Company Limited Liability in Denmark

Anpartsselskab (ApS) is a type of Danish company with limited liability, which is required to register with Erhvervsstyrelsen (the Business Activity Authority) through the website erhvervsstyrelsen.dk.

Requirements and process for establishing an ApS in Denmark

Setting up a Danish private limited liability company (ApS – Anpartsselskab) is the most common way to run a business in Denmark with limited personal risk. The process is largely digital and handled through the Danish Business Authority (Erhvervsstyrelsen), but it requires meeting specific legal, capital and documentation requirements.

Basic legal requirements for an ApS

An ApS is a separate legal entity with its own rights and obligations. The owners (shareholders) are only liable up to the amount of capital they contribute. To establish an ApS in Denmark, the following core conditions must be met:

• Minimum share capital of DKK 40,000 (in cash or eligible non-cash contributions)
• At least one founder (can be an individual or a company, Danish or foreign)
• At least one member of management (executive director/board), who must be a real person
• Registered office address in Denmark (can be a business address or an authorised office service)
• Preparation and signing of a memorandum of association and articles of association
• Registration with the Danish Business Authority and allocation of a CVR number (company registration number)

Founders and eligibility

Both Danish and foreign individuals or legal entities can establish an ApS. There is no requirement for Danish citizenship or residence for shareholders. However, management must meet general “fit and proper” criteria: persons who are under bankruptcy, subject to disqualification, or banned from managing companies in Denmark or certain other jurisdictions cannot serve as directors.

If all founders are foreign, it is still possible to register an ApS, but you must ensure that the company has a valid Danish address and that management can comply with Danish bookkeeping and reporting rules.

Company name and registered address

The company name must be unique and clearly distinguishable from existing registered names and trademarks in Denmark. It must include the designation “ApS” and may not be misleading or offensive. Before registration, it is advisable to check name availability in the Danish Central Business Register (CVR).

The company must have a registered office in Denmark. This address is publicly visible and used for official correspondence from authorities. A P.O. box alone is not sufficient; a physical address is required, though it can be provided by an authorised office provider.

Memorandum of association and articles of association

The establishment of an ApS requires two key documents:

• Memorandum of association – the founding document signed by all founders. It must at least state:
  • Names and identification of founders
  • Company name and registered office municipality
  • Share capital and currency (usually DKK)
  • Whether contributions are in cash or non-cash
  • Any special rights or obligations for founders or others
  • Estimated costs related to the establishment to be borne by the company
• Articles of association – the company’s internal rules. They must specify:
  • Company name and registered office municipality
  • Purpose of the company (can be broad, e.g. “to conduct any lawful business”)
  • Size of the share capital and number or nominal value of shares
  • Rules on management structure (executive director and, if relevant, board of directors)
  • Rules on shareholders’ meetings, voting rights and notice periods
  • Any transfer restrictions on shares (e.g. pre-emption rights, approval clauses)
  • Financial year of the company

Both documents must be prepared in accordance with the Danish Companies Act (Selskabsloven). They can be drafted in Danish or English; however, Danish authorities may request a Danish version if needed.

Share capital and contributions

The minimum share capital for an ApS is DKK 40,000. It can be paid in as:

• Cash contribution – the most common and simplest option. The founders deposit the capital into a temporary bank account or provide documentation of payment.
• Non-cash contribution (contribution in kind) – for example machinery, equipment, intellectual property or other assets. Non-cash contributions must be valued and documented in a valuation report prepared by an independent, state-authorised public accountant, and must be fully available to the company at the time of establishment.

The capital must be fully subscribed at the time of establishment. It is possible to have different share classes (e.g. A and B shares) with different rights, but this must be clearly described in the articles of association.

Opening a bank account and depositing capital

In practice, you will need a Danish business bank account to deposit the share capital and run the company. Banks in Denmark are required to carry out anti-money laundering (AML) and “know your customer” (KYC) checks, which can be time-consuming, especially for foreign owners. Typical documentation requested by banks includes:

• Passports and address documentation for ultimate beneficial owners (UBOs)
• Corporate documents for foreign parent companies (if any)
• Description of business activities, expected turnover and main markets

Until the permanent account is opened, it is possible in some cases to document capital payment via a lawyer’s client account or other acceptable proof, but banks’ and authorities’ requirements must be observed carefully.

Digital registration with the Danish Business Authority

Most ApS companies are registered online via the Danish Business Authority’s self-service system. The standard steps are:

1. Prepare the memorandum of association and articles of association.
2. Arrange payment of share capital and obtain documentation (bank confirmation or valuation report for non-cash contributions).
3. Complete the online registration form, providing:
   • Company name and address
   • Information about founders and shareholders
   • Information about management (executive director, board members, if any)
   • Share capital, share classes and ownership structure
   • Financial year and main business activity (NACE code)
4. Upload required documents (founding documents, capital documentation, valuation report if applicable).
5. Sign digitally (using MitID or authorised representative) and pay the registration fee to the Danish Business Authority.

Once the registration is approved, the company receives a CVR number. This number is the company’s unique identification for all dealings with Danish authorities, including tax, VAT and employment registrations.

Deadlines and timing

The memorandum of association must be signed no later than the date of registration, and the company must be registered within a relatively short period after signing (the establishment documents specify the deadline, which cannot exceed the maximum allowed by law). In practice, if all documentation is in order, the Danish Business Authority often processes standard ApS registrations within a few business days.

Registration with tax and other authorities

After the CVR number is issued, the company must be registered for the relevant tax schemes:

• Corporate income tax – all ApS companies are automatically subject to Danish corporate income tax on their worldwide income, unless specific exemptions or double tax treaty rules apply.
• VAT (MOMS) – registration is mandatory if the company’s taxable turnover exceeds DKK 50,000 over a 12‑month period. Many companies choose to register from the start to recover input VAT on start-up costs.
• Employer registration – if the company will have employees in Denmark, it must register as an employer for withholding A-tax (PAYE), labour market contributions (AM-bidrag) and other payroll-related obligations.

These registrations are typically done via the online system TastSelv Erhverv linked to the company’s CVR number.

Management structure at the establishment stage

An ApS must have at least one executive director. It may also have a board of directors, but this is not mandatory unless required by the articles of association or specific sector rules. The founders decide the management structure in the founding documents. The first management is appointed in the memorandum of association or at the first shareholders’ meeting.

Management is responsible for ensuring that the company is registered correctly, that capital is paid in, and that the company complies with bookkeeping, tax and reporting obligations from day one.

Beneficial ownership and transparency requirements

When establishing an ApS, information about the company’s beneficial owners must be registered. A beneficial owner is typically a natural person who directly or indirectly owns or controls more than 25% of the shares or voting rights, or otherwise exercises significant control. If no beneficial owners can be identified, this must also be registered, and the legal owners are recorded instead.

Use of professional assistance

Although it is legally possible to establish an ApS without professional help, many founders – especially foreign entrepreneurs and companies – use Danish accountants, lawyers or corporate service providers. Professional support helps ensure that:

• Founding documents comply with the Danish Companies Act
• Capital contributions and valuation reports meet legal requirements
• Tax, VAT and employer registrations are done correctly and on time
• Ongoing bookkeeping and annual reporting obligations are planned from the start

A correctly structured and registered ApS from day one reduces the risk of later disputes with authorities, penalties for non-compliance and problems with banks or investors.

Minimum share capital and contribution forms for an ApS

The minimum share capital for a private limited liability company (ApS) in Denmark is currently set at DKK 40,000. This capital can be contributed in cash, as non-cash assets (contribution in kind), or as a combination of both, provided that all legal requirements are met and properly documented. Understanding how share capital works is crucial for planning the financing and risk profile of your Danish company.

Minimum share capital for an ApS

An ApS must have a fully subscribed share capital of at least DKK 40,000 at the time of incorporation. The capital can be denominated in Danish kroner (DKK) or in euro (EUR), but most small and medium-sized companies choose DKK for simplicity in accounting and tax reporting.

The share capital represents the company’s equity at incorporation and serves as a basic protection for creditors. It does not have to remain in the bank account after registration; the company can use the funds for its normal business activities, as long as it complies with capital maintenance rules and remains solvent.

Cash contribution

The most common way to establish an ApS is through a cash contribution. In this case, the founders pay the share capital into a bank account, and the bank issues documentation confirming the deposit. This documentation is used in the incorporation process with the Danish Business Authority.

Key points for cash contributions:

• The full minimum capital of DKK 40,000 must be paid in at incorporation; there is no legal option to pay in only part of the capital for an ApS.
• The funds can be used by the company after registration to pay suppliers, salaries and other operating costs.
• The payment must be clearly documented (typically via a bank statement or a bank confirmation letter).

Non-cash contribution (contribution in kind)

Instead of paying the share capital entirely in cash, founders may contribute assets such as equipment, inventory, intellectual property rights or other valuables. This is known as a contribution in kind and is subject to stricter documentation requirements to protect creditors and future shareholders.

For a contribution in kind:

• The assets must have a reliable, determinable value at the time of incorporation.
• The total value of the contributed assets must at least equal the subscribed share capital (minimum DKK 40,000).
• An independent valuation is required, typically prepared by a state-authorised or registered public accountant, describing the assets, valuation method and confirming that the value at least equals the capital subscribed.
• The valuation report must be submitted to the Danish Business Authority as part of the incorporation documents.

Contributions in kind are often used when an existing business, equipment or intellectual property is transferred into a newly formed ApS, for example when converting from a sole proprietorship to a limited liability company.

Mixed contributions: combining cash and assets

It is possible to combine cash and non-cash contributions. In such a mixed contribution, part of the share capital is paid in cash and the remainder is covered by assets contributed in kind.

In this case:

• The total of cash and asset values must reach at least DKK 40,000.
• The non-cash part is subject to the same valuation and documentation requirements as a full contribution in kind.
• The incorporation documents must clearly specify how much of the capital is paid in cash and how much is covered by assets.

Share capital, nominal value and share classes

The share capital is divided into shares with a specified nominal value. Danish law allows very low nominal values per share (for example DKK 0.01), which gives flexibility in structuring ownership percentages and future capital changes. The total nominal value of all shares must equal the registered share capital.

Companies can issue one or more share classes with different rights (for example voting or dividend rights), but all share classes together must still represent at least the minimum capital requirement. Any special rights attached to share classes must be described in the articles of association.

Capital maintenance and protection rules

Once the ApS is incorporated, the share capital is subject to capital protection rules designed to safeguard creditors and ensure that the company remains solvent:

• The company may not distribute dividends or make other value transfers to owners if this would cause the equity to fall below the registered share capital or if the company would become insolvent as a result.
• Management must monitor the company’s financial position. If there is reason to believe that the equity is lower than the registered share capital, management is obliged to react, for example by preparing interim financial statements and considering capital measures.
• Loans to shareholders and certain related parties are generally restricted and must comply with Danish company law and tax rules.

If the company’s equity becomes negative or significantly reduced, the owners may need to consider a capital increase, shareholder loans on market terms or other restructuring measures to restore a sound capital base.

Increasing and reducing share capital

Over time, the share capital of an ApS can be adjusted to reflect the company’s development and financing needs.

Capital increase can be carried out by:

• New cash contributions from existing or new shareholders
• Contributions in kind (for example when bringing new assets into the company)
• Bonus issues, where retained earnings or reserves are converted into share capital

Any capital increase must be decided by the general meeting, documented in updated articles of association and registered with the Danish Business Authority.

Capital reduction is also possible, for example to cover accumulated losses or to repay capital to shareholders. A reduction must follow strict procedures, including creditor protection rules and registration with the Danish Business Authority. After any reduction, the share capital may not fall below DKK 40,000.

Practical considerations for founders and foreign investors

When choosing the form and level of share capital for an ApS, founders should consider:

• The company’s expected financing needs and risk profile
• Whether assets are available and suitable for a contribution in kind, and whether the cost of valuation is justified
• The need for flexibility in future ownership changes and capital increases
• The expectations of banks, investors and business partners, who may prefer a higher capital than the legal minimum

For foreign owners, it is important to plan the capital structure together with Danish accounting and tax advisors to ensure that contributions, shareholder loans and future distributions comply with Danish company law, tax rules and reporting requirements.

Ownership structure, shareholders’ rights and share classes in an ApS

The ownership structure of a Danish private limited company (ApS) is flexible and can be tailored to the needs of both small founder teams and more complex investor groups. An ApS is a separate legal entity, which means that ownership is represented by shares, and the shareholders’ liability is limited to the capital they have contributed.

Who can own shares in a Danish ApS?

Shares in an ApS can be held by both individuals and legal entities, regardless of nationality or place of residence. There is no general requirement for shareholders to be Danish residents. A single shareholder is sufficient to establish and own 100% of the company, but there is no upper limit on the number of shareholders.

Shareholders can be:

• Private individuals (founders, employees, business partners)
• Companies (Danish or foreign, including holding companies)
• Investment funds and other institutional investors
• Foundations and associations, if permitted by their own statutes

Shareholders’ register and transparency

Every ApS must keep an internal register of shareholders showing who owns the shares and in what proportion. In addition, Danish law requires registration of owners and “beneficial owners” with the Danish Business Authority (Erhvervsstyrelsen):

• Owners of 5% or more of the share capital or voting rights must be registered as owners
• Beneficial owners (typically persons who ultimately own or control more than 25%) must also be registered

Changes in ownership must be reported without undue delay. Basic ownership information is publicly available in the CVR register, which increases transparency and is relevant for banks, business partners and authorities.

Core rights of shareholders in an ApS

Shareholders’ rights are primarily governed by the Danish Companies Act and the company’s articles of association. Unless the articles provide otherwise, each share usually carries the same rights. Key shareholder rights include:

• Voting rights – the right to vote at the general meeting on matters such as approval of the annual report, distribution of dividends, election and removal of board members and amendments to the articles
• Right to dividends – the right to receive a share of the company’s distributable profits when the general meeting decides on dividend distribution, provided that capital protection rules are respected
• Right to information – the right to receive the annual report and other relevant information, and to ask questions to management at the general meeting
• Pre-emptive rights – in many ApS companies, existing shareholders have a pre-emptive right to subscribe for new shares in proportion to their existing holdings, unless this right is limited or waived in the articles or by a specific resolution
• Right to transfer shares – the right to sell or otherwise transfer shares, subject to any transfer restrictions in the articles of association or shareholders’ agreement
• Protection of minority shareholders – minority shareholders benefit from statutory protections, for example against unfair decisions that clearly favour majority owners at the expense of the company or other shareholders

General meeting and decision-making

The general meeting of shareholders is the supreme decision-making body in an ApS. Ordinary resolutions are usually passed by a simple majority of votes cast, unless the Companies Act or the articles require a higher majority. Typical decisions taken by shareholders include:

• Approval of the annual report and allocation of profit or loss
• Election and removal of board members (if a board of directors exists)
• Appointment of an auditor, if required
• Decisions on dividends and other distributions
• Changes to share capital (capital increases or reductions)
• Amendments to the articles of association, mergers, demergers and dissolution

Amendments to the articles and other fundamental changes normally require a qualified majority, for example at least two-thirds of both the votes cast and the share capital represented at the meeting, and in some cases even stricter rules may apply.

Share classes in a Danish ApS

Danish law allows an ApS to issue different classes of shares with different rights, provided that this is clearly described in the articles of association. This flexibility is often used to structure relationships between founders, investors and employees. Common distinctions between share classes include:

• Voting vs. non-voting shares – some shares may carry full voting rights, while others have limited or no voting rights but may have the same or enhanced economic rights
• Ordinary vs. preference shares – preference shares can give priority in dividend payments or in distribution of proceeds on liquidation or sale of the company
• Shares with different voting weight – for example, A-shares with multiple votes per share and B-shares with one vote or no vote, allowing founders to retain control while raising capital
• Redeemable shares – shares that can be redeemed by the company under predefined conditions and at a specified price or formula

All differences between share classes must be precisely defined in the articles of association, including their voting rights, dividend rights, priority in case of liquidation and any redemption or conversion rights. This is crucial for legal certainty and for avoiding disputes between shareholders.

Transferability and restrictions on shares

While shares in an ApS are generally transferable, it is common to include restrictions in the articles of association or in a separate shareholders’ agreement to protect the ownership structure. Typical mechanisms include:

• Consent clauses – transfer of shares requires approval from the board of directors or the general meeting
• Pre-emption rights – existing shareholders have the right to buy shares before they are sold to an external party
• Lock-up periods – founders or key employees are restricted from selling their shares for a certain period
• Tag-along and drag-along rights – contractual rights that protect minority shareholders or facilitate a full sale of the company when a majority owner sells

These restrictions must be carefully drafted to comply with Danish law and to ensure they are enforceable. If they are included in the articles of association, they become binding on all current and future shareholders.

Shareholders’ agreements and internal governance

In addition to the articles of association, many ApS companies use a shareholders’ agreement to regulate internal relations in more detail. Such agreements typically cover:

• Decision-making rules and veto rights for key matters
• Dividend policy and reinvestment of profits
• Non-compete and confidentiality obligations
• Exit scenarios, valuation methods and buy-out mechanisms
• Consequences of breach, death, disability or departure of a shareholder

While a shareholders’ agreement is not registered with the Danish Business Authority and is not public, it is an important tool for aligning expectations and reducing the risk of conflicts between owners.

A well-designed ownership structure, clear definition of share classes and a balanced set of shareholder rights are essential for protecting both founders and investors in a Danish ApS, and for ensuring stable long-term development of the company.

Management structure: directors, board and their responsibilities

The management structure of a Danish private limited company (ApS) is designed to ensure clear responsibility, effective control and compliance with the Danish Companies Act. Depending on the size and needs of the business, an ApS can have a simple structure with only one management body or a more complex setup with both an executive management and a board of directors or supervisory board.

Possible management models in an ApS

Under Danish law, an ApS must always have at least one registered management body. There are three main models:

• Sole executive management (one or more directors) – the most common structure in small and medium-sized companies. The company is managed by one or more managing directors, and there is no board of directors.
• Executive management + board of directors – used when owners want additional control, strategic oversight or when the company reaches a certain size or complexity.
• Executive management + supervisory board – less common in ApS; the supervisory board oversees management but does not participate in day-to-day decisions.

The chosen structure must be described in the articles of association and registered with the Danish Business Authority (Erhvervsstyrelsen).

Directors (executive management) – role and responsibilities

The executive management (managing director or directors) is responsible for the day-to-day operations of the ApS. This includes:

• Implementing the strategy and decisions adopted by the shareholders and, where applicable, the board of directors
• Managing the company’s finances, liquidity and risk on an ongoing basis
• Ensuring proper bookkeeping, accounting and timely filing of annual reports and tax returns
• Ensuring that the company complies with Danish company law, tax law, employment law and sector-specific regulations
• Maintaining updated corporate records and registers (shareholder register, minutes, management information)

Directors must act in the best interest of the company and all shareholders, not only the majority owner or appointing party. They have a duty of loyalty and a duty of care, meaning they must make informed decisions and avoid conflicts of interest. If a conflict cannot be avoided, it must be disclosed and the director should abstain from decision-making in that matter.

Board of directors – when and why to have one

An ApS is not legally required to have a board of directors unless this is stipulated in the articles of association or triggered by other specific regulation (for example, in regulated industries). However, many growing companies choose to establish a board in order to:

• Strengthen strategic management and long-term planning
• Introduce independent members with experience, industry knowledge or networks
• Improve internal control and risk management
• Increase credibility towards banks, investors and business partners

The board of directors is responsible for the overall management and strategic direction of the company. It supervises the executive management and must ensure that the company’s organisation, accounting and financial controls are adequate. The board appoints and can dismiss the managing director(s).

Composition and appointment of management

Members of the executive management and the board of directors are appointed by the shareholders’ meeting, unless the articles of association provide otherwise (for example, appointment rights for specific shareholders). In an ApS:

• There must be at least one managing director or one board member registered with the Danish Business Authority
• Management members must be natural persons with legal capacity; other companies cannot act as directors
• There is no general requirement that directors reside in Denmark or the EU/EEA, but practical and banking requirements often favour at least one locally based director

Employee representation on the board is mandatory only if the company has an average of at least 35 employees over a three-year period and a board of directors has been established. In that case, employees may elect representatives with the same rights and obligations as other board members.

