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DENMARK
COMPANY FORMATION
ESTABLISHING A COMPANY IN DENMARK
COUNTRY FEATURES - OVERVIEW
The activity has revived in Denmark in 2004. GDP growth rate was 1% in 2002, 0.2% in 2003 and is estimated at 2.4% in 2004. The IMF forecasts a 2.5% growth in 2005. Tax cuts and interest rates lowering since 2003 have been stimulating domestic demand and have led to a slow recovery. The Danish economy is strong: GDP per capita ranks second (behind Luxembourg) in the European Union, the State has a surplus budget and the unemployment rate, though increasing, remained inferior to 7% in 2004. The country's economy is strongly dependant on its external trade.
Denmark's natural resources are limited and the development of heavy industry is consequently restrained. However, the country holds important gas and oil resources which can ensure its energy independence. The economy's main pillars are chemical and pharmaceutical industry, biotechnologies and services as a whole (71% of GDP). Denmark is the world's leading manufacturer of wind turbines and exports 85% of its production. The agriculture sector only accounts for 3% of the GDP. Two thirds of the agricultural production are exported.
Denmark is a member of the European Union but doesn't currently participate to the single currency. Exports and imports value accounts for about one third of the GDP. Almost two thirds of external trade exchanges are carried out with European countries. Denmark's predominant bilateral trade partner is significantly Germany, and Sweden, Great Britain and the Netherlands are also important partners. Denmark mainly imports consumer goods, raw materials and semi-manufactured products. Building manufacturing sectors represent 75% of goods exports.
GENERAL INFORMATION
POPULATION
Total population (millions): 5.4
Urban population: 85%
Average annual population growth: 0.2%
Surface area (km²) : 43,090Population origin
Origin of the population - % of the population
Danish: 96.4%
Asian: 0.4%
British: 0.2%
Other: 2.7%
MAIN CITIES - Population
Copenhagen – 1,750,000
Arhus - 279,000
Odense – 183,000
Alborg - 159,000
Esbjerg - 83,000
Randers - 61,000
LANGUAGES
Official language: Danish, but also the Greenlandic and the Faroese dialects.
Business language: Danish and English (Danes usually have a very good level of English).
RELIGION
Religious practises : Protestants 91%
Catholics 2%
Others 7%.
POLITICAL SYSTEM
Denmark is a constitutional monarchy. The monarch represents the executive, but he (she) only has a symbolic authority. The parliament is unicameral, it counts 179 members of whom 175 represent Denmark, 2 Faeroes and 2 Greenland. Parliamentary election take place every 4 years. The government consists of a coalition between the SDP, the CD (democrats of the centre) and the liberal radical party. The opposition to the government is formed by the conservatives, the SP and the progressive party.
CURRENCY
The currency is the Danish Krone (DKK), 1 DKK = 10 aures. The currency is issued in coins of 25 and 50 aures and of 1, 2, 5, 10 and 20 crowns. There are also bills of 50, 100, 500 and 1000 crowns. The Danish Krone is not part of the Euro currency, or at least, not yet.
BUSINESS HOURS
Banks open Monday to Friday from 9:30 / 10:00 to 16:30/17:00, they stay open later on Thursdays. Credit cards are accepted everywhere and cash machines are easy to find.
DOING BUSINESS
LOCAL BUSINESS INCENTIVES
Both the Danish Government and the EU provide a number of industrial incentives. The Royal Danish Ministry of Foreign Affairs, through its investment promotion agency Invest in Denmark, provides a comprehensive overview of these investment incentives. It should also be contacted in order to get a complete investor guide.
Denmark offers foreign investors a wide range of possibilities for establishing a business, enabling you to tailor your investment plans to suit your business needs.
The information relevant to establishing a business is organised in two sections:
(a) business activities and the corresponding corporate forms often used;
(b) special conditions relating to the European corporate forms of a SE company and Economic Interest Grouping, including joint ventures.
DENMARK – INCORPORATION FEATURES
DENMARK OFFERS …
• A range of corporate forms enabling investors to tailor the investment to business needs and activities
• Quick, informal and cost-efficient establishment procedures
• Online incorporation of new companies within a few hours
• No resident requirements for managing directors or members of board of directors
• Shareholders’ and board meetings can be held electronically
• Dividends can be distributed on an interim basis
• No notary deeds
• Danish company law in conformity with current EU legislation
• OECD transfer pricing
BUSINESS ACTIVITIES IN DENMARK
THE CHOICE OF CORPORATE FORMS
The choice of corporate form is highly dependent on the type of business activities to be performed in Denmark. Certain corporate forms are evident for business activities that require an extensive level of public presence and appearance whereas other forms are better suited for e.g. investment activities.
