Investment Screening in Denmark: Additional Considerations for Danish M&A Targets
Denmark has joined the list of countries with mandatory investment screening regimes. New rules came into force on 1 July 2021 affecting foreign direct investment and special financial agreements. The rules apply to investments and agreements which are due to be closed after 1 September 2021.
The purpose of the screening regime is to ensure that foreign direct investments and special financial agreements do not pose a threat to national security and public order in Denmark. The screening consists of two mechanisms: mandatory screening and voluntary screening.
Mandatory Screening
Screening is mandatory for foreign direct investments if the foreign investor directly or indirectly gains possession of or acquires control over ownership interests or voting rights or the equivalent control by other means in a Danish company, explain the Ecovis experts. Furthermore, the investment must take place in one of the following sectors, which are defined as particularly sensitive:
- Defence
- Dual use
- Data security
- Critical infrastructure
- Critical technology
Screening is also mandatory on special financial agreements within the same sectors if the investor resides outside the EU or EFTA and obtains control over or has considerable impact on the Danish company.
If a foreign direct investment is covered by the mandatory screening requirements outlined above, the foreign investor must apply in advance for permission to conclude the transaction. The Danish Business Authority must either permit or prohibit the transaction within 60 business days of the date of the complete filing (or 90 days if the period is extended).
Are you planning to invest in Denmark? We can advise you on all questions relating to the new investment screening.Niels Løber, Partner, ECOVIS Legal Denmark, Copenhagen, Denmark
Voluntary Screening
In addition to mandatory screening, the investment screening regime also introduces voluntary cross-sectoral screening. A foreign investor in any sector may apply to the Danish Business Authority for screening if the investment could constitute a threat to national security or public order, and if the foreign investor directly or indirectly obtains possession of or control of 25% or more of the shares or voting rights in a Danish company. Screening is voluntary, but the Danish Business Authority may initiate an examination of the investment within 5 years of completion if the investment has not been notified but is considered a threat. If the Danish Business Authority examines the investment and concludes that the investment is a threat to national security or public order, it may require that the investment is rolled back.
Impact on Future Investments
The new investment screening rules imply that at an early stage in their investment considerations, foreign investors contemplating investing in Danish companies must factor in that the investment may need to be approved by the Danish Business Authority before closing. In this context, it might be difficult for investors to assess whether the investment falls within the scope of voluntary screening and if screening should be carried out, advise the Ecovis consultants.
For further information please contact:
Niels Løber, Partner, ECOVIS Legal Denmark, Copenhagen, Denmark
Email: nlo@bach.law
Julie Hald, assistant attorney at law, ECOVIS Legal Denmark, Copenhagen, Denmark
Email: julie.hald@ecovis.dk