Division of powers between shareholders, board and directors

The Danish Companies Act clearly separates the roles of the different corporate bodies:

• Shareholders’ meeting is the supreme authority. It approves the annual report, decides on distribution of dividends, elects and dismisses board members and auditors, amends the articles of association and decides on major structural changes (mergers, demergers, liquidation).
• Board of directors or supervisory board (if established) is responsible for overall management, supervision of the executive management and ensuring that the company’s organisation is sound and controlled.
• Executive management handles daily operations within the framework set by the board and shareholders. It may not make decisions that are reserved for the board or shareholders under law or the articles of association.

This division of powers is important for limiting liability and ensuring that decisions are taken at the correct level.

Formal requirements: meetings, minutes and documentation

To demonstrate proper governance and reduce liability risk, management must comply with certain formalities:

• Board meetings and, where relevant, supervisory board meetings should be held regularly, with an agenda and written minutes
• Decisions of the executive management and board that are significant for the company should be documented in writing
• Shareholders’ resolutions (including written resolutions) must be recorded and kept in the company’s minute book
• Changes in management (appointment, resignation, removal) must be registered promptly with the Danish Business Authority

Proper documentation is often decisive in disputes with shareholders, creditors or authorities and is a key element of good corporate governance.

Liability of directors and board members

Although shareholders in an ApS have limited liability, members of the executive management and the board can be held personally liable if they intentionally or negligently cause loss to the company, shareholders or creditors. Typical risk situations include:

• Continuing to trade when the company is clearly insolvent without taking steps to restructure or file for bankruptcy
• Failing to withhold and pay taxes, VAT or labour market contributions on time
• Approving unlawful distributions to shareholders, such as dividends that exceed distributable reserves
• Serious breaches of bookkeeping, accounting or reporting obligations

If the company approaches financial distress, management has a duty to monitor liquidity closely, seek professional advice and consider restructuring or insolvency proceedings. Failure to act in time can lead to personal liability and, in serious cases, disqualification from acting as a director.

Practical considerations for foreign owners

Foreign shareholders establishing an ApS in Denmark should pay particular attention to the management structure. Banks, tax authorities and business partners often expect:

• Clear identification of who has authority to sign on behalf of the company
• Transparent documentation of management decisions and powers of attorney
• Effective communication between foreign owners and local management

In many cases, appointing a local director or using a professional corporate services provider can simplify dealings with Danish authorities, ensure compliance with local rules and reduce the risk of personal liability for foreign-based management.

Liability of owners and management in an ApS

In a Danish private limited company (ApS), the core principle is that the company is a separate legal entity. This means that, as a rule, the owners (shareholders) are only liable up to the amount of their contribution to the share capital, while the management is responsible for running the company in compliance with Danish company law, tax law and other regulations.

Limited liability of shareholders

Shareholders in an ApS are not personally liable for the company’s debts and obligations beyond their paid-in or committed share capital. If the company cannot meet its obligations, creditors can only claim against the assets of the ApS, not against the private assets of the owners.

Limited liability applies regardless of the number of shareholders and the size of their shareholding. However, this protection can be weakened if a shareholder:

• Has provided a personal guarantee or security (for example, to a bank or landlord)
• Has acted as a de facto manager and participated in unlawful or grossly negligent decisions
• Has abused the company form, for example by mixing private and company funds or deliberately harming creditors

In such situations, Danish courts can, in exceptional cases, “pierce the corporate veil” and hold an owner personally liable.

Personal guarantees and security

In practice, banks and other lenders often require personal guarantees from owners, especially in newly established or small ApS companies. By signing a personal guarantee, the owner assumes direct personal liability towards the creditor, independent of the company’s limited liability. The scope of the guarantee (amount, duration, conditions for termination) should always be clearly documented and reviewed before signing.

Liability of the management (directors and board)

The management of an ApS typically consists of one or more executive directors (managing directors). Larger companies may also have a board of directors or a supervisory board. Management is responsible for the day-to-day operations and for ensuring that the company complies with the Danish Companies Act, the Danish Financial Statements Act, tax and VAT rules, employment law and other relevant legislation.

Members of management can incur personal liability if they intentionally or through gross negligence cause loss to the company, shareholders, creditors or other third parties. Typical risk areas include:

• Continuing to trade when the company is insolvent and there is no realistic prospect of restoring solvency
• Failing to pay withheld A-tax (PAYE income tax), labour market contributions (AM-bidrag), VAT or other public charges on time
• Providing misleading or incomplete information in annual reports, to the Danish Business Authority or to creditors
• Approving unlawful distributions to shareholders, such as dividends that breach capital protection rules

If management is found liable, they can be ordered to compensate the loss personally. In serious cases, they may also be disqualified from serving as a director or board member in Danish companies for a period of time.

Capital protection and duty to act in case of losses

Danish law contains strict capital protection rules. Management must continuously monitor the company’s financial situation. If there is reason to believe that the company’s equity is less than half of the registered share capital, management must prepare a balance sheet and, if the concern is confirmed, convene a general meeting without undue delay.

At the general meeting, the shareholders must decide on measures to restore the financial position, such as capital injection, cost reductions, restructuring or, if necessary, liquidation. If management fails to act, continues operations irresponsibly or worsens the position of creditors, this can lead to personal liability.

Unlawful distributions and repayment duty

Shareholders may only receive distributions (dividends, share buy-backs, repayment of capital) in accordance with the Danish Companies Act and based on approved, available profits or distributable reserves. If an unlawful distribution is made, the recipient shareholder may be obliged to repay the amount to the company if they knew or should have known that the distribution was unlawful.

Management that proposed or approved an unlawful distribution can also be held personally liable for the loss caused to the company or its creditors.

Liability in case of bankruptcy

In a bankruptcy situation, the appointed trustee will examine whether management or owners have acted in a way that has harmed creditors. If there is evidence of wrongful trading, preferential treatment of certain creditors, concealment of assets or other breaches of duty, the trustee may bring claims for damages against management or, in rare cases, against owners.

Furthermore, if management has not ensured proper bookkeeping and documentation, this can be considered a serious breach of duty and increase the risk of personal liability.

Bookkeeping, reporting and compliance obligations

Proper bookkeeping and timely reporting are central to limiting liability. Management must ensure that the company:

• Maintains accurate and up-to-date accounting records in accordance with the Danish Bookkeeping Act
• Prepares and files annual financial statements with the Danish Business Authority within the statutory deadline
• Registers for and reports VAT, payroll taxes and other obligations correctly and on time
• Retains accounting documentation for the required retention period

Failure in these areas can lead to fines, compulsory dissolution of the company and, in serious cases, personal liability for management.

How professional support can reduce liability risks

Although an ApS offers strong protection through limited liability, owners and management must actively comply with Danish corporate, tax and accounting rules to maintain this protection. Professional accounting and advisory support helps ensure that the company’s finances, reporting and decisions are documented and compliant, reducing the risk of personal liability for both shareholders and directors.

Taxation of an ApS: corporate income tax, withholding tax and VAT obligations

Taxation is a key element when running an ApS (Anpartsselskab) in Denmark. An ApS is treated as a separate legal and tax entity, which means that the company pays corporate income tax on its profits, and shareholders are taxed separately on dividends and other distributions. Below you will find an overview of the main tax obligations: corporate income tax, withholding tax and VAT.

Corporate income tax for an ApS in Denmark

The standard corporate income tax rate in Denmark is 22%. This rate applies to the taxable profit of the ApS, regardless of whether the shareholders are Danish or foreign residents.

Taxable profit is calculated as the company’s income (for example sales revenue, service fees, interest income) minus tax-deductible expenses (such as salaries, rent, depreciation, certain professional fees and other business-related costs). Denmark generally follows the accrual principle, so income and expenses are recognized when earned or incurred, not when paid.

An ApS is taxed on its worldwide income if it is tax resident in Denmark. A company is typically considered tax resident if it is incorporated in Denmark or if its effective place of management is in Denmark. Double tax treaties may reduce or eliminate double taxation on foreign income.

Corporate tax is paid on the basis of the income year, which usually follows the calendar year, but an ApS can choose a different financial year. The company must file a corporate tax return electronically with the Danish Tax Agency (Skattestyrelsen). The filing deadline is generally 6 months after the end of the income year, and no later than 31 August in the year following the income year, depending on the chosen financial year.

During the year, an ApS pays corporate tax in the form of two on-account instalments. These are typically due in the spring and autumn of the following income year. The final tax liability is then settled when the tax assessment is issued, which may result in an additional payment or a refund.

Withholding tax on dividends and interest

When an ApS distributes profits to its shareholders, Danish withholding tax rules may apply, especially if the shareholders are non-residents.

The general withholding tax rate on dividends paid by a Danish ApS to shareholders is 27%. For foreign shareholders, the effective rate can often be reduced under:

• an applicable double tax treaty between Denmark and the shareholder’s country of residence, or
• the EU Parent-Subsidiary Directive, if the conditions are met (for example, a minimum shareholding and beneficial ownership).

In many treaty cases, the dividend withholding tax rate is reduced to 15% or lower. For corporate shareholders within the EU/EEA or treaty countries that hold a substantial participation and meet specific anti-abuse conditions, dividends may be exempt from Danish withholding tax. However, Danish anti-avoidance rules, including beneficial ownership and substance requirements, are strictly applied.

For Danish resident individual shareholders, the 27% withholding tax is a prepayment of personal tax on share income. The final tax rate on dividends for individuals is progressive and may be higher than 27%, with the excess settled through the personal tax assessment.

As a rule, Denmark does not levy withholding tax on arm’s length interest payments to non-resident lenders, unless the interest is reclassified as a distribution or falls under specific anti-avoidance provisions (for example, certain hybrid or controlled debt structures). There is also generally no withholding tax on royalties paid to associated companies within the EU if the conditions are met, but specific rules and treaties must be checked in each case.

VAT obligations for an ApS

Most ApS companies that supply goods or services on a regular basis in Denmark must register for VAT (moms). The standard Danish VAT rate is 25% and applies to most taxable supplies of goods and services.

VAT registration is mandatory when the company’s taxable turnover in Denmark exceeds DKK 50,000 over a 12‑month period. Voluntary registration is possible in some cases, for example when the company expects to exceed the threshold or wants to recover input VAT on start-up costs.

Once registered, the ApS must:

• charge 25% VAT on taxable sales (output VAT)
• issue VAT-compliant invoices
• keep proper VAT records and bookkeeping documentation
• file VAT returns and pay VAT to the Danish Tax Agency within the applicable deadlines.

