Forced dissolution

In Denmark, companies must comply with a number of formalities and requirements towards SKAT and the Danish Business Authority. If these rules are not followed, the Danish Business Authority will often send a reminder to put things right. If this does not happen, the Danish Business Authority can ask the courts to compulsorily dissolve the company.

Every year, the Danish courts handle more than 17,000 bankruptcies and compulsory dissolutions.

When do you become compulsorily dissolved?

Companies in Denmark must comply with the Danish Business Authority's instructions, requirements and rules. If this is not done, the agency can recommend the company for compulsory dissolution.

There are several issues that can lead to a compulsory dissolution, especially related to management, auditing and financial statements.

• If the company does not have a legal (registered) management. This can happen, for example, if the director has died and a new one is not appointed or if a director has resigned without compensation.
• If the company doesn't have an accountant, but the law requires it, for example due to the size of the company.
• If the company does not submit its annual report on time.

In such cases, the Danish Business Authority can send the company for compulsory dissolution.

What types of forced dissolution are there?

Forced dissolution can take place in three different ways: informal dissolution, bankruptcy or liquidation. The form of dissolution is decided by the Bankruptcy Court and depends on whether the company has assets and is solvent.

Formless solution

If the company has no cash or assets to finance a dissolution or provide security for it, an informal dissolution will generally take place. In this type of dissolution, no actual dissolution proceedings are carried out.

bankruptcy

If the company is unable to maintain its obligations, including payments, and is therefore insolvent, the Bankruptcy Court will decide on bankruptcy and initiate bankruptcy proceedings.

Liquidation

If the Bankruptcy Court determines that the company has liquid funds or assets that can cover the costs of a dissolution and pay any creditors, a decision on liquidation will be made.

Can you cancel a forced dissolution?

It is rare for a forced dissolution to be annulled, but it does happen from time to time.

For example, a compulsory dissolution can happen if the company fails to submit its annual report on time. In such cases, the company's management will typically receive several warnings before the company ends up in compulsory dissