proprietorship and partnership:
• Limited liability
• Public annual report

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Choosing the right company structure
Private limited company (ApS)
11
• One or more owners – may be private individuals and/or legal entities
• Limited liability
• Statutory minimum of invested capital of DKK 50,000– non-cash contribution allowed
• Ownership interest of 5% and more à Public Register of Shareholders
• Executive board compulsory à board of directors and/or supervisory board voluntary
• Compulsory registration with Danish Business Authority
• Public annual report and tax specifications required
• 22% corporation tax on company’s net income + 42% tax on dividends distributed
from the company to personal shareholder à 54.76% (2016)
• If the shares are held by a holding company holding 10% or more à dividends are
tax free until distributed to personal shareholder

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Choosing the right company structure
Public limited company (A/S)
12
• One or more owners – may be private individuals and/or legal entities
• Limited liability
• Statutory minimum of invested capital of DKK 500,000 – non-cash contribution allowed
• Ownership interest of 5% and more à Public Register of Shareholders
• Executive board + board of directors and/or supervisory board compulsory
• Board of directors/supervisory board à minimum 3 persons
• Compulsory registration with Danish Business Authority
• Public annual report and tax specifications required
• 22% corporation tax on company’s net income + 42% tax on dividends distributed from
the company to personal shareholder à 54.76% (2016)
• If the shares are held by a holding company holding 10% or more à dividends are tax
free until distributed to personal shareholder

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Choosing the right company structure
Chart
13
Sole proprietorship Partnership Entreprenurial
company
Private limited company Public limited
company
Minimum
initial capital
0 0 DKK 1-49,999 DKK 50,000 DKK 500,000
Owner(s) 1 1 or more 1 (at least) 1 (at least) 1 (at least)
Liability Unlimited, primary Joint, unlimited,
primary
Limited Limited Limited
Management No legal requirements No legal
requirements
Executive board
(compulsory), board of
directors and/or
supervisory board
(voluntary)
Executive board
(compulsory), board of
directors and/or
supervisory board
(voluntary)
Executive board
(compulsory) +
board of directors and/or
supervisory board of at
least 3 persons
(compulsory)
Annual
report
Required to prepare,
publication voluntary
Required to
prepare,
publication
voluntary
Publication required Publication required Publication required
Taxation Taxed as personal
income – up to 55.79%
if above DKK 476,300
a year (2016)
Taxed as personal
income – up to
55.79% if above
DKK 476,300 a
year (2016)
22% corporation tax on
company’s net income +
42% tax on dividends
distributed from the
company to personal
shareholder à 54.76%
(2016)
Tax-free dividend to holding
company holding 10% or
more
22% corporation tax on
company’s net income +
42% tax on dividends
distributed from the
company to personal
shareholder à 54.76%
(2016)
Tax-free dividend to holding
company holding 10% or
more
22% corporation tax on
company’s net income +
42% tax on dividends
distributed from the
company to personal
shareholder à 54.76%
(2016)
Tax-free dividend to
holding company
holding 10% or more

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Legal pitfalls when dealing with outside investors
Maintaining controlling interest
14
• How many (and which) shares are you left with?
• Dual share system/structures – voting rights left with A shares?
• Who will get the majority of the seats on the board of directors?
• Right of appointment?
• Are any corporate decisions left for certain shareholders’ approval?
• Or changes of the articles of association?

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Legal pitfalls when dealing with outside investors
Use of shareholders’ agreement
15
• Which matters should be dealt with in the articles of association or in a
shareholders’ agreement? – from a legal and a commercial perspective
• Provisions on the following issues are often incorporated in shareholders’
agreements:
• Competition
• Shareholders’ rights to transfer shares
• Pre-emptive rights/right of first refusal
• Right to withhold purchase price in case of unsettled disputes
• Right to pledge the owners’ shareholdings
• Shareholders’ trading with the company – terms/conditions
• Working shareholders’ work performance
• Definition of breach of the shareholders’ agreement

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Legal pitfalls when dealing with outside investors
Make sure you own “your” IP rights
16
• A clear condition for investors à both the company and the owners declare full and
unencumbered ownership of all relevant IP rights
• Necessary to map out your IP rights à may be copyright, design right, trademark
right, patent right etc.
• If you declare such ownership, but you are not entitled thereto:
à at best, the investment contract is invalid and you must indemnify investors
• Or you must pay for the IP rights à very weak bargaining situation
• In any case, you are likely to face legal action for commercial exploitation of IP
rights which you do not hold

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Legal pitfalls when dealing with outside investors
Who is entitled to the IP rights?
17
An employee has developed a computer program following the instructions of his
employer:
• Danish Act on Copyright, section 59:
​ ‘Where a computer program is created by an employee in the execution of his
duties or following the instructions given by his employer the copyright in such
a computer program shall pass to the employer’
• Very important: Section 59 is an implementation of an EU Directive – how is
‘computer programs’ interpreted in your jurisdiction?
• Section 59 does not cover consulting agreements (work done by 3rd parties) à
the holder of the IPR is determined by the agreement
• If no agreement à only right to the implied/intended use à not your IP
rights

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Legal pitfalls when dealing with outside investors
IP rights in APAs and SPAs
18
• Asset Purchase Agreements:
• Important to specify which IP rights are included in the purchase –
especially unregistered IP rights
• Stock Purchase Agreements:
• Which IP rights are to stay in the subsidiary/belong to the parent
company?
• Allocation of risk
• Opportunity for royalty payments to parent company – regardless of
dividend payment
• Can make restructuring of operations/activities in subsidiary easier

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Going international
Legal research before going international
19
• Which of the available business forms are relevant for your enterprise?
• Consider IP regulation separately in each market - How are computer
programs protected?
• Local corporation tax, income tax and VAT
• Employment regulation
• Advertising and marketing regulation varies widely in jurisdictions
• Want to share customer information? à Data protection

20. Navn
Baggrund /
information
Titel:
E-mail:
Phone:
Mobile:
gsområder:
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Anders Erlandsen
Advokat
( +45 33 33 03 18
+45 21 12 29 03
* ane@lett.dk
20

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