EXAMPLES OF BUSINESS ACTIVITIES
(1) SALES
Sales activities on the Danish market can be carried out in many different ways. Some investors take an active approach and establish their own presence in Denmark by:
• Founding a Danish company (A/S or ApS)
• Acquiring a Danish company (A/S or ApS)
• Establishing a branch
• Establishing a representative office
The choice between these options generally depends on the expected level of sales activity in Denmark.
Alternatively, a more passive approach may be chosen. The investing body may not establish its own presence in Denmark, but instead choose to pursue Danish market interests through an independent agent or distributor.
In addition, various forms of sales may be chosen such as franchising or commissionaire. In many cases, Denmark is chosen as the centre for Nordic or other regional sales. In such cases, the investor may establish a Danish sales company (A/S or ApS) which can then establish a branch or a representation office in other Nordic or regional countries.
Furthermore, a Danish company may serve as Nordic headquarters or holding company for other European activities. Such a Danish company may be exempted from tax on inbound or outbound dividends. Dividends are distributable on an interim basis.
(2) MANUFACTURING
Manufacturing in Denmark may be carried out in various ways. A foreign company may establish separate production facilities, either by building, acquiring or leasing such facilities, or having products manufactured by establishing contacts to existing producers of similar products in Denmark.
Establishing production facilities in Denmark is most often done by establishing a Danish company (A/S or ApS) and letting the company acquire or lease such facilities.
(3) SERVICES
Services may be performed in Denmark through e.g. a distribution centre, a regional headquarter, or a shared services centre. Services are most often carried out through a Danish company (A/S or ApS), but may also be performed via a branch or a representative office.
(4) SE COMPANY – THE EUROPEAN COMPANY
From 8 October 2004 it will be possible to found a European public limited company. The legal framework of the SE company is to a large degree subject to national company law, but it will be possible to change the nationality of the company without liquidation and re-founding. The SE company must be registered at the Danish Commerce and Companies Agency if the official address of the company is in Denmark. The minimum capital requirement is EUR 120,000. The liability of the shareholders is limited to their shareholdings. An SE company must have annual financial statements prepared by the company and audited by a State Authorized Public Accountant or a
Registered Accountant. An SE company registered in Denmark is subject to a corporate tax of 28%.
(5) EUROPEAN ECONOMIC INTEREST GROUPINGS – EEIG
EEIG is a cross-border general partnership to be formed by European business persons and/or business entities with the purpose of performing certain business tasks in the EU, save for the sheer accumulation of capital. The entity must be registered at the Danish Commerce and Companies Agency if the head office of the EEIG is in Denmark. No capital is required. One manager must be appointed and there is no requirement to prepare separate financial accounts. Each member of the EEIG is subject to individual taxation. For tax purposes an EEIG is treated as a transparent partnership.
(6) JOINTVENTURE
A joint venture is a special business vehicle often used by companies of different nationality to carry out specified business activities. If the corporate form of the joint venture is a legal entity which requires registration, such registration must be completed. A joint venture is often established in the
corporate form of an A/S, an ApS or a general partnership. There is no separate legislation on joint ventures.
(7) PERSONAL BUSINESS ENTITIES
Sole proprietorships are often used for small businesses run by a single entrepreneur as there are no capital requirements.
General partnerships are often used in relation to joint ventures.
Limited partnerships are often used for businesses doing investments, e.g. investing in real estate, etc.
If the business entity is involved in trading, industry or craftsmanship, all partners (or the sole proprietor) must register with the local business register.
The sole proprietor has unlimited liability for the debts and obligations of the business. As for general partnerships the liability for the debts and obligations of the business is joint and unlimited for the partners. As for limited partnerships the liability for the debts and obligations of the business is unlimited for the general partner and limited to the contribution stake for the limited partners.
There are no requirements to prepare and file financial statements, but adequate books and records must be kept in conformity with Danish bookkeeping law. The participating parties are taxed individually.
PROCEEDURE OF ESTABLISHMENT
Limited liability companies and branch offices must be registered at the Danish Commerce and Companies Agency and will be given an identification number upon registration, known as a CVR number.
Personal business entities must be managed by a physical person being an EU national or someone having a valid permit to work and do business in Denmark.
All persons living or working in Denmark will be awarded a personal identification number, known as a CPR number.
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