Denmark has introduced a new regime for screening of Foreign Direct Investments in Denmark
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Partner
Denmark
I'm a partner and co-head of our international Competition & EU group. I also lead the Competition & EU team in Denmark. I have a particular focus on applying competition & EU law as a tool to achieve specific and measurable business objectives for our clients.
Associate
Denmark
I'm an associate in our international Competition & EU group in Denmark, advising both national and international clients on Danish and EU competition law.
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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.
