Our point of view

Nordic Market Newsletter 6/2013

27 December 2013



Crowdfunding in the EU

Crowdfunding is a way of raising capital from a large number of investors in relatively small amounts to fund a business, project or venture, often through online platforms or social media.

Crowdfunding can take many different forms such as (i) donations, (ii) sponsoring (advertising in exchange for financing), (iii) rewards (a product or service of lower value than the contribution), (iv) pre-selling (collecting funds to develop and deliver a product), (v) lending (the project borrows money from the crowd with or without interest) and (vi) securities-based investments (where the project issues shares or bonds to contributors to the crowdfunding campaign).

European Union measures to promote crowdfunding

On 3 October 2013, the European Commission published a consultation document concerning crowdfunding in the EU. As banks’ lending activity has declined and other sources of finance have dried up since the financial crisis, the Commission recognises the importance of this increasingly widespread means of connecting those who need financing for a specific project with potential investors. In 2012, crowdfunding in Europe reached EUR 735 million, an estimated growth of 65 per cent over 2011. The consultation aims to explore actions that might be taken by the EU (including soft-law measures) to promote crowdfunding in Europe. Specific proposals include:

  • Raising awareness among citizens in general (as potential contributors) and specific groups, such as small entrepreneurs, artists, social entrepreneurs (as potential fund raisers).
  • Encouraging the allocation of public funding to follow crowdfunding. Governments and other funding agencies should consider the popularity of a project on a crowdfunding platform in their own decision-making process. Grants could be designed, for example, to facilitate the uptake of crowdfunding to platforms, to accelerate awareness or to finance certain adaptation/co-operation costs.
  • Granting EU-wide access to platforms would allow them to reach scale at a European level, providing more choices, competition and access to a larger pool of crowd capital.

The Prospectus Directive (“PD”) and the Markets in Financial Instruments Directive (“MiFID”)

Investment-type crowdfunding falls under the sector-specific EU legislation on financial services. The PD applies to fund-raisers who issue securities through a public offering. Offerings below EUR 5 million are outside the scope of the PD (but subject to regulation at national level). There are several exemptions in the PD from the obligation to publish a prospectus, for example offers with a total consideration of less than EUR 100 thousand within the EU. The EC consultation aims to gather information on the rules in place in Member States for offerings between EUR 5 million and EUR 100 thousand to find out whether these rules are appropriate for crowdfunding campaigns where there is a cross-border element.

With regard to crowdfunding platforms that host securities campaigns, MiFID requires entities performing financial intermediation to be registered and comply with MiFID investor protection rules. These entities benefit from a passport to other EU Member States. Member States have the option to apply an exemption (Article 3 MiFID) for certain well defined entities advising or receiving orders from investors and transmitting them to platforms and other specified entities.


In November 2013 the European Commission published a roadmap on communication on crowdfunding in the EU. The communication aims to have a clear overview of what EU level action would add value for which crowdfunding models. The planned communication will summarise the results of the consultation described above.


The concept of crowdfunding is still in early stages in Denmark but seems to be gaining popularity, as evidenced by the fact that the Danish FSA has announced that it will publish guidelines on the use of crowdfunding by the end of the year. The guidelines will seek to address the legal ramifications of the various types of crowdfunding, with a special focus on equity crowdfunding.

There are currently a number of Danish providers of crowdfunding solutions, including boomerang.dk which is currently the largest in Denmark. These sites typically focus on facilitating donations to small cultural projects such as independent movies, books and similar without getting a financial stake in the projects, i.e. Denmark is yet to experience crowdfunding on a bigger scale.

A number of sites have announced their intention to launch more sophisticated crowdfunding solutions, including equity crowdfunding, and the FSA guidelines should help pave the way for these sites.


Several crowdfunding platforms have emerged in recent years in Finland. These include both equity crowdfunding and non-equity platforms. The legal context for crowdfunding is now fairly well established. Non-equity projects must contain a clear element of consideration, such as a product or an admission ticket, in return for payment made. Without such consideration, the solicitation of funds from the public may be deemed fundraising for regulatory purposes, which requires a permit from the police authorities.