The VAT reporting frequency depends on the company’s annual turnover:

• Small businesses: typically semi-annual VAT returns
• Medium-sized businesses: typically quarterly VAT returns
• Larger businesses: typically monthly VAT returns.

The ApS can deduct input VAT on purchases and expenses that are directly related to its VAT-taxable activities. If the company carries out both VAT-taxable and VAT-exempt activities (for example, certain financial or insurance services), it may only deduct a proportion of the input VAT, based on a pro-rata calculation.

For cross-border transactions within the EU, special rules apply. Supplies of goods to VAT-registered customers in other EU countries are generally zero-rated in Denmark, provided the customer’s VAT number is valid and the goods are transported out of Denmark. The customer then accounts for VAT in their own country under the reverse charge mechanism. For many cross-border B2B services within the EU, the reverse charge mechanism also applies, meaning that the foreign business customer accounts for VAT in their own country.

Practical implications for ApS owners and management

For owners and managers of an ApS, understanding Danish corporate tax, withholding tax and VAT rules is essential for avoiding penalties and optimizing the overall tax position. Timely registration for VAT, correct invoicing, proper bookkeeping and on-time filing of tax and VAT returns are key compliance obligations.

Because Denmark has extensive anti-avoidance rules and a broad network of double tax treaties, foreign owners of an ApS should pay particular attention to the structure of dividend flows, financing arrangements and cross-border transactions. Professional tax and accounting support can help ensure that the ApS meets all Danish requirements while making use of available reliefs and treaty benefits.

Accounting, bookkeeping and annual reporting requirements for ApS

Every Danish private limited company (ApS) must keep orderly accounts and prepare annual financial statements in accordance with the Danish Financial Statements Act and the Danish Bookkeeping Act. Proper accounting is not only a legal obligation, but also a key element in protecting the limited liability of the owners and demonstrating solvency to banks, investors and the Danish authorities.

Bookkeeping obligations and retention of records

An ApS must record all business transactions on an ongoing basis and ensure that the bookkeeping gives a true and fair overview of the company’s financial position. Bookkeeping can be done digitally or in a mixed form, but in practice most companies use approved digital accounting systems.

All accounting records, vouchers and supporting documentation must be stored securely for at least 5 years from the end of the financial year. This applies to invoices, bank statements, contracts, payroll documentation, VAT calculations and any other evidence supporting the entries in the accounts. The company must also ensure that data is backed up and protected against loss and unauthorised access.

Chart of accounts, documentation and internal controls

The ApS must have a structured chart of accounts that allows clear identification of income, costs, assets, liabilities and equity. Each transaction must be traceable from the financial statements back to the original voucher and vice versa. The management is responsible for implementing internal controls that reduce the risk of errors, fraud and non-compliance, for example segregation of duties, approval procedures and regular reconciliations of bank accounts, receivables and payables.

Preparation of annual financial statements

Every ApS must prepare annual financial statements for each financial year. The financial year is typically 12 months and often follows the calendar year, but it may be different if registered as such with the Danish Business Authority (Erhvervsstyrelsen). The annual report must be prepared in accordance with the Danish Financial Statements Act and the company’s chosen reporting class (usually Class B for small and medium-sized ApS).

The annual report for an ApS normally includes at least:

• Management’s statement on the financial statements
• Auditor’s report, if the company is subject to statutory audit
• Income statement and balance sheet
• Notes with explanations of key items, accounting policies and related party transactions
• Management commentary, if required by the reporting class

The financial statements must be prepared in Danish kroner (DKK), unless another functional currency is approved and consistently applied. The management must ensure that the accounts give a true and fair view of the company’s assets, liabilities, financial position and result.

Filing deadlines and submission to Erhvervsstyrelsen

The annual report of an ApS must be submitted electronically to the Danish Business Authority no later than 5 months after the end of the financial year. For example, if the financial year ends on 31 December, the filing deadline is the end of May of the following year. Late filing may result in fines for the management and, in serious cases, compulsory dissolution of the company.

The annual report is filed digitally via the official reporting system and becomes publicly available in the CVR register. This transparency is an important element of doing business in Denmark and is often required by banks and business partners.

Audit requirements and audit exemption thresholds

Not all ApS are required to have their annual financial statements audited. Small companies can opt out of statutory audit if they do not exceed two of the following three thresholds for two consecutive financial years:

• Net turnover: DKK 8 million
• Balance sheet total: DKK 4 million
• Average number of full-time employees: 12

If the company stays below these limits, the shareholders can decide to waive the audit requirement. The decision must be registered and disclosed in the annual report. However, banks, investors or other stakeholders may still require audited financial statements as a condition for financing or cooperation.

If the ApS exceeds the thresholds, it becomes subject to statutory audit. In that case, a state-authorised or registered public accountant must audit the annual report and issue an auditor’s report. The auditor also has a duty to report material breaches of law to the authorities.

Management responsibility and personal liability risks

The management of an ApS (directors and, where applicable, board members) is legally responsible for ensuring that bookkeeping, accounting and reporting are carried out correctly and on time. Failure to comply with accounting and reporting obligations can lead to:

• Fines for the company and members of management
• Compulsory dissolution of the ApS by the Danish Business Authority
• Potential personal liability for losses suffered by creditors, if mismanagement or gross negligence is proven

Proper accounting and timely submission of annual reports are therefore essential to maintain the company’s good standing and to protect the limited liability of the shareholders.

Cooperation with accountants and digital solutions

Many ApS choose to outsource bookkeeping and preparation of annual financial statements to authorised accounting firms familiar with Danish rules and digital reporting systems. Using a professional accountant helps ensure compliance with the Danish Financial Statements Act, the Bookkeeping Act and tax regulations, and allows the management to focus on running the business.

Digital accounting systems integrated with online banking, payroll and VAT reporting can significantly reduce the risk of errors and make it easier to meet deadlines. For foreign owners, cooperation with a local Danish accountant is often crucial to navigate language barriers, local practices and communication with the authorities.

Registration with the Danish Business Authority (Erhvervsstyrelsen) and CVR number

Every Danish private limited company (ApS) must be registered with the Danish Business Authority (Erhvervsstyrelsen) before it can legally operate. Registration results in the allocation of a unique Central Business Register number (CVR number), which functions as the company’s official identification in all dealings with authorities, banks, suppliers and customers.

Online incorporation and registration with Erhvervsstyrelsen

Incorporation and registration of an ApS is carried out online via the Danish Business Authority’s digital self‑service systems. The founders submit the memorandum of association, articles of association and information about share capital, management and the company’s registered address. In most cases, the process is fully digital and requires the use of a Danish electronic ID (MitID) or a representative with such access.

Once the required documents and information are submitted and the registration fee is paid, Erhvervsstyrelsen reviews the application. If the documentation is complete and compliant with the Danish Companies Act, the company is usually registered within a short time. From the moment of registration, the ApS acquires legal personality and may enter into contracts, hire employees and open a business bank account in its own name.

CVR number: function and practical use

The CVR number is a 8‑digit number assigned to the company upon successful registration. It must be stated on invoices, contracts, the company’s website, letterheads and other business documents. Authorities use the CVR number to identify the company in all registers, including tax, VAT, employer and statistical registers.

The CVR number is publicly available in the Central Business Register, where basic information about the company can be accessed, such as name, address, management, ownership structure (where applicable), registration status and main business activity code (NACE/branchekode). This transparency is an important element of doing business in Denmark and supports counterparties in verifying the existence and status of the company.

Mandatory registrations linked to the CVR number

Obtaining a CVR number is the prerequisite for further registrations that are often necessary for an ApS to operate in practice. Depending on the company’s activities, it may need to:

• Register for VAT (moms) if its taxable turnover exceeds DKK 50,000 within a 12‑month period, or earlier on a voluntary basis
• Register as an employer if it will have employees in Denmark, which triggers obligations related to income tax withholding (A‑tax), labour market contributions (AM‑bidrag) and ATP contributions
• Register for import/export or specific sector licences, if the business operates in regulated industries

These registrations are normally carried out via the same online systems, using the CVR number as the key identifier. The company’s reporting obligations and deadlines for VAT, payroll taxes and other filings are then linked to this number.

Updates, changes and deregistration

The company has an ongoing duty to keep its registration data with Erhvervsstyrelsen up to date. Changes to the company name, registered address, management, share capital or articles of association must be reported digitally within the deadlines set by the Danish Companies Act. Many changes, such as capital increases or reductions, require supporting documentation and, in some cases, approval by the Danish Business Authority or a declaration from an auditor.

If the ApS ceases its activities, it must be deregistered from relevant schemes (for example VAT and employer registration) and ultimately from the Central Business Register in connection with liquidation, dissolution or bankruptcy. Deregistration of the CVR number marks the formal end of the company’s legal existence, although certain accounting and documentation retention obligations continue for a number of years after closure.

Proper and timely registration with Erhvervsstyrelsen, followed by accurate maintenance of CVR data and related tax and VAT registrations, is essential for ensuring that an ApS operates in full compliance with Danish corporate and tax law.

ApS vs. sole proprietorship and I/S: comparison of liability and risk

Anpartsselskab (ApS), sole proprietorship (enkeltmandsvirksomhed) and general partnership (interessentskab, I/S) are the three most common forms for small and medium-sized businesses in Denmark. The key difference between them is how much of your private wealth is at risk if the business runs into debt or legal claims.

Legal personality and separation of assets

An ApS is a separate legal entity. The company owns its assets, enters into contracts and is sued in its own name. The owners (shareholders) are legally distinct from the company, which is the foundation of limited liability.

A sole proprietorship has no legal separation between the business and the owner. All assets and liabilities belong directly to the individual. Contracts are signed in the owner’s name and any dispute or claim is directed against the person behind the business.

An I/S is a partnership between at least two partners (individuals or companies). The I/S itself is not a separate legal person in the same way as an ApS. In practice, creditors can claim directly against the partners, and the partners are jointly and severally liable for the partnership’s obligations.

Scope of financial liability

In an ApS, the shareholders’ financial risk is in principle limited to the capital they have contributed to the company. The minimum share capital is 40,000 DKK, which can be paid in cash or, under certain conditions, as non-cash contributions. If the ApS cannot pay its debts, creditors can normally only claim against the company’s assets, not the shareholders’ private assets.

In a sole proprietorship, the owner is personally and unlimitedly liable. All private assets – including salary, savings and, in many cases, real estate – can be used to satisfy business debts. There is no upper limit to the potential loss, and private and business creditors compete over the same pool of assets.

