DENMARK Law and Practice Contributed by: Jakob Østervang, Peter Østergaard Nielsen, Anders Hørlyck Jensen and Tejs Degn Leth Ernst, Accura Advokatpartnerselskab
3.3 Spin-Off Followed by a Business Combination
These drivers are particularly relevant in the context of renewable energy, where regulatory changes and the need for specialised focus are prominent. 3.2 Tax Consequences Spin-offs in Denmark can be structured as tax-free transactions at both corporate and shareholder levels. The Danish tax rules on spin-offs are largely based on the EU Tax Merger Directive. However, there are spe- cific requirements that must be met to achieve the tax- free status of a spin-off, also depending on whether the spin-off is executed with or without permission from the Danish tax authorities. Requirements With Permission (Non-Exhaustive) • The spin-off must have a valid commercial purpose and cannot be made solely due to tax considera- tions. • The shareholders must receive shares in the spun- off company in a ratio corresponding to their own- ership in the company before the spin-off. • If the spin-off does not result in a dissolution of the contributing company, then the spun-off entity must be able to function as a stand-alone entity with an active trade or business. In this regard, holding of shares is not considered an active trade or business. Further, it is often the case that a permission from the Danish tax authorities comes with an obligation to report any sell-offs or restructurings carried out within the subsequent three-year period. Requirements Without Permission (Non- Exhaustive) The requirements for carrying out a spin-off with per- mission also apply for spin-offs without permission. • If the shareholder is a company that owns at least 10% of the share capital in the companies taking part of the spin-off, these shares cannot be sold for a three-years holding period. If the requirements are not observed, the spin-off will become taxable with retroactive effect. • The spun-off company must have the same proportion of assets and liabilities as the original company.
A spin-off immediately followed by a business com- bination is possible in Denmark. The combination process may be included within the spin-off process. Creating a spin-off immediately followed by a busi- ness combination would require the spin-off and business combination to be approved by the general meeting of the companies concerned. Depending on the companies involved, (i) the plan must be approved by the companies concerned; and then (ii) the deci- sion must be finalised at a second general meeting of the companies concerned. 3.4 Timing and Tax Authority Ruling A tax-exempt spin-off in Denmark can be carried out with and without permission from the Danish tax authorities – see 3.2 Tax Consequences . If the spin-off is carried out with permission, an appli- cation must be submitted to the Danish tax authori- ties and is generally processed within three to four months. If the spin-off takes place without permission, the receiving company must report the tax-exempt merg- er to the Danish tax authorities, together with, at the latest, the company’s tax return for the income year in which the spin-off took place. It is possible to apply for a permission retroactively. 4. Acquisitions of Public (Exchange- Listed) Energy and Infrastructure Companies 4.1 Stakebuilding In Denmark, it is not uncommon for a buyer to acquire a stake in a public company prior to making a formal tender offer. Reporting Thresholds and Timing Shareholders must notify the company and the Danish Financial Supervisory Authority (FSA) when their own- erships or voting rights reach, exceed, or fall below
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