Equity crowdfunding programs must comply with the Finnish Securities Markets Act, just like any other offering of securities to the public. Therefore a prospectus must be published on the offering, unless one of the Prospectus Directive exemptions applies. Even when there is no duty to publish a prospectus (e.g. if the consideration is less than EUR 1.5 million) sufficient information must always be provided on factors that may materially affect the value of the investment. One example of a successful securities crowdfunding project was the Finnish-German-Australian science fiction comedy “Iron Sky” (released in 2012), which raised several hundred thousands of euros in the EEA to supplement financing from more traditional film funding channels.
Crowdfunding has also become increasingly popular for sports financing. The prolonged economic recession has inevitably cut sponsoring revenue and forced teams and athletes to find new ways to finance their activities. One of the most visible campaigns has been the Finnish Ski Jumping Team’s “Help a man up the hill” campaign (“Kansallistalkoot – Auta miestä mäessä”). Another interesting initiative has been a campaign to support individual event athletes (Tueurheilijaa.fi), which collected EUR 25 000 during its first eight months. Funds are raised by selling campaign products that are often supplied by sponsors.


Although crowdfunding is increasingly popular on a global basis, it remains rare in Sweden. A recent report by the Stockholm School of Economics on use of crowdfunding among IT entrepreneurs found that many entrepreneurs believe that there is not enough money to be raised on a Swedish platform.

The Swedish site FundedByMe, created in March 2011, was one of the world’s first crowdfunding platforms to offer both reward-based and equity crowdfunding. The platform focuses on cross-border investments that benefit both entrepreneurs and investors to assist with job creation and economic growth.

Ebba Werkell, Senior Associate, Stockholm
Silja Kanerva, Associate, Helsinki
Antti Kuha, Associate, Helsinki
Tobias Bonde Frost, Associate, Copenhagen
Mads Ilum, Partner, Copenhagen


New model documentation for corporate bonds in Finland

The Nordic corporate bond market in general, and the Finnish corporate bond market in particular, was very active last year, and 2012 set new records in number of issues and volume, with a volume of around 10 billion EUR. In 2013, the Finnish corporate bond market appears to have cooled a bit, but it is nevertheless strong in comparison to pre-2012 figures.

A working group established by the Confederation of Finnish Industries EK and the Advisory Board of Finnish Listed Companies is drafting new model documentation aimed particularly for non-investment grade corporate bond issues. The working group consists of various interest groups on the corporate bond market such as representatives of EK, issuers, bond investors, banks involved in arranging bond issuances and law firms. Hannes Snellman has been an active member of the working group.

In the face of increasing regulation of the financial markets and restrictive bank lending policies, many companies need to diversify their funding and the capital markets offer substantial potential for such diversification. The model documentation aims to develop the Finnish corporate bond market, to encourage an increasing number of companies, including medium-sized companies and non-investment grade issuers, to issue debt instruments as an alternative source of financing and to provide investors with more investment possibilities. Furthermore, the model documentation could reduce costs for issuers and investors and lower barriers for entry into the corporate bond market.

The model documentation consists of model terms and conditions for the non-commercial aspects of a bond issue and model conditions for commercial undertakings, such as financial covenants and undertakings relating to the business of the issuer. The model documentation assumes that a third party agent represents the bondholders, and the terms include optional provisions for secured or guaranteed bond issues. Use of the model documentation is not mandatory, but we expect it to become (or at least underpin) a developing market standard.

Underlying the project is an understanding that uptake is likely to be greater if the model documentation can claim a pan-Nordic pedigree and be familiar to key issuers and investors in the region. Accordingly, the working group has drafted the Finnish model terms and conditions largely based on the corresponding Swedish documentation. Also, Norsk Tillitsmann, a Norwegian company mainly owned by Norwegian banks, life assurance companies and securities companies that offers trustee services to bond investors, was consulted in respect of Norwegian market practice during the project. The model documentation is meant to be finalised by the end of this year.

We believe that the new model documentation will be a good working tool for medium-sized companies and private equity portfolio companies when reviewing further possibilities for raising funds.