In an I/S, each partner is personally, unlimitedly and jointly and severally liable for all obligations of the partnership. This means a creditor can demand full payment from one partner alone, regardless of internal ownership percentages. The partner who pays more than their share must then seek recourse from the other partners, which can be difficult in practice.

Risk of personal liability for management

Although an ApS offers limited liability, directors and, in some cases, shareholders can become personally liable if they act negligently or in breach of their duties. Examples include:

• Continuing to trade while the company is clearly insolvent
• Failing to file annual reports, leading to compulsory dissolution
• Withholding VAT, A-tax or AM-bidrag and not paying them to the authorities
• Providing wrongful or misleading information to creditors or public authorities

In a sole proprietorship, there is no distinction between “business” and “personal” liability – the owner is always personally responsible for all obligations, including tax, VAT and employee-related liabilities.

In an I/S, each partner can incur obligations on behalf of the partnership. If one partner signs an unfavourable contract or fails to pay taxes, all partners can be held fully liable towards creditors and authorities, regardless of internal agreements.

Credit risk and access to financing

Because shareholders in an ApS are not personally liable, banks and other lenders often require additional security, such as personal guarantees from the owners, pledges in assets or surety from a parent company. In practice, this can reintroduce personal risk, especially in the early years of the company.

In a sole proprietorship, lenders and suppliers know that the owner is personally liable. This can make it easier to obtain smaller credit lines, but it also increases the owner’s private risk. Overdraft facilities and supplier credits are often granted based on the owner’s personal creditworthiness and assets.

In an I/S, the joint and several liability of the partners can be attractive to creditors, as they can claim against all partners. However, this significantly increases the financial risk for each partner, especially if one partner has a weaker financial position or takes on obligations without the others’ knowledge.

Risk in case of disputes and damages

If the business causes damage – for example, through professional errors, product defects or accidents – the form of business determines who is exposed:

• In an ApS, claims are generally directed against the company. The company’s insurance coverage and assets are used to cover compensation. Personal liability of directors or shareholders arises only in exceptional cases, such as gross negligence or intentional misconduct.
• In a sole proprietorship, the owner is personally the defendant in most disputes. If insurance is insufficient, compensation can be enforced against private assets.
• In an I/S, all partners can be sued and held liable for the full amount of damages. One partner’s mistake can therefore have direct and severe financial consequences for the others.

Tax-related liability and risk

An ApS is subject to corporate income tax at a rate of 22% on its taxable profits. The company itself is responsible for paying corporate tax, VAT and payroll-related taxes. If these obligations are not met, the company is primarily liable. Personal liability for management arises only in specific situations, such as gross negligence, fraud or misuse of withheld taxes.

In a sole proprietorship, business profits are taxed as the owner’s personal income under the Danish personal tax system. The owner is directly liable for income tax, VAT and any payroll taxes. Non-payment or incorrect reporting can quickly lead to personal arrears with the Danish Tax Agency (Skattestyrelsen), including surcharges and interest.

An I/S is tax-transparent. The partnership itself is not taxed on its profits; instead, profits are allocated to the partners and taxed at their level. Each partner is personally liable for their share of tax, as well as for VAT and payroll taxes of the partnership. If the I/S fails to pay, the tax authorities can pursue each partner personally for the full amount.

Bankruptcy and debt restructuring risk

In an ApS, bankruptcy proceedings are conducted against the company. Once the company is declared bankrupt, its assets are liquidated to satisfy creditors. Shareholders usually lose their investment but are not pursued for remaining debts, unless they have provided personal guarantees or acted in a way that triggers personal liability.

In a sole proprietorship, business bankruptcy is effectively personal bankruptcy. All private and business debts are combined in the same estate. This can lead to forced sale of private assets and long-term restrictions on the owner’s financial freedom.

In an I/S, bankruptcy of the partnership does not protect the partners. After the partnership’s assets are liquidated, creditors can pursue each partner personally for any remaining debts. If one partner cannot pay, the others may have to cover the shortfall.

Risk management and practical considerations

From a pure liability and risk perspective, an ApS generally offers the strongest protection of private assets, provided that management duties are fulfilled and no personal guarantees are given. It is often the preferred form for activities with higher financial, contractual or professional risk.

A sole proprietorship can be suitable for low-risk activities, freelancers and very small businesses with limited obligations and investments. However, the unlimited personal liability means that even a single large claim or tax issue can have serious private consequences.

An I/S may be relevant when two or more persons want to run a simple business together without the formalities of a company. Nevertheless, the combination of unlimited and joint and several liability makes it one of the riskiest forms from a personal liability perspective, especially if the partners have different risk appetites or financial strength.

When choosing between an ApS, sole proprietorship and I/S, it is crucial to assess not only expected profits and administrative costs, but also the potential size of future claims, contractual obligations, financing needs and the value of your private assets that you want to protect.

ApS vs. A/S (public limited company): key legal and practical differences

When choosing a Danish company form with limited liability, most entrepreneurs compare a private limited company (ApS) with a public limited company (A/S). Both are capital companies with separate legal personality and limited liability for the owners, but they differ significantly in terms of minimum capital, governance, regulatory burden and possibilities for raising funds.

Minimum share capital and contribution

The most visible difference is the required share capital. An ApS must have a minimum share capital of DKK 40,000, while an A/S requires at least DKK 400,000. In both cases, the capital can be contributed in cash or as non-cash assets (apport contributions), but non-cash contributions must be documented with a valuation report prepared by an independent expert and approved by the general meeting.

For many small and medium-sized businesses, the lower capital requirement makes an ApS more accessible and less risky in terms of initial investment. An A/S is usually chosen by larger businesses or companies that plan to raise significant external capital or eventually list on a stock exchange.

Ownership structure and transfer of shares

Both ApS and A/S can have one or more shareholders, and there is no upper limit on the number of owners. However, in practice the ownership structure is often different:

• An ApS is typically used for closely held companies with a limited number of owners (founders, key employees, family or a small investor group).
• An A/S is designed to accommodate a broader and more dispersed shareholder base, including institutional investors.

Shares in an A/S are generally easier to transfer and can be listed on a regulated market or multilateral trading facility, provided the company meets the listing requirements. An ApS cannot be listed on a stock exchange, and its articles of association often contain transfer restrictions, such as pre-emption rights or consent requirements, to keep control within a defined group of owners.

Management and corporate governance

The management structure of an ApS is more flexible and less formalised than that of an A/S. An ApS must have at least one management body, which can be either:

• one or more executive directors (management board), or
• a board of directors together with executive directors.

There is no legal requirement for an ApS to have a board of directors, unless employee representation rules apply because of the number of employees.

An A/S is subject to stricter corporate governance rules. It must have either:

• a board of directors and executive directors, or
• a supervisory board and executive directors.

The board of directors or supervisory board in an A/S must consist of at least three members elected by the general meeting, unless employee representatives are also required. The separation of oversight (board) and day-to-day management (executive directors) is more clearly defined and regulated in an A/S, which increases the level of control and formal decision-making processes.

Employee representation in the board

Employee representation rules apply similarly to both ApS and A/S, but are more common in larger A/S companies. If a company in Denmark has on average at least 35 employees over a three-year period, employees can demand representation on the board of directors or supervisory board. In that case, employees can elect a number of board members equal to half of the shareholder-elected board members, rounded up. This can significantly influence the governance structure of larger A/S companies, where boards are already mandatory.

Liability and risk for owners and management

In both an ApS and an A/S, shareholders’ liability is limited to the capital they have contributed. Creditors generally cannot claim against the personal assets of the shareholders. The company itself is liable for its obligations with all its assets.

The management’s liability is also similar in both forms. Directors and executive management can be held personally liable if they intentionally or through gross negligence cause losses to the company, shareholders or creditors, for example by violating the Danish Companies Act, the articles of association or general fiduciary duties. In practice, however, A/S management is subject to more intensive scrutiny from regulators, auditors and investors, which can increase the practical risk of liability claims.

Regulatory requirements and supervision

An A/S is subject to stricter regulatory requirements than an ApS, reflecting its potential to raise capital from a wide investor base. Key differences include:

• Disclosure and transparency: A/S companies must comply with more detailed rules on publication of information, including management reports, corporate governance statements (for listed companies) and, where relevant, insider information rules.
• Corporate law formalities: A/S companies are more tightly regulated regarding general meetings, board procedures, related-party transactions and capital protection rules.
• Supervision: Listed A/S companies are subject to supervision by the Danish Financial Supervisory Authority (Finanstilsynet) and must comply with securities market regulations in addition to the Danish Companies Act.

An ApS is still regulated and supervised by the Danish Business Authority (Erhvervsstyrelsen), but the level of formal requirements is lower, which reduces administrative burden and compliance costs.

Audit and financial reporting

Both ApS and A/S must prepare annual financial statements in accordance with the Danish Financial Statements Act and file them with the Danish Business Authority. However, the audit requirements differ.

Smaller ApS companies can opt out of statutory audit if they meet at least two of the following three criteria for two consecutive financial years:

• net turnover not exceeding DKK 8 million
• balance sheet total not exceeding DKK 4 million
• average number of full-time employees not exceeding 12

Many ApS companies therefore operate without a mandatory audit, which reduces costs and administrative work.

In contrast, most A/S companies are required to have their annual financial statements audited by a state-authorised public accountant. The possibility to opt out of audit is very limited in practice, and listed A/S companies are always subject to full audit and enhanced reporting requirements, including more detailed notes and management commentary.

Raising capital and access to investors

One of the main reasons to choose an A/S instead of an ApS is the possibility to raise larger amounts of capital from a wide range of investors. An A/S can:

• issue different share classes with varying voting rights and dividend preferences
• carry out public offerings of shares or bonds
• apply for listing on a regulated market or other trading platform

This makes the A/S structure attractive for companies with growth strategies that rely on external equity or debt financing, including venture capital, private equity and institutional investors.

An ApS can also issue different share classes and raise capital from investors, but it cannot offer shares to the public or be listed. Capital raising is therefore limited to private placements and negotiations with a smaller group of investors, which may restrict the company’s financing options and valuation potential.

