DENMARK Law and Practice Contributed by: Poul Guo, Martin Søndergaard, Patricia Rasch and Jonas Miller Rasmussen, Moalem Weitemeyer
5.4 Implementation When implementing an investment round, it is common to establish an employee incentive programme concurrently with a new investment round. This ensures that a portion of equity is allocated before new investments, managing dilution effects. The size and structure of these programmes are key negotiation points in VC financings, and are typically documented in the investment agree - ment or shareholders’ agreement. However, implementation is often delegated to the (new) board of directors post-closing, with minimal direct impact on the VC investment process itself. VC shareholders’ agreements in Denmark typi - cally include exit provisions governing liquidity events such as trade sales or IPOs. Common clauses include: • tag-along rights – allow minority sharehold - ers to sell under the same terms as majority shareholders; and • drag-along rights – enable majority share - holders to force minority shareholders to sell on agreed terms. Exit triggers are often tied to: • achieving specific financial milestones; • reaching a predetermined investment horizon; and • receiving qualifying acquisition offers. 6. Exits 6.1 Investor Exit Rights
Transfer restrictions typically include: • rights of first refusal – existing sharehold - ers have the first option to purchase shares before external investors; and • lock-in periods – restricting share sales within a set timeframe to ensure stability. 6.2 IPO Exits The Danish initial public offering (IPO) market has fluctuated significantly. After a peak in 2021, activity slowed, with only three IPOs in 2023 and none in 2024. This has shifted investor prefer - ences towards trade sales as a more reliable exit strategy. Recent legislative changes allow companies to opt for realisation-based taxation for up to seven years after an IPO, meaning taxes are paid only upon the actual sale of shares, rather than on unrealised mark-to-market gains, which previ - ously applied to companies holding less than 10% ownership in listed companies. This pro - vides a liquidity advantage for founders and early investors, especially those subject to IPO lock-ups. The realisation-based taxation option applies to IPOs taking place between 1 January 2015 and 31 December 2024, and is available to “original shareholders” defined as shareholders who have held shares in the company for at least 30 days prior to the IPO. For past income years, shareholders may request a reopening of their tax return to claim a refund of previously paid tax, provided the com - pany has an overall capital gain on the shares. Such requests must be submitted no later than 1 July 2025.
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