For further information please contact:

Matti Engelberg, Partner, Helsinki
Jonathan Andersin, Associate, Helsinki

AIFMD Implementation in Finland; Significant Changes Underway

The Finnish implementation of the Alternative Investment Fund Managers Directive (2011/61/EU, “AIFMD”) has been delayed from the July 2013 target date. A government proposal has now finally been submitted to the Finnish Parliament, and the process of implementing the directive into national legislation is under way. The new legislation is currently estimated to enter into force as of February 2014. The Government proposal consists of a new act on alternative investment fund managers (the “AIFM Act”, Laki vaihtoehtorahastojen hoitajista) and (mostly technical) amendments to other related laws as well as detailed regulation in the form of Ministry of Finance decrees and further underlying guidance by the Finnish Financial Supervisory Authority (“Fin-FSA”).

The application of the new legislation will be comprehensive; fund management activity currently not regulated under the Act on Common Funds (48/1999, as amended) will, with few exceptions, be regulated under the new AIFM Act. This is a significant change for most alternative fund managers since very few of those now becoming regulated under the AIFM Act have previously been subject to authorisation or supervision. Once the AIFM Act enters into force, management of an alternative fund, as defined in the new act, will require at the very least registration with the Fin-FSA or, if certain defined thresholds relating to assets under management are exceeded, authorization by the Fin-FSA. Managers falling below the thresholds may also choose to opt-in and apply for authorization. The advantage of opting in lies in obtaining a so called “marketing passport”, which entitles authorized alternative investment fund managers (“AIFMs”) to market alternative investment funds (“AIFs”) in all EU countries subject only to a notification to the local financial supervisory authority. According to the draft AIFM Act, a manager currently regulated under the Act of Common Funds will also be able to obtain authorization under the AIFM Act and thus to market AIFs cross border.

The AIFM Act will also set out many new requirements to previously unregulated fund managers relating e.g. to risk management and liquidity management, having a separate securities depository for each fund, arrangement of yield calculations, reporting of data to supervisory authorities and disclosure of investor information. Significant changes imposed by the AIFMD, and set out in the AIFM Act, include the disclosure requirements regarding non-listed companies. According to the AIFM Act, AIFMs shall provide information to the Fin-FSA regarding significant shareholdings in non-listed entities (increases or decreases above or below certain levels) of AIFs managed by it. When acquiring control of a non-listed company, AIFMs must further report certain information (e.g. information on the AIFM, its communication policies, its future plans for the company) to the board of directors of the target company and the AIFM shall require the board of directors to relay such information to the representatives of the employees of the target company.

Further, there are certain limitations to how the target company’s assets may be utilized. Accordingly it becomes clear that the AIFM Act will have consequences not only on the managers of alternative funds, but also on the portfolio companies of the funds. Further, the new regulation will put more stringent reporting requirements on AIFMs regarding the ownership of non-listed companies compared to the requirements on other owners of non-listed companies.

Specifics of the Finnish implementation

Based on the draft AIFM Act, a grace period in force until 22 July 2014 will be available to AIFMs with respect to existing AIFs that have been marketed in Finland prior to the implementation of the AIFM legislation and to EEA AIFMs with respect to existing AIFs that are marketed under a “marketing permission” from the Fin-FSA. An AIF benefiting from such grace period may continue to be marketed to professional investors until 22 July 2014 under the same legal regime as previously in place (pre-implementation of the new legislation), without complying with the minimum AIFM Act requirements (e.g. the MoUs and the tax treaty requirements discussed below), provided that a notification to the Fin-FSA is submitted within one month of the implementation of the AIFM Act. Additionally, AIFMs benefiting from the grace period must “take all necessary measures to comply with the AIFM Act”. It is not yet clear what exactly will satisfy this requirement. Neither is it yet entirely clear how the grace period will be available to newly established AIFs managed by AIFMs which already benefit from the grace period.

As the AIFMD and the local implementing regulation regulate the marketing of AIFs, the definition of the term “marketing” has been deemed important. The draft AIFM Act defines “marketing” as a direct or indirect offering or placement at the initiative of the AIFM or on behalf of the AIFM of units or shares of an AIF it manages to or with investors. As an important distinction set out in the Government Proposal, reverse solicitation and road show-type events, where no binding sale- or purchase offerings of AIF units or shares take place, shall not be deemed to be marketing. Measures, which are not deemed to be marketing, will not generally be governed by the regulation set out in the AIFM Act. However, generally applicable duties to act in accordance with good securities market practice and to provide investors with accurate, sufficient and not misleading information will apply also in the context of reverse solicitation and other private placement activities which are not deemed to be marketing.

