Until now, Denmark has been one of the few EU countries that has not allowed companies to issue loans to shareholders and members of management, except for loans to Danish and some international parents. Obviously, this is a competitive disadvantage. On 1 January 2017, such loans will be legal.

With one stroke, the total ban against such loans will be history as parliament has adopted a bill legalising loans to all kinds of shareholders and members of management. The loans will become legal if the below conditions are fulfilled:

  • the loan may be held within the company's distributable reserves and on market terms;  
  • the decision to grant a loan is made either by the general meeting or the company's central management body with an authorisation from the general meeting;
  • the decision to grant a loan is not made until after the presentation of the company's first annual report.

The act will come into force on 1 January 2017.

No amendments of the tax rules

Unfortunately, there is another side to the picture as the bill does not imply any amendments of the tax rules. This means that shareholders and members of management, who are:

  • natural persons or tax-transparent companies  
  • holding a controlling interest in the company

will still be taxed as if the loan proceeds were salary or dividend.

Consequently, the new act is advantageous to all minority shareholders.

A welcome change of the competition situation

Despite the tax aspect of natural majority shareholders, the change will still create better opportunities for companies situated in Denmark to compete on equal terms with the rest of the EU.

Other changes

The new act also implies:

  • that new limited companies cannot be registered unless they make some kind of registration of the owners;
  • that existing limited companies cannot be subject to compulsory dissolution unless they make some kind of registration of the owners;
  • that some companies may omit from stating certain information on subsidiaries and associated companies in the annual report;
  • that it will be specified how to increase the capital of entrepreneurial companies.


Lise Lotte Hjerrild