DENMARK Law and Practice Contributed by: Dan Moalem, Jakob Skafte-Pedersen, Poul Guo and Thomas Enevoldsen, Moalem Weitemeyer
primarily a matter of the fund undertaking not to issue shares below market value unless as part of future incentive programmes. Veto Rights and Governance Influence Only in certain cases, particularly where management holds a significant mark post-closing, are a limited set of consent rights granted. Directors’ appointment rights for management are rare but may be considered in founder-led situations or where management holds a meaningful minority stake. Exit Rights Management typically does not have any control over the timing or form of the private equity fund’s exit. Tag- along rights are commonly granted but drag-along obligations will always be in place. 9. Portfolio Company Oversight 9.1 Shareholder Control and Information Rights Control Through Board Representation and Governance Rights Private equity fund shareholders in Denmark typi - cally exercise control over their portfolio companies through a combination of board appointment rights and extensive information rights. In minority invest - ments, the private equity fund will typically remain in control of an exit and, further, have certain reserved matters protected. Board Appointment Rights In minority investments, the fund will usually have the right to appoint one or more members to the board of directors of the portfolio company, including the chair. In majority investments, the fund often holds a controlling board position. In minority situations, appointment rights are negotiated based on owner - ship thresholds and may include observer rights. Reserved Matters Key strategic decisions are in minority investments typically subject to shareholder consent through reserved matters provisions. These may include:
• changes to share capital or articles of association; • acquisitions or disposals above a certain threshold; • incurrence of debt or granting of security; • approval of budgets and business plans; • changes to executive management; • entry into material contracts or related-party trans - actions; and • dividend policy and distributions. Information Rights Private equity funds customarily receive robust financial reporting, including monthly management accounts, quarterly financials, annual budgets, and access to auditors. These rights are often contractual and supplement statutory rights under Danish com - pany law. 9.2 Shareholder Liability Limited Liability is the General Rule Under Danish law, a private equity fund acting as shareholder is generally not liable for the obligations or actions of its portfolio company. The corporate veil ensures that liability is limited to the amount invest- ed, and Danish courts respect the legal separation between shareholders and the company, even in cas - es of full ownership. Exceptions Are Narrow and Rarely Applied In exceptional cases, a fund may face liability if it is found to have exercised actual control in a manner that goes beyond normal shareholder influence, and where such control has caused harm to third parties. This may include situations involving: • fraud, wilful misconduct or gross negligence; • undercapitalisation or misuse of the company form (piercing the corporate veil); and • de facto management or shadow directorship. However, such cases are extremely rare in Danish legal practice and would require clear evidence of abuse of the corporate structure. Practical Risk Management In practice, private equity funds mitigate such risks through proper corporate governance, arm’s length dealings and formal separation between fund repre - sentatives and portfolio management. Danish courts
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