Costs and administrative burden

The ongoing costs of running an A/S are generally higher than for an ApS. Factors that increase the cost level for an A/S include:

• mandatory board of directors or supervisory board with at least three members
• more extensive corporate governance and documentation requirements
• mandatory audit in most cases
• higher expectations from investors and authorities regarding internal controls and reporting

For smaller and medium-sized businesses that do not need public capital, an ApS is usually more cost-effective and easier to manage, while still offering limited liability and a professional corporate structure.

When to choose ApS and when to choose A/S

An ApS is typically the best choice for:

• start-ups and small businesses that want limited liability with low capital requirements
• consultancy, service and trading companies owned by a few individuals
• holding companies and special purpose vehicles used in group structures

An A/S is more suitable when:

• the company plans to raise substantial capital from external investors
• there is a long-term strategy to list the company on a stock exchange
• customers, partners or lenders require the A/S form for reputational or governance reasons
• the business is already of a size where stricter governance and audit requirements are expected

Both forms provide limited liability and a solid legal framework under Danish law. The choice between ApS and A/S should be based on the company’s size, growth plans, financing needs and the level of governance and transparency expected by owners, lenders and other stakeholders.

Distribution of profits: dividends, retained earnings and capital protection rules

In a Danish private limited company (ApS), profit distribution is tightly regulated to protect creditors and ensure the company remains financially sound. Owners are free to pay out dividends and other distributions, but only within the framework of the Danish Companies Act and the company’s articles of association.

When and how profits can be distributed

Profits can be distributed in two main ways: as ordinary dividends based on the approved annual financial statements and as extraordinary dividends during the financial year. In both cases, the company must have sufficient distributable reserves, meaning positive retained earnings after covering any accumulated losses and required reserves.

Ordinary dividends are decided by the general meeting when approving the annual report. Extraordinary dividends can be decided by the general meeting or, if authorised in the articles of association, by the management. Before any distribution, management must prepare a statement confirming that the company remains solvent after the payout.

Retained earnings and distributable reserves

Retained earnings are the accumulated profits that have not been distributed as dividends. Only the part of equity that is classified as free reserves (including retained earnings) can be distributed. The following items are not distributable:

• Share capital (minimum DKK 40,000 for an ApS)
• Revaluation reserves and other statutory reserves
• Development costs capitalised as intangible assets
• Other equity that is restricted under the articles of association, loan agreements or other binding commitments

Before deciding on a dividend, management must ensure that the company’s equity after distribution is still sufficient in relation to the company’s risk profile, activities and obligations. If there is uncertainty about future losses or liabilities, it may be necessary to retain more earnings instead of distributing them.

Capital protection rules and solvency test

Danish law contains strict capital protection rules designed to safeguard creditors and maintain the company’s minimum capital. A distribution is only allowed if it is justifiable in light of the company’s and the group’s financial position. This is often referred to as the solvency test.

In practice, this means that after paying out dividends:

• The company must still be able to meet its current and foreseeable obligations as they fall due
• The equity must not be reduced to a level that is unjustifiably low considering the company’s operations and risks
• No distribution may lead to negative equity or threaten the company’s going concern status

If equity falls below half of the registered share capital, the management is obliged to convene a general meeting without undue delay to present the company’s financial situation and discuss possible measures, such as capital increase, cost reductions or restructuring. Ignoring this duty can trigger personal liability for management.

Forms of profit distribution

The most common form of profit distribution in an ApS is cash dividends. However, distributions can also take other forms, such as:

• Distribution of non-cash assets (dividends in kind), for example shares or other assets at fair value
• Share buy-backs, where the company purchases its own shares from shareholders
• Capital reductions with distribution to shareholders

All these forms are subject to the same capital protection principles: the company must have sufficient distributable reserves, and the transaction must not undermine solvency. Distributions in kind must be made at fair market value and properly documented.

Prohibited distributions and unlawful shareholder loans

Any transfer of value to shareholders or related parties that is not made on normal market terms and not based on available distributable reserves can be considered an unlawful distribution. This includes hidden dividends, such as:

• Unjustified high management fees or rent to shareholders
• Sale of assets to shareholders below market value
• Purchase of assets from shareholders above market value

Danish rules also generally prohibit loans to shareholders and management, including guarantees and security for their obligations, unless a narrow set of conditions is met (for example, certain group situations). Unlawful loans or distributions can be reclaimed by the company, and management may become personally liable for losses caused.

Tax aspects of dividends and retained earnings

Dividends paid by a Danish ApS are not deductible for corporate income tax purposes. The company pays corporate tax on its profits at a flat rate of 22%, and only the after-tax profit can be distributed. For shareholders, the tax treatment depends on whether they are individuals or companies and whether they are resident in Denmark or abroad.

Retaining earnings in the company can be tax-efficient when profits are reinvested in the business, as corporate tax is often lower than the marginal personal tax rate on salary and dividends. However, once profits are distributed to individual shareholders, Danish dividend tax rules apply, and for foreign shareholders, Danish withholding tax may be levied, subject to double tax treaties and EU directives.

Best practice for profit distribution policy

To manage risk and ensure compliance, it is advisable for an ApS to adopt a clear dividend policy approved by the owners. Such a policy typically addresses:

• Target equity level and minimum solvency ratio
• Conditions for paying ordinary and extraordinary dividends
• Priorities between dividends, loan repayment and reinvestment
• Procedures for documenting the solvency assessment before each distribution

A well-defined approach to dividends and retained earnings helps protect the company’s financial stability, reduces the risk of unlawful distributions and supports transparent communication with shareholders, banks and other stakeholders.

Employment and payroll obligations for ApS (ATP, holiday pay, social contributions)

When your Danish ApS hires employees, it becomes an employer under Danish law and must comply with a wide range of employment and payroll obligations. These rules apply whether the owners are Danish or foreign and whether employees are local or expatriates working in Denmark.

Employment contracts and working conditions

Every employee in Denmark is entitled to clear information about their employment terms. For most employees, you must provide a written employment contract or employment statement if the employment lasts more than 8 hours in total or more than 5 consecutive days. The document should cover at least:

• Job title, workplace and start date
• Working hours (full-time/part-time, weekly hours, overtime rules)
• Salary, bonuses, benefits in kind and payment dates
• Holiday entitlement and holiday pay rules
• Notice periods and termination conditions
• Reference to any applicable collective agreement (if relevant)

Standard full-time employment is usually 37 hours per week. Many conditions are regulated by collective bargaining agreements, but even without such an agreement, your ApS must comply with mandatory Danish legislation on working time, holidays, discrimination, maternity and paternity rights and health and safety.

Payroll registration and reporting (eIndkomst)

Before paying any salary, your ApS must register as an employer with the Danish Tax Agency (Skattestyrelsen) and obtain access to the eIndkomst system. Through eIndkomst, you report salary, benefits, tax withholdings and social contributions for each employee.

Key obligations include:

• Withholding A-tax (income tax) and AM-bidrag (labour market contribution) from salaries
• Reporting all salary components, benefits in kind and reimbursements each month
• Paying withheld A-tax and AM-bidrag to Skattestyrelsen by the statutory deadlines

The labour market contribution (AM-bidrag) is 8% of the gross salary and is withheld before income tax. A-tax is withheld according to each employee’s individual tax card, which you must retrieve electronically from Skattestyrelsen.

Holiday entitlement and holiday pay

Danish employees are covered by the Holiday Act, which provides a minimum of 5 weeks of paid holiday per holiday year. Denmark uses a concurrent holiday system: employees earn 2.08 days of paid holiday for each month of employment and can usually take the holiday as they earn it within the same holiday year.

For employees with a fixed monthly salary, holiday is typically taken as paid time off at normal salary. For hourly paid employees and some fixed-term employees, you normally pay a holiday allowance (feriepenge) of 12.5% of the employee’s qualifying salary, which is reported and usually transferred to an approved holiday fund (for example FerieKonto) unless a collective agreement or specific scheme applies.

Your ApS must:

• Accrue and track employees’ holiday entitlement and usage
• Calculate and report holiday pay correctly each month
• Ensure that employees can take their main holiday (typically 3 consecutive weeks) during the main holiday period, unless otherwise agreed

ATP – Danish Labour Market Supplementary Pension

ATP (Arbejdsmarkedets Tillægspension) is a mandatory statutory pension scheme that covers most employees in Denmark. Your ApS must register with ATP and pay contributions for employees who:

• Are aged 16 or older
• Work at least 9 hours per week on average for your company

ATP contributions are shared between employer and employee. The exact amounts depend on the employee’s working hours (full-time, part-time or very low hours). For a full-time employee, the total ATP contribution per month is a fixed amount set by law, of which the employer pays the majority and the employee pays the remainder via salary deduction.

ATP contributions are usually reported and paid together with other labour market contributions through the ATP administration system or via your payroll provider.

Other statutory social contributions and schemes

Denmark does not have high employer social security contributions like many other countries, but your ApS must still pay several mandatory labour market contributions and insurances. The main ones are:

Labour market insurance and occupational injury

Your ApS must take out occupational injury insurance (arbejdsskadeforsikring) for all employees. This insurance covers work-related accidents and occupational diseases. Premiums depend on industry risk and salary levels and are paid to a private insurance company approved to provide this coverage.

In addition, most employers pay contributions to labour market schemes such as:

• AUB (Arbejdsgivernes Uddannelsesbidrag) – employer’s education contribution, used to finance vocational training and apprenticeships
• Barsel.dk or other maternity/paternity equalisation schemes – to share the cost of parental leave compensation between employers
• Possibly other sector-specific funds depending on your industry and any collective agreements

These contributions are typically calculated as a fixed amount per employee or as a percentage of salary and are billed periodically, often via ATP or other central schemes.

Voluntary and collective pension schemes

In addition to ATP, many employees are covered by occupational pension schemes agreed in collective agreements or individual contracts. While not always legally mandatory, these schemes are often standard in the Danish labour market and can in practice be obligatory if a collective agreement applies.

Typical occupational pension contributions are in the range of 12–18% of the employee’s pensionable salary, with the employer paying the larger share (for example 8–12%) and the employee paying the rest via salary deduction. Contributions are paid to a pension provider each month together with payroll.

Holiday allowance, public holidays and other paid absences

Besides statutory holiday, employees may be entitled to pay on public holidays, special days off and other paid absences, depending on law, contract and collective agreements. Denmark has several public holidays during the year when many workplaces close. Whether your ApS must pay salary on those days depends on the type of employment and any applicable agreement.