As an exception allowed under the AIFMD, Finnish legislation will permit marketing of EEA AIF’s also to non-professional investors. As a general rule, marketing to non-professional investors of EEA-AIFs will be available to AIFMs that have obtained authorization (subject to certain further requirements) but is not available to registration-only AIFMs. Certain listed registration-only AIFMs may however market to non-professional investors and the Fin-FSA may also grant permissions to registration-only AIFMs to market to non-professional investors. It is our understanding that very few current Finnish AIFMs will exceed the authorization threshold set out in the AIFMD. Therefore, the possibility for registration-only AIFMs of obtaining permission from the Fin-FSA to market to non-professional investors may prove to be important for many AIFMs in the future. The draft legislation does not permit the marketing by non-EEA AIFMs of any AIFs or by any AIFMs of non-EEA AIFs to non-professional investors.

The Finnish draft legislation requires that an AIFM that markets a non-EEA AIF and a non-EEA AIFM that markets any AIF to professional investors in Finland must comply with the minimum cross-border requirements set out in the AIFM Act. These include the requirement for there to be a memorandum of understanding in place between Finland and the home state of the AIFM/AIF and that an OECD model tax treaty must be in place between Finland and home state of the AIF. There is yet no all-encompassing guidance as to which treaties satisfy the OECD model tax treaty requirement.

For further information, please contact:

Jari Tukiainen, Specialist Partner, Helsinki


How a supplier can be precluded from public procurement

The Supreme Administrative Court considered whether a supplier could be excluded from a public procurement process on the basis that the supplier had made serious mistakes in its business (case number 4266-12). The Supreme Administrative Court found that involvement by the supplier in handling false invoices could constitute grounds for excluding the supplier from the public procurement process. However, the contracting authority was obliged to show (on a balance of probabilities (Sw. sannolikt)) that the supplier was guilty of this serious professional misconduct (i.e. the authority had the burden of proof).

Joakim Lavér, Partner, Stockholm

Swedish Capital Adequacy Rules

On 16 September 2013, the Swedish “Capital Survey” submitted its report “Strengthening of capital adequacy rules”. The report is based on an EU directive which is to be implemented as Swedish law on 1 January 2014 (Directive 2013/36/EU of the European Parliament and Council of 26 June 2013 on access to the activity of credit institutions and prudential supervision of credit institutions and investments firms). Implementation is expected by mid-2014.

The report suggests a new act, the Capital Buffers Act. The new Act would require credit institutions and the security companies to maintain further capital buffers in order to strengthen the financial system and reduce the risk of financial crises and potential costs for the taxpayers. In order to ensure that the institutions are well capitalised it is suggested that Sweden should implement all of the buffers in the directive.

The Riksbank (Swedish Central Bank) and the Ministry of Finance are proposed as the competent authorities in relation to different kinds of buffers. The Ministry of Finance would be empowered to take action against non-compliant institutions and to implement higher penalties than currently in force. One contentious issue is the Committee’s proposal that an institution’s officers would be liable for penalties up to EUR 5 million, where they were responsible for the infringement. Furthermore, the Ministry of Finance would monitor compliance with the regulation and have the power to issue penalties against officers without any form of adversarial proceedings. In order to improve the institutions’ risk-monitoring, a new agency regulation would be issued, requiring institutions to establish independent risk control, in the form of a risk committee. Furthermore, several regulations regarding corporate governance are suggested and one of them aims to restrict the number of directorships that a director may hold at any one time in different companies, which will indirectly affect all listed companies.

Björn Kristiansson, Partner, Stockholm

Proposed fine for improper credit controls

In order to strengthen consumer protection in Swedish civil law and to address indebtedness levels among Swedish consumers, the Swedish government is proposing a change to the Consumer Credit Act (Sw. konsumentkreditlagen), authorising the Swedish Consumer Agency (Sw. Konsumentverket) to fine businesses up to SEK 10 million for failure to perform a proper credit check on consumer customers.

