Governance structures in a Danish limited company

Danish public and private limited companies are regulated by the Companies Act (the “Companies Act”).

  1. Classical Danish system where the day-to-day management of the company is carried out by a management board that is separated from a board of directors responsible for policy and operational decisions as well as the supervision of the management board (the “Classical Danish System”); or 
  2. Modified two-tier system where the primary managerial competences are vested with a management board that is supervised by a supervisory board that has no material managerial powers (the “Modified Two-Tier System”).
  3. Furthermore, private limited companies are allowed to operate solely with a management board (the “One-Tier System”). 

The general meeting
The general meeting is the highest authority of a public and private limited company and the forum where the shareholders can exercise their rights.

At least one general meeting must be held every year, and the board of directors is responsible for convening the meeting. If the company operates with a Modified Two-Tier System, the management board is responsible for convening the meeting. In a private limited company which operates with a One-Tier System, the management board is responsible for convening the meeting.  

Normal resolutions presented at the general meeting can be passed by a simple majority of votes. Qualified majority of votes is required to pass resolutions of a more vital character to the company and/or the shareholders, including, inter alia, changes to the articles of association.

The board of directors
The board of directors is entrusted with the ultimate responsibility for the public and private limited company and the supervision of its management.

It is the board of directors that determines the company’s policies in relation to business strategy, organization, accounting and finance, and the board of directors undertakes to perform the following duties and to ensure observance of: 

  1. Bookkeeping and financial reporting; 
  2. Risk management and internal controls; 
  3. Reporting on the company’s financial position; 
  4. The management board’s performance of its duties; 
  5. The propriety of the company’s financial resources; and 
  6. Sufficient liquidity in the company.

Furthermore, the board of directors appoints the management board of the company.

In a public limited company the board of directors must comprise at least three directors, including the chairman (appointed by the directors or the shareholders depending on the articles of association). The majority of the directors shall be elected by the shareholders at the general meeting of the company.

In a private limited company there are no requirements as to the number of directors in the board of directors, and the majority of the members do not have to be elected by the shareholders at the general meeting of the company.

If the average number of employees in a company in the course of the preceding three years has been at least 35, the employees in such a company are entitled to elect a number of employee representatives to the board of directors (“Company Representation”). The number of employee representatives shall be equivalent to at least half of the rest of the board of directors, however no fewer than two (i.e. if a board of directors consists of eight regular members, the employees have the right to elect four employee representatives).

The Companies Act further provides for employee representation on the board of directors in a parent company (“Group Representation”). The employees have the right to Group Representation if: 

  1. The parent company has a subsidiary; 
  2. The parent company possesses a majority of the voting rights in the said subsidiary; and 
  3. The parent company and its subsidiaries have employed an average of at least 35 employees in the preceding three years.

The number of employee representatives in the parent company shall be equivalent to at least half of the rest of the board of directors, however no fewer than three.

The employee representatives of the board of directors are currently elected for a period of four years and hold the same rights and obligations as any director.

No restrictions as to nationality or place of residence of the directors apply.

The supervisory board
The supervisory board in a Modified Two-Tier System is entrusted with the ultimate responsibility for the public and private limited company and the supervision of its management board. 

The supervisory board appoints the management board of the company. No member of the management board can be a member of the supervisory board.

The supervisory board has no authority to determine the company’s policies in relation to business strategy, organization, accounting and finance, as the main function of the supervision board is to supervise the management board.

The supervisory board supervises the management board to ensure observance of: 

  1. Bookkeeping and financial reporting;
  2. Risk management and internal control;
  3. Reporting on the company’s financial position;
  4. The management board’s performance of its duties;
  5. The propriety of the company’s financial resources; and
  6. Sufficient liquidity in the company.   

In a public limited company the supervisory board must comprise at least three members, including the chairman (who is appointed by the supervisory board unless the articles of association of the company states otherwise). The majority of the members shall be appointed by the shareholders on the general meeting of the company.

In a private limited company there are no requirements as to the number of members of the supervisory board, and the majority of members do not have to be elected by the shareholders at the general meeting.

The articles of association of the company must state the number of members of the supervisory board and their election period. The election period must, however, not be longer than four years (re-election is allowed). 

In respect of Company Representation and Group Representation please refer to 2.4. The rules applicable on Company Representation and Group Representation are similar as regards the Classical Danish System and the Modified Two-Tier System. 

The management board
The board of directors / the supervisory board appoints a chief executive officer (or a management board if more than one executive officer is appointed), who is responsible for the day-to-day management of the company and for observing guidelines and recommendations issued by the board of directors.

The day-to-day management undertaken by the management board does not include transactions which, considering the scope and nature of the company’s activities, are of an unusual nature or magnitude. However, if the company is governed by a Modified Two-Tier System, the management board has full managerial power, hence both day-to-day management, the company’s policies on business strategy and transactions which, considering the scope and nature of the company’s activities, are of an unusual nature or magnitude are governed by the management board. The company’s articles of association can, however, decide that certain decisions only can be made with the approval of the supervisory board.

A member of the management board of a public limited company may not hold the office of chairman (or vice-chairman) of the board of directors, and the majority of the members of the board of directors must be persons who are not members of the management board of the company. There are no similar requirements as regards private limited companies.

If the company has a supervisory board, no members of the management board can be a member of the supervisory board.

  • Copenhagen

    Langelinie Allé 35
    2100 Copenhagen

  • Aarhus

    Værkmestergade 2
    8000 Aarhus C

  • Shanghai Representative Office

    No.1440 Yan'an Middle Road, Suite 2H08
    Jing'an District, 200040 Shanghai, P.R. China

  • Bech-Bruun Law Firm P/S

    P +45 72270000
    F +45 72270027
    E info@bechbruun.com
    VAT number 38 53 80 71
    Cookie policy
    Legal Notice and Disclaimer
    Privacy Policy