Your payroll setup must handle:

• Public holiday pay and any special holiday allowances
• Paid sick leave according to the Sickness Benefits Act and any collective agreement
• Parental leave pay and reimbursement from public schemes where applicable

Payroll administration, payslips and record-keeping

Your ApS must issue a detailed payslip for each pay period, showing at least:

• Gross salary and any overtime, bonuses and allowances
• Taxable benefits in kind
• Employee pension contributions
• ATP and other statutory contributions
• AM-bidrag and A-tax withheld
• Net salary paid and payment date

Payroll records, employment contracts, time sheets and documentation of tax and contribution payments must be stored securely for the statutory retention period, typically at least 5 years, and be available for inspection by the tax authorities and other relevant bodies.

Foreign employees and cross-border situations

If your ApS employs foreign workers or posts employees to or from Denmark, additional rules may apply regarding tax residence, social security coordination (for example EU Regulation on social security and A1 certificates), work permits and registration with Danish authorities. In many cases, your company must still withhold Danish A-tax and AM-bidrag and comply with Danish labour market contribution rules when the work is physically performed in Denmark.

Why professional payroll and HR support is crucial

Danish employment and payroll rules are detailed and change regularly. Incorrect handling of ATP, holiday pay, tax withholdings or social contributions can lead to back payments, interest and penalties. Using a professional Danish accounting and payroll provider helps your ApS:

• Register correctly as an employer and set up eIndkomst reporting
• Calculate salary, tax, ATP and other contributions accurately
• Manage holiday pay, sick leave and parental leave reimbursements
• Stay compliant with current Danish employment and social security regulations

This allows the management of your ApS to focus on business development while ensuring full compliance with Danish employer obligations.

Changes in share capital and ownership: capital increases, transfers and buy‑backs

Changes in share capital and ownership are common in the life cycle of a Danish private limited company (ApS). Properly planned and documented transactions help protect limited liability, ensure tax efficiency and keep the company compliant with the Danish Companies Act (Selskabsloven) and the Danish Business Authority (Erhvervsstyrelsen) requirements.

Capital increases in a Danish ApS

An ApS can increase its share capital to strengthen its equity, bring in new investors or meet banking and contractual requirements. The minimum share capital for an ApS is 40,000 DKK, but there is no statutory upper limit.

Capital may be increased in different ways:

• By cash contribution from existing or new shareholders
• By contribution in kind (for example, machinery, intellectual property, receivables)
• By converting existing debt to equity (debt‑to‑equity swap)
• By bonus issue from reserves (conversion of retained earnings or other equity reserves into share capital)

Any capital increase requires a resolution by the general meeting. The resolution must specify the amount of the increase, subscription price, subscription period, who is entitled to subscribe (existing shareholders with pre‑emption rights or specific investors), and whether the contribution is in cash or in kind. For contributions in kind, a valuation report by a state‑authorised or registered public accountant is normally required to document the value of the non‑cash assets.

After the resolution, the capital increase must be registered with the Danish Business Authority within a short statutory deadline, typically no later than two weeks from subscription and payment. The increase is only legally effective once it is registered and reflected in the company’s articles of association and on the public CVR register.

Share transfers and changes in ownership

Shares in an ApS are generally freely transferable, but the articles of association or a shareholders’ agreement often contain restrictions. Common mechanisms include approval clauses (board or shareholder consent required), pre‑emption rights (existing shareholders have a first right to buy) and lock‑up periods.

A valid share transfer normally requires:

• A written share transfer agreement describing the parties, number and class of shares, purchase price and payment terms
• Compliance with any internal approval or pre‑emption procedures set out in the articles of association or shareholders’ agreement
• Update of the company’s register of shareholders and, if applicable, the register of beneficial owners

There is no stamp duty on share transfers in Denmark. However, capital gains on shares may be taxable for the seller, and the tax treatment depends on whether the seller is an individual or a company, the holding period and the classification of the shares (for example, subsidiary shares, group shares or portfolio shares). Buyers should also consider whether the transaction triggers any change‑of‑control clauses in financing agreements, key contracts or employment contracts.

Share buy‑backs by an ApS

A Danish ApS is allowed to buy back its own shares, subject to strict capital protection rules. The company may only use distributable reserves for buy‑backs, and after the transaction the remaining equity must still be adequate in relation to the company’s risks and activities.

Key conditions for lawful share buy‑backs include:

• Authorisation from the general meeting, either as a specific resolution or as a time‑limited mandate to the management
• Buy‑back price and volume that do not jeopardise the company’s solvency and ability to meet its obligations
• Equal treatment of shareholders within the same share class, unless there is a clear and lawful justification for different treatment

Own shares acquired by the company do not carry voting rights or dividend rights. They must be recorded separately in the annual report and in the shareholder register. The company may later cancel the bought‑back shares (capital reduction) or re‑sell them to new or existing investors, subject to the rules on capital increases and reductions.

Capital reductions and cancellation of shares

Capital reductions are used to adjust the capital structure, return excess capital to shareholders, cover accumulated losses or cancel treasury shares. A capital reduction requires a resolution by the general meeting and an amendment of the articles of association.

There are three main purposes for a capital reduction:

• Repayment to shareholders (cash distribution)
• Transfer to distributable reserves
• Loss coverage (offsetting accumulated losses)

When the reduction involves repayment to shareholders or transfer to reserves, creditor protection rules apply. The company must publish a notice to creditors, who are given a statutory period to object and demand security before the reduction can be finally implemented and registered. If the reduction is solely to cover losses, the procedure is usually simpler, as no repayment is made.

Corporate governance and documentation

Any change in share capital or ownership structure should be carefully documented to withstand scrutiny from authorities, auditors, banks and potential investors. Typical documentation includes minutes of the general meeting, updated articles of association, valuation reports for contributions in kind, share transfer agreements and updated shareholder and beneficial owner registers.

Management is responsible for ensuring that all changes are registered with the Danish Business Authority within the applicable deadlines and that the company remains compliant with capital protection rules. Failure to follow the formal procedures can lead to personal liability for management, invalidity of the transaction and tax risks for both the company and its owners.

Closing or converting an ApS: liquidation, bankruptcy and restructuring options

Closing or converting a Danish ApS (private limited liability company) requires a clear decision on whether the company is solvent or insolvent, and whether the owners want to liquidate, sell or restructure the business. The choice of procedure has direct consequences for the owners’ liability, tax position and future ability to do business in Denmark.

Voluntary liquidation of a solvent ApS

If the ApS is solvent and can pay all its debts as they fall due, the owners can choose a voluntary liquidation. This is a formal process regulated by the Danish Companies Act and supervised by the Danish Business Authority (Erhvervsstyrelsen).

The general meeting must pass a resolution to liquidate the company, normally with at least a two‑thirds majority of both votes and capital represented, unless the articles of association require a higher majority. A liquidator is appointed to replace the management; the liquidator can be a board member, director or an external adviser.

Key steps in a voluntary liquidation typically include:

• Resolution to liquidate and appointment of liquidator
• Notification to the Danish Business Authority and registration of the liquidation
• Preparation of an opening balance sheet and statement of assets and liabilities
• Notification to creditors and publication of a notice giving creditors a deadline to file claims
• Realisation of assets, settlement of liabilities and handling of any disputes
• Preparation of final liquidation accounts and a proposal for distribution of remaining funds to shareholders
• Approval of the final accounts by the general meeting and filing with the Danish Business Authority

During liquidation, the ApS remains a legal entity and must continue to meet its accounting, bookkeeping and tax obligations, including filing corporate income tax returns and VAT returns where applicable. After the final accounts are approved and filed, the company is dissolved and removed from the Central Business Register (CVR). Any remaining assets are distributed to shareholders in proportion to their shareholdings, subject to capital protection rules and creditor priority.

Fast‑track dissolution by declaration (solvent companies)

For small, simple and fully solvent ApS companies, it may be possible to use a simplified dissolution procedure based on a joint declaration from the owners and management. This option is only available if:

• The company has no outstanding debt to public authorities, including tax, VAT, labour market contributions and duties
• The company has no other creditors or all creditors have been fully paid
• The company is not involved in any legal disputes
• All shareholders agree to the dissolution

In this procedure, the shareholders and management sign a declaration confirming that all liabilities are settled and that the company is solvent. The declaration is filed with the Danish Business Authority, together with any required documentation. If the conditions are fulfilled, the company can be struck off the register relatively quickly, without a full formal liquidation process. However, if it later appears that there were undisclosed debts, creditors may in certain cases pursue claims against the former owners or management.

Bankruptcy of an insolvent ApS

If the ApS is insolvent and cannot meet its obligations as they fall due, and there is no realistic prospect of restoring solvency, bankruptcy (konkurs) may be necessary. A bankruptcy petition can be filed by the company itself, by a creditor or, in some cases, by public authorities such as the Danish Tax Agency (Skattestyrelsen).

Once the court opens bankruptcy proceedings, management loses its powers and a court‑appointed trustee (curator) takes control of the company. The trustee’s main tasks include:

• Securing and realising the company’s assets
• Reviewing and verifying creditors’ claims
• Challenging unlawful or preferential transactions made before bankruptcy
• Distributing the bankruptcy estate according to the statutory order of priority

Shareholders in an ApS normally lose their entire investment in a bankruptcy, as they rank last in the distribution order. The limited liability principle means that owners are not personally liable for the company’s debts beyond their capital contribution, unless they have provided personal guarantees or engaged in wrongful conduct such as gross negligence, fraudulent trading or unlawful distributions.

Management may incur personal liability if they continue trading while the company is clearly insolvent, fail to file for bankruptcy in due time, or breach their duties under the Danish Companies Act. In serious cases, the court may also impose disqualification from acting as a director or manager in Danish companies for a period of years.

Reconstruction and restructuring instead of closure

Before deciding on liquidation or bankruptcy, it may be possible to restructure the ApS. Danish law allows for both out‑of‑court and court‑supervised reconstruction procedures, depending on the company’s financial situation and the willingness of creditors to cooperate.

Typical restructuring options include:

• Renegotiation of supplier, bank and lease agreements
• Debt rescheduling, partial debt write‑offs or standstill agreements
• Conversion of debt into equity or subordinated loans
• Sale of non‑core assets or business lines
• Operational restructuring, including staff reductions and cost‑cutting measures

In a court‑supervised reconstruction, the court appoints a restructuring administrator and, in some cases, an accountant. A reconstruction plan is prepared and must be approved by the creditors and confirmed by the court. If the plan is not approved, the court will normally convert the case into bankruptcy. Reconstruction can preserve value, jobs and contracts, but it is a complex process that requires early action and professional advice.

