DENMARK Law and Practice Contributed by: Dan Moalem, Jakob Skafte-Pedersen, Poul Guo and Thomas Enevoldsen, Moalem Weitemeyer
non-notifiable sectors if they pose a risk to national security or public order. Although the threshold for exercising these powers is high, private equity spon - sors increasingly consider the potential for call-in when structuring transactions – particularly in sensitive areas such as dual-use technologies, AI, quantum, or access to critical data infrastructure. As a result, early stage screening and pre-clearance discussions with the authority have become a more common feature in high-risk sectors. EU Foreign Subsidies Regulation (FSR) The EU FSR regime, which became effective in 2023, is relevant for private equity transactions involving EU targets or bidding processes. Under the regime, par - ties must notify if financial contributions from non-EU countries exceed certain thresholds. While the regime has only recently begun to impact Danish deals, pri - vate equity bidders, particularly those participating in public tenders, must assess whether FSR filings are required. Private equity sponsors have responded by incorporating FSR risk assessments into early trans - action planning. Other Regulatory Considerations: Anti-Bribery, Sanctions and ESG Denmark maintains a robust anti-bribery and sanc - tions framework, in alignment with EU law. There have been no major legislative changes in the past 12 months, but enforcement risk and compliance expectations remain high, especially for cross-border sponsors. ESG compliance has become a growing area of focus, driven by CSRD implementation and increased regulatory expectations.
Buyers typically apply a risk-based approach, prioritis - ing red-flag issues with potential financial, operational or reputational impact. Findings are documented in a legal due diligence report, which often forms the basis for key transaction documents, including warranties, disclosures and potential closing conditions. Where warranty and indemnity (W&I) insurance is used, the scope and format of legal due diligence is often expanded and formalised to meet insurer requirements. In particular, insurers typically expect a structured, risk-based due diligence process cover - ing key areas such as tax, litigation, regulatory, ESG and compliance. The extent and granularity of the due diligence may affect both the insurability of certain risks and the level of coverage. As a result, PE spon - sors typically invest significant time and resources to ensure a well-rounded diligence process, on the sell- side by way of vendor due diligence reports and on the buy-side by way of ensuring cohesion between the vendor due diligence (if available) and additional due diligence. Consequently, legal due diligence remains a key work - stream in Danish private equity transactions, particu - larly in transactions involving W&I insurance. Key Focus Areas Beyond standard corporate and contractual matters, the following areas are typically in focus. • Employment and incentive structures, including compliance with the Danish tax rules under Sec - tion 7P of the Tax Assessment Act, which allow for favourable tax treatment of equity-based compen - sation. • Regulatory compliance, especially under Danish FDI, merger control, and sector-specific regimes. • Litigation and contingent liabilities. • Data protection and IT, especially in tech-driven or data-rich businesses. • Change-of-control clauses, which are carefully reviewed to ensure deal continuity. • Intellectual Property Rights, especially in IP- focused businesses, including software compa - nies.
4. Due Diligence 4.1 General Information
Comprehensive but Targeted Legal Due Diligence Key focus areas include corporate structure, financing arrangements, material contracts, employment mat - ters, real estate, compliance, and litigation. ESG com - pliance and data protection are also being integrated into the due diligence process, particularly where the target operates in regulated or data-intensive sectors.
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