The government is concerned about the lack of detailed credit controls conducted by grantors of credit (especially by so-called Payday lenders and informal text message loans) and is now hoping to address the problem by the introduction of this penalty. The Swedish Consumer Agency would also be empowered to ban businesses from granting consumer credit.

The change to the Consumer Credit Act is proposed to come into force on 1 April 2014.

Michael Schantli, Trainee, Stockholm
Richard Åkerman, Partner, Stockholm

Changes regarding the allowance of group contributions

On 15 October 2013, the government submitted a bill that will restrict group contribution allowances. The regulation aims to prevent companies with a split financial year from moving their profits, which are attributable to a tax year beginning before 1 January 2013 and ending after 18 April 2013, to a subsidiary company whose fiscal year began after 31 December 2012 in order to reduce taxes. Otherwise, it would be possible for such a company to benefit from a tax rate of 22 per cent, which was introduced as of 15 January 2013, instead of the previous tax rate of 26.3 per cent.

The new act will concern companies with a financial year ending after 18 April 2013.

Carl-Magnus Uggla, Specialist Partner, Stockholm

Regulatory Technical Standards (RTS)

The European Banking Authority (“EBA”) has submitted a consultation on draft RTS concerning categories of instruments that can form part of variable remuneration. The aim is to improve requirements to ensure that institutions’ credit quality is reflected within such instruments and ensure that the instruments remain fit for purpose. The draft RTS will introduce additional requirements for Tier 1 and Tier 2 and other instruments. In order to guarantee that the instruments are used for their stated purpose, i.e. variable remuneration instruments issued according to market conditions, the draft RTS requires that a substantial portion of the instruments be issued publicly or privately to other investors.

The proposal has been developed on the basis of Directive 36/2013 of 26 June 2013 and the draft RTS is expected to be settled at the beginning of 2014. The EBA plans to submit the draft RTS to the European Commission for endorsement by 31 March 2014.

Björn Kristiansson, Partner, Stockholm

Swedish Securities Council

During September and October the Swedish Securities Council made the following statements:

Generally accepted practices on the Swedish stock market
Lambros Overseas S.A. and OJSC Alliance Group intended to acquire the rest of Alliance Oil Company’s Ltd (“AOC”) depository receipts. AOC is registered in Bermuda, although AOC’s depository receipts for its ordinary shares and preference shares are admitted to trading on NASDAQ OMX Stockholm. The Swedish Securities Council considered the NASDAQ OMX Stockholm’s rules regarding public offers on the stock market and generally accepted practices on the Swedish stock market when two foreign companies merge through a so-called “Amalgamation” or a “Scheme of Arrangement”. The Swedish Securities Council emphasised the importance of giving the shareholders information according to generally accepted practices on the Swedish stock market.

Dispensation from the bid obligation
In statement 2013:34, MultiQ received a dispensation from the Swedish Securities Council from the bid obligation that might otherwise arise in its acquisition of a subsidiary associated with Mikrolund through a non-cash issue. In connection with the acquisition, MultiQ guaranteed that a preferential issue would be made in MultiQ. The dispensation was conditional on (i) certain information being given to the shareholders of MultiQ, regarding the capital and voting rights obtained by Mikrolund as a result of the acquisition and (ii) approval by two thirds of the shareholders, both specified shares and the shares that were represented at the meeting (not including Mikrolund shares represented).

In statement 2013:37, Mobicard Media Group received a dispensation from the Swedish Securities Council from the bid obligation that might otherwise arise from the acquisition of a subsidiary associated with Cellpoint through a non-cash issue.

Atletico Nordic received a dispensation from the Swedish Securities Council from the bid obligation that might otherwise arise regarding Betting Promotion Sweden’s non-cash issue to Atletico, as consideration for the acquisition of a subsidiary associated with Atleticos.

In statement 2013:38, the Swedish Securities Council approved a dispensation from the bid obligation for Viking Invest AS regarding subscription for shares in a new share issue made by Rederi AB Translantic (“Translantic”), according to Viking Invest’s preferential right. Viking Invest had received such a dispensation in another case and consequently the Swedish Securities Council did not find any reasons to change their opinion regarding dispensation in this case.