Converting an ApS to another company form

Instead of closing the company, the owners may wish to change its legal form. The Danish Companies Act allows for several types of conversion, provided that specific legal and accounting requirements are met.

Common conversion scenarios include:

• ApS to A/S (public limited company): This requires an increase of the share capital to at least DKK 400,000 and compliance with the stricter governance rules applicable to A/S companies, including board structure and, in some cases, employee representation.
• ApS to holding structure: An operating ApS can be contributed to a newly established holding company through a tax‑neutral share‑for‑share exchange, subject to Danish tax rules. This is often used to facilitate future sales, dividend planning and risk separation.
• Cross‑border conversions and mergers: An ApS can participate in cross‑border mergers or conversions within the EU/EEA, subject to both Danish and foreign regulations, including creditor protection rules and registration requirements in each jurisdiction.

Direct conversion from an ApS to a sole proprietorship is generally not possible as a simple legal transformation, because an ApS is a separate legal entity. Instead, the company’s business and assets must be transferred to the individual owner, and the ApS must then be liquidated or dissolved. Such transfers can have significant tax implications, including potential taxation of hidden reserves and goodwill.

Tax and accounting considerations when closing or converting an ApS

Any decision to close or convert an ApS should be evaluated from a tax and accounting perspective. Key aspects include:

• Final corporate income tax return and settlement of any outstanding tax liabilities
• Taxation of liquidation proceeds distributed to shareholders, including classification as dividends or capital gains
• Realisation and taxation of hidden reserves in assets, inventory and intellectual property
• VAT adjustments on fixed assets and inventory at the time of closure or transfer
• Handling of tax losses carried forward, which may be lost or limited in certain restructurings

Proper documentation, timely filings and accurate final financial statements are essential to avoid disputes with the Danish Tax Agency and to ensure that the closure or conversion is legally effective. Foreign owners should pay particular attention to double taxation treaties, withholding tax rules and the tax treatment of distributions in their home country.

Because the legal and tax consequences of liquidation, bankruptcy and restructuring can be far‑reaching, it is advisable for ApS owners and directors to seek professional Danish accounting and legal advice before initiating any formal process. Early planning often increases the available options and reduces the overall risk and cost of closing or converting a company in Denmark.

Compliance, audits and common pitfalls for foreign owners of ApS in Denmark

Running a Danish ApS comes with a number of ongoing compliance, accounting and tax obligations. For foreign owners, the rules can feel unfamiliar, and misunderstandings often lead to penalties, blocked bank accounts or even compulsory dissolution. Below you will find the key compliance areas, how audits work in Denmark, and the most common mistakes made by non‑resident shareholders and directors.

Core compliance obligations for a Danish ApS

Every ApS must keep its registration data up to date in the Central Business Register (CVR) and comply with the Danish Companies Act and tax legislation. In practice, this means in particular:

• Maintaining proper bookkeeping in accordance with the Danish Bookkeeping Act, including secure storage of accounting records for at least 5 years
• Preparing an annual report that complies with the Danish Financial Statements Act and filing it digitally with the Danish Business Authority (Erhvervsstyrelsen)
• Filing corporate income tax returns with the Danish Tax Agency (Skattestyrelsen) and paying corporate tax on time
• Registering for and reporting VAT (moms) when the company’s taxable turnover exceeds the registration threshold
• Registering as an employer when hiring staff in Denmark and handling Danish payroll, withholding tax (A‑tax) and labour market contributions (AM‑bidrag)
• Complying with rules on beneficial ownership, anti‑money laundering (if applicable) and data protection (GDPR)

Failure to meet these obligations can result in daily fines, late‑filing penalties, interest on unpaid tax and, in serious cases, compulsory dissolution of the ApS.

Annual report, deadlines and late‑filing penalties

An ApS must file its annual report electronically with the Danish Business Authority no later than 5 months after the end of the financial year (for most small ApS with a calendar year, this means by the end of May). The report must include at least a management statement, income statement, balance sheet, notes and, where required, an auditor’s report.

If the annual report is filed late, the company may receive:

• Daily fines imposed on the company and, in some cases, on management
• A formal warning that the company will be dissolved if the report is not submitted within a short additional deadline

Continued non‑compliance can lead to compulsory dissolution through the Danish Business Authority and the Maritime and Commercial High Court, which is costly and time‑consuming to reverse.

Corporate tax, VAT and employer compliance

The standard corporate income tax rate in Denmark is 22%. An ApS must file a corporate tax return (årsopgørelse/selvangivelse) and typically pay tax in instalments during the year based on expected profits, with a final settlement once the tax return is processed.

For VAT, most ApS are subject to the standard VAT rate of 25% on taxable supplies. Key points for foreign‑owned companies include:

• Mandatory VAT registration once taxable turnover in Denmark exceeds the applicable threshold for VAT registration (very low in practice, so most trading ApS must register early)
• Periodic VAT returns (monthly, quarterly or half‑yearly) depending on turnover level
• Obligation to issue VAT‑compliant invoices and keep detailed VAT records

If the ApS has employees in Denmark, it must register as an employer, withhold A‑tax and AM‑bidrag from salaries, pay ATP contributions and report payroll data through the Danish e‑income system. Late or incorrect payroll reporting can trigger penalties and audits.

Audit requirements and exemptions for ApS

Not all ApS are required to have a statutory audit. Danish law allows smaller companies to opt out of audit if they do not exceed two of the following three thresholds for two consecutive financial years:

• Net turnover: DKK 8 million
• Balance sheet total: DKK 4 million
• Average number of full‑time employees: 12

If the company exceeds these limits, or if the articles of association or shareholders require it, the annual report must be audited by a state‑authorised or registered public accountant. Some sectors (for example, certain financial or regulated activities) may have stricter audit obligations regardless of size.

Even when an audit is not mandatory, many foreign owners choose a voluntary audit or review to increase credibility with banks, investors and business partners, and to reduce the risk of material errors in tax and financial reporting.

How audits and inspections typically work

A statutory audit in Denmark focuses on whether the annual report gives a true and fair view in accordance with the Danish Financial Statements Act and relevant accounting standards. The auditor will typically:

• Review accounting policies, internal controls and bookkeeping procedures
• Test revenue, expenses, assets and liabilities on a sample basis
• Verify key balances such as bank accounts, receivables, payables and share capital
• Assess going‑concern assumptions and any significant risks or uncertainties

In parallel, the Danish Tax Agency may select the company for a tax audit or control visit. This can cover corporate tax, VAT, payroll taxes and transfer pricing. The authorities usually request accounting records, contracts, invoices and bank statements, and may ask detailed questions about cross‑border transactions and pricing between related parties.

Common compliance pitfalls for foreign owners

Foreign shareholders and directors often underestimate how strictly Danish authorities enforce formal requirements. Typical problem areas include:

• Underestimating bookkeeping requirements – keeping records only in spreadsheets or foreign systems without ensuring they meet Danish Bookkeeping Act standards, including documentation, traceability and secure digital storage
• Missing annual report deadlines – assuming that a tax return alone is sufficient and overlooking the separate obligation to file an annual report with the Danish Business Authority
• Incorrect VAT handling – applying foreign VAT rules to Danish transactions, failing to register for VAT in time, or incorrectly treating cross‑border services and distance sales
• Improper salary vs. dividend mix – paying out funds to foreign owners without respecting Danish rules on dividends, withholding tax and arm’s‑length remuneration for working shareholders
• Ignoring Danish payroll rules – classifying workers as independent contractors when they are effectively employees, or failing to withhold A‑tax and AM‑bidrag
• Not updating company information – neglecting to register changes in directors, address, share capital or beneficial owners with the Danish Business Authority
• Weak documentation for related‑party transactions – lacking transfer pricing documentation or clear contracts for services, loans or royalties between the Danish ApS and foreign group entities
• Using the company bank account as a personal account – mixing private and company expenses, creating problems for both tax and liability protection

Risk of personal liability for management

Although an ApS is a limited liability company, directors and, in some cases, shareholders can become personally liable if they act negligently or intentionally in breach of their duties. Risk areas include:

• Continuing to trade when the company is clearly insolvent without taking steps to restructure or file for bankruptcy
• Failing to keep proper accounts or destroying accounting records
• Not paying withheld payroll taxes and VAT to the authorities while continuing other payments
• Approving unlawful distributions to shareholders, such as dividends that exceed distributable reserves

Foreign directors are subject to the same standards as Danish directors. Being unfamiliar with local rules is not accepted as a defence, so it is important to obtain local guidance.

Practical tips to stay compliant as a foreign owner

To minimise risk and avoid unnecessary audits or penalties, foreign owners of an ApS should:

• Engage a Danish accountant or bookkeeping firm familiar with cross‑border issues and digital reporting systems
• Use accounting software that supports Danish VAT, e‑invoicing and reporting formats
• Set up internal deadlines earlier than the legal ones for annual reports, tax returns and VAT filings
• Ensure that at least one person (director, manager or adviser) monitors official digital mail (e‑Boks) from Danish authorities
• Document all related‑party transactions with clear contracts and arm’s‑length pricing
• Hold and document board and shareholder meetings, especially when approving annual reports and distributions

With the right structure, clear documentation and ongoing support from local professionals, a foreign‑owned ApS can operate in Denmark with a high level of legal certainty, predictable tax outcomes and limited risk of unpleasant surprises during audits or inspections.

What is worth knowing about ApS?

1. Private limited companies in Denmark (ApS) are regulated by the Law on Private Limited Liability Companies and the Tax Law.
2. The owner of ApS is not personally responsible for the company's debts and liabilities.
3. The minimum required share capital to establish ApS is DKK 20,000, which is owned by the company and can be used to pay expenses, dividends, and distributions.
4. Assets other than cash can be deposited into the company, but it's more complicated and expensive to do so.
5. Limited liability company in Denmark has a legal personality and is suitable for family businesses where the owner wants to have full control.
6. Incorporation documents and articles of incorporation are required to set up an ApS.
7. The owner should avoid borrowing money from the company, as this can result in high taxes.

An Anpartsselskab may have one or more owners who may or may not be Danish residents. Additionally, an owner can also serve as a director of the company and vice versa, meaning a director can also be an owner and may or may not be a Danish resident.