Legislative framework

While the Danish Companies Act is based on EU company law in many significant areas, there are still many differences between the EU countries.

Danish companies are registered with the Danish Commerce and Companies Agency. Members of the board of directors, executive management and the company's articles of association are also registered with the Agency. The articles include basic company information such as name, domicile, business pursued, signatory authorisations, management and accounting periods.

The Danish Companies Act includes rules on companies' incorporation, share capital, governing bodies, annual general meetings, auditing and management's liability.

Several areas within corporate governance deserve special attention including:
Audit requirements

Management's liability

Governing bodies
Danish companies have a two-tier structure, requiring both a board of directors and an executive board, which is made up of executive management. The general meeting has the ultimate authority. The Danish Companies Act includes several rules about the division of labour between governing bodies.

The governing bodies and the division of powers are regulated by Danish Companies Act. The articles of association for each company lay down in detail the duties of these bodies.

The general meeting has the ultimate authority. All shareholders may attend the general meeting.

The board of directors and the executive board are responsible for the management of the company's affairs. The board of directors is responsible for ensuring that the company has a sound organisation. The executive board is responsible for the day-to-day-management of the company.

The provisions of the Danish Financial Business Act specifically prohibits members of the executive board of a financial institution from being members of the board of directors.
executive board

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General meeting
The board of directors convenes the general meeting. All shareholders may attend the meeting personally or by proxy. All shareholders may submit proposals in writing, and they are entitled to speak and vote at the general meeting.

The annual general meeting is held at a date that allows sufficient time for the company to send the Danish Commerce and Companies Agency a copy of the audited and adopted annual report within four months of the end of the company's accounting year.

At the annual general meeting, the shareholders adopt the annual report and the management's proposal for allocation of profit. Other business transacted at the meeting may include business that, according to the articles of association, must be submitted to the general meeting.

The annual general meeting elects directors to the board. Directors can be elected for a term of up to four years.

Furthermore, the general meeting must approve or reject capital increases, buybacks of own shares and the issue of convertible debt instruments. However, the articles of association may stipulate that the board of directors is authorised to make such decisions for a specific period of time.

In addition to the annual general meeting, extraordinary general meetings shall be held if requested by the board of directors, the auditors elected by the shareholders, the advisory board, or by shareholders holding a total of one-tenth of the share capital.

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Board of directors
The general meeting must elect at least three members to the board of directors to hold office for a four-year term. In companies with a staff of more than 35, employees are entitled to elect directors corresponding to half the number of directors elected by the general meeting.

The management of financial institutions cannot serve on the institution's board of directors.

At least half of the directors must be Danish, EU or EEA residents.

The board of directors appoints and discharges the members of the executive board and determines their remuneration. If the remuneration (salary, incentive programmes, etc.) exceeds what is normal and reasonable, it must be approved by the general meeting. The fee payable to the directors is specified in the articles of association or is decided on by the general meeting.

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Executive board
The board of directors appoints the executive board and determines its remuneration.

Members of the executive board of financial institutions are not eligible for the board of directors.

The executive board is responsible for the day-to-day-management of the company and must therefore follow the guidelines and instructions set forth by the board of directors.

Day-to-day management includes decisions to be taken in the normal course of operations, but not decisions of an unusual nature or of fundamental importance.

Members of the executive board must ensure that

• books are kept in accordance with current legislation
• assets are carefully managed
  
• relevant matters are submitted to the board of directors
  
• decisions made by the board of directors are executed.

Often rules of procedure and instructions will describe specific duties in more detail.

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Division of duties between the board of directors and the executive board
The board of directors and the executive board are responsible for the management of the company's affairs. The board of directors is responsible for ensuring that the company has a sound organisation. The executive board is responsible for the day-to-day-management of the company and must therefore follow the guidelines and instructions set forth by the board of directors.

The Danish Companies Act emphasises the division of duties by prohibiting the chairman of the board of directors of listed companies from taking on any duties of the executive board and serving as executive chairman.

The board of directors may require that specific matters of interest be submitted to the board.

The precise duties of the board of directors depend on specific statutory requirements and on the rules of procedure.

The laws, including the Danish Companies Act and the Danish Financial Business Act, contain more detailed provisions on the duties and obligations of the board of directors and the executive board. In supplementary rules, the Danish Financial Supervisory Authority has specified requirements regarding organisation, procedures, internal control and the board of directors' work, including the board of directors' guidelines for the executive board.

The rules of procedure of listed companies must

• determine the composition of the board of directors and quorum
• specify the division of duties between the executive board and the board of directors
• make certain that the board of directors ensures that necessary data are available to the auditors.
  
  

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Audit requirements
The board of directors and executive board of a company present the annual report and confirm by their signatures that it presents an accurate picture of the company.

If a member of management disagrees with the annual report, that person can make his or her objections known in connection with the signed declaration.

The general meeting chooses one or more auditors whose term will extend until another auditor is chosen.

The auditor compiles audit records that set forth the nature and conclusions of its audit work. These records are submitted at each meeting of the Board of Directors and signed by each of the board members.

The auditor signs the annual report with a statement on whether it lives up to the legal requirements and gives an accurate picture of the company.

Shareholders who represent at least 10% of share capital have the right to ask the Danish Commerce and Companies Agency to select a minority auditor.

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Management's liability
The Danish Companies Act states that, if members of the board of directors or the executive board of a company cause damage to the company, either deliberately or through negligence, they are liable for damages.

If management causes damage to the company's shareholders, creditors or a third party, either deliberately or through negligence, management is liable for damages if there is a violation of the Danish Companies Act or the articles of association.

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