Public takeover bids
H Intressenter intended to extend the offer period of Höganäs and at the same time raise its outstanding bid. The increase of the bid depended on H Intressenter achieving acceptances in relation to at least 90 per cent of the shares in total. The side business within its higher bids also depended on H Intressenter achieving at least 90 per cent of the shares in Höganäs.

The Swedish Securities Council stated, decision 2013:36, that the bid structure was compatible with the Takeover-rules and generally accepted business practice of the stock market.

Related-party transactions
The Swedish Security Council made a statement, 2013:40, on compliance with regulations governing related party transactions during the acquisition of Selena Oil & Gas Holding AB (“SOGH”), transactions which the Swedish Security Council had earlier considered in its decision 2012:05. More specifically, the question was whether some transactions with the major shareholders and an officer before and during the extraordinary general meeting for SOGH were in accordance with general accepted stock market principles. The Swedish Security Council also looked at the information that was given to the stakeholders and whether the information was in line with generally accepted stock market principles.

The situation for the company was complicated, contentious and included non-transparent transactions with related parties, and the circumstances did not give an exemption from the requirements of the regulations in AMN 2012:05 regarding related party transactions. Moreover, the regulation should have been followed during the acquisition process of SOGH and therefore the process was not in accordance with the general accepted stock market principles. Regarding the information to the stakeholders the Swedish Security Council states that it was insufficient. The previous board was held responsible for the infringement.

Björn Kristiansson, Partner, Stockholm

NASDAQ OMX Stockholm – Achieving a better market climate

NASDAQ OMX Stockholm serves a key function in society due to its role as part of the infrastructure for raising capital. The stock exchange therefore recently held discussions with representatives of the business community to assess any problem areas and to develop a list of measures to improve the climate for IPOs in Sweden.

The aim of the proposal is to facilitate investment in small companies and to support the growth of new Swedish small and medium-sized enterprises (“SMEs”). Statistics Sweden identifies 99 per cent of Swedish companies as SMEs. One goal is to attract other SMEs to invest in the First North market, which acts as a springboard for the Stock Exchange. From figures concerning IPOs on First North between 2006 and 2012, companies that listed their shares on First North increased their workforce by 36.5 per cent compared with overall job growth of 1.5 per cent for all companies in Sweden.

It was asserted that, because IPOs involving institutional and retail investors create engagement and loyalty, it is considered essential to include public authorities, legislators and other stakeholders in discussions to improve the climate for IPOs and to generate better growth conditions in Sweden.

Björn Kristiansson, Partner, Stockholm



Certain changes to the Danish Companies Act will take effect on 1 January 2014

In June 2013, the Danish Parliament adopted a number of changes to the Danish Companies Act.

The changes coming into effect on 1 January 2014 are of special relevance to start-ups and entrepreneurs, who can benefit from the reduced minimum capital requirements for private limited liability companies (“PLLCs”) and also the new “Entrepreneur Companies” (in Danish “Iværksætterselskab”) (“IVS”). Some of the most significant upcoming changes to the Act include:

  • Reduction of the minimum capital requirement for PLLCs, established as of 1 January 2014 from the current DKK 80,000 to DKK 50,000. Existing PLLCs can reduce their capital to DKK 50,000, if the ordinary capital reduction requirements are met.
  • Possibility to establish an IVS with a minimum initial capital requirement of DKK 1. The minimum capital requirement is replaced by an obligation to transfer 25 per cent of annual profits to the statutory reserves until the reserves together with the share capital reach the minimum capital requirement of DKK 50,000 applicable for PLLCs (you can read more about the new IVS structure in our previous newsletter

In addition, there are also a number of other changes to the Act which will take effect on 1 January 2014, including rules regarding cross-border relocation of a company’s registered office.

At Hannes Snellman we view the new rules as a positive step towards a more harmonised regulation to facilitate start-ups in Denmark. We have broad corporate law experience, including in respect to advising start-ups on all matters of establishment.

