DENMARK Law and Practice Contributed by: Morten Jensen, Elise Ross-Hansen, Frederik André Bork and Paula Grønlund, Bruun & Hjejle
9.2 Directors’ Use of Defensive Measures
pany (ie, generally the collective interest of the shareholders in the company). That said, there are no specific rules governing directors’ duties in relation to defensive measures. In practice, the board of directors will often consult strategically important shareholders to ensure that they support the initiatives taken by the board of directors. However, this must be done in accordance with the duty to not take any action that is clearly capable of providing certain shareholders or others with an undue advantage over other shareholders or the lim - ited liability company. Certain defensive meas - ures must be approved by the shareholders at a general meeting. Naturally, the potential responsibility of the board of directors is greater if it actively seeks to prevent a takeover offer being made or imple - mented than if it refrains from actively supporting the takeover offer. 9.5 Directors’ Ability to “Just Say No” As long as the directors work loyally in the best interest of the shareholders and the company as a whole, directors are deemed to have a fairly broad ability to oppose business combinations. In the context of public takeover offers, whether to deny or accept an offer is primarily left to the shareholders. In practice, however, directors are left this broad ability to assess whether an offer is in the best interest of the shareholders and the company, since a bidder, if they are met with resistance from the management, will have the option to approach the shareholders directly. The board of directors will usually hire financial advisers in order to assess the offer and, option - ally, formalise an auction process to create price competition.
Use of defensive measures by the directors is allowed under Danish law. Subject to the duties of the management, the directors must, how - ever, be aware of potential risks of becoming lia - ble when utilising aggressive measures, such as when issuing new shares to a friendly third party or using “poison pills” . Other and less aggressive ways of using defensive measures include deny - ing a due diligence review and recommending that shareholders decline the tender offer. As hostile tender offers are generally quite uncommon in Denmark, so too are these meas - ures. 9.3 Common Defensive Measures In terms of reactive measures, the most com - mon response to a hostile tender offer is for the management to search the market for compet - ing bidders and to create a formalised auction process in an effort to ensure price competition. It is also not uncommon for companies to have precautionary measures incorporated into the articles of association (eg, an authorisation for the board of directors to make a directed share issue); and, especially in the financial sector, it is common for voting rights ceilings to be included. It is also fairly common in larger, formerly family- owned businesses to have separated classes of shares. This way, B shares are usually listed on a regulated market, while A shares with stronger voting rights attached remain in the hands of the original owners. 9.4 Directors’ Duties When enacting defensive measures, directors must have due regard to the corporate benefit doctrine, according to which any action taken by the directors must be in the interest of the com -
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