If you are interested in learning more, please contact:

Mads Ilum, Partner, Copenhagen
Tobias Bonde Frost, Associate, Copenhagen


The Danish government has published its catalogue of bills to be adopted in the parliamentary year 2013/2014

The Danish parliamentary season started on 1 October 2013, and the Danish government has published its plan for implementation of new bills for the 2013/14 parliamentary year. Several bills are planned to be tabled; however none is of major importance to the Danish corporate tax regime.

Proposed changes to the Corporate Tax Regime

The following proposals affecting businesses have among others been planned:

  1. The Danish Merger Tax Act will be amended to allow companies residing in EEA-countries to participate in tax-free restructurings as is currently the case for EU-companies.
  2. The Danish VAT regime will be amended to extend the reverse charge mechanism to include different types of electronics.
  3. The Danish Corporate Tax Act will be amended so that membership fees of business councils, trade- and tourist associations again - and retroactively from 2011 - will be tax-free.
  4. In 2012, rules regarding limitation on a company’s losses carry forward were adopted. As a consequence, the Danish Tax Control Act will be amended to allow for a formation of a loss carry forward register for companies.
  5. A proposal will be made to amend the Danish rules on exit taxation of assets leaving the Danish tax jurisdiction. The proposal is a follow-up on the ECJ ruling of 18 July 2013.

The bill regarding amendment of the Danish Merger Tax Act was tabled on 2 October and is currently under first reading. The exact content of the rest of the bills is unknown and will be published when legislation implementing the specific initiatives of the bills is tabled.

If you are interested in learning more about the proposed changes or Danish corporate taxation in general, please contact:

Bodil Tolstrup, Counsel, Copenhagen
Sona Margaryan, Associate, Copenhagen


Political agreement in Denmark concerning the regulation of SIFIs and new capital requirements

On 10 October 2013, a Danish political agreement (“Bank Package VI”) was concluded concerning (i) the regulation of systematically important financial institutions (“SIFIs”), (ii) capital requirements for all Danish banks and mortgage-credit institutions (“Danish Institutions”) under the revised Capital Requirements Directive and Regulation (“CRD IV/CRR”) and (iii) certain other measures, including the establishment of a governing board to assist the Danish FSA.

The conclusion of Bank Package VI is of particular importance to the Danish Institutions classified as SIFIs under the agreement.

Identification of and additional capital requirement imposed on Danish SIFIs

Danish SIFIs will be identified on the basis of whether at least one of the following limits is exceeded in two consecutive years:

  • the size of the balance sheet is equivalent to more than 6.5% of Denmark’s GDP;
  • loans comprise more than 5% compared to total sector loans; or
  • deposits comprise more than 5% of total sector deposits).

Based on existing data, BRFkredit, Danske Bank, DLR Kredit, Jyske Bank, Nordea Bank Danmark, Nykredit and Sydbank are expected to be identified as SIFIs in connection with the first identification on 30 June 2014.

As set out in CRD IV/CRR, Danish SIFIs will be subject to a capital requirement of 1% to 3% of the SIFIs’ total risk exposure amount. The exact percentage for each SIFI will be determined on the basis of such SIFI’s systematic importance. The requirement is in addition to the standard capital requirement (8% of the total risk exposure amount) and the capital conservation buffer requirement introduced for all Danish Institutions under CRD IV/CRR (2.5% of the total risk exposure amount) entailing a total capital requirement of 11.5% to 13.5% for Danish SIFIs.

Implementation of CRD IV/CRR in Denmark

In relation to the implementation of CRD IV/CRR in Denmark, it has been agreed:

  • that the requirement for a short-term liquidity cover ratio will be gradually introduced for Danish Institutions other than SIFIs pursuant to the minimum requirement set out in CRD IV/CRR, i.e. gradual introduction until 2018. The existing Danish liquidity requirement is to be maintained as a minimum requirement up to and including 2016;
  • that from 2015 Danish SIFIs must comply with the short-term liquidity cover ratio requirement. However, if Danish covered bonds cannot be included as “liquid assets” to a sufficient extent (or if the European Commission otherwise makes it difficult for Danish SIFIs to comply), it has been agreed to gradually introduce the cover ratio requirement like other Danish Institutions;
  • that the Danish framework for the countercyclical buffer will be gradually introduced until 2019. Buffer rates set in other countries in which Danish Institutions have exposure will, however, be recognised from 2015 (to a level of up to 2.5%);
  • that the Danish Minister for Business and Growth shall set out rules for temporarily imposing stricter requirements than the standard requirements set out in CRD IV/CRR (as permitted under CRD IV/CRR) by means of an executive order; and
  • to appoint a committee tasked with studying the possibility of incorporating the CRD IV/CRR framework for assessing administrative penalties into Denmark’s criminal code. Furthermore, a group of experts will be appointed and tasked with assessing the need to implement a leverage ratio target (the ratio of capital to unweighted assets).

Other regulation of Danish SIFIs

Due to the complexity and importance of Danish SIFIs, it has been agreed to strengthen the supervision of Danish SIFIs. Accordingly, it shall be explicitly stated in the new legislation that the Danish FSA shall conduct tighter supervision of Danish SIFIs in the form of:

  • enhanced examination activity (more frequent inspections);
  • benchmarking of Danish SIFIs, including in relation to foreign SIFIs;
  • enhanced focus on corporate governance and risk management; and
  • enhanced focus on model risk and capital allocation.

In relation to corporate governance, the following requirements will be imposed on the Danish SIFIs:

  • existing fit and proper principles must also apply to the SIFIs’ managerial employees, i.e. not only to the board and management team;
  • special requirements in relation to organising and staffing of risk-management functions shall be imposed; and
  • special IT-requirements shall be imposed.

A working group will be appointed tasked with submitting proposals for how the above measures shall be implemented in practice.

It has been further agreed that a restriction on the number of directorships and executive management positions shall apply. Thus, a board member of a Danish SIFI may at most have (i) one executive management position combined with two directorships, or (ii) four directorships.

Because of the importance of the Danish SIFIs, it has been agreed to prepare winding-up plans in relation to all Danish SIFIs. Such winding-up plans shall enable the continuation of the critical operations of a failing SIFI. Under CRD IV/CRR, each Member Country shall appoint a national winding-up authority. It has been agreed that the Danish winding-up authority shall be Finansiel Stabilitet A/S (an entity owned by the Danish State currently handling defunct Danish banks).

In addition to the above, the following initiatives have been agreed:

  • to limit the variable salary of certain significant “risk-takers” of Danish Institutions to 100% of the fixed salary or 200% if approved by the entity’s general meeting or similar;
  • that listed banks and mortgage-credit institutions or financial institutions with more than 1,000 employees shall set up nominating and risk committees to support the board’s work;
  • that all Danish financial institutions (including Danish Institutions) will be required to establish in-house whistle-blower schemes for violations of financial regulation committed by the financial institution and that a whistle-blower scheme shall be established by the Danish FSA;
  • that changes to the Danish tax laws will be adopted in order to ensure that interest paid on Additional Tier 1 capital (hybrid capital) will remain fully deductible for the issuer; and
  • that a governing board tasked with providing technical, organisational and managerial assistance to the management team of the Danish FSA is to be established.

If you are interested in further information or have other questions related to financial regulatory matters, please contact:

Mikkel Fritsch, Partner, Copenhagen
Anders Schmidt Pedersen, Associate, Copenhagen


The Alternative Investment Fund Managers Directive

The implementation of the Alternative Investment Fund Directive (AIFMD) in Norway has been delayed. The deadline for the implementation was on 22 July 2013. According to the official information the implementation is not likely to take place earlier then 1 January 2014, although unofficial information from sources within the Ministry of Finance suggests that it is possible that the Bill will not be adopted before Q1 2014. However, if the implementation takes place on 1 January 2014 the act will not come into force before the 1 April 2014. One consequence of this late implementation is that marketing of foreign non-UCITS’ must comply with the Norwegian legislation (The Securities Trading Act and The Investment Fund Act). One purpose of the directive is to fill gaps in areas where European and national provisions are incomplete, e.g. regarding the activities of the managers of Alternative Investment funds (includes all funds that are not harmonised under the UCITS directive).

Anett Kristin Lilliehöök, Senior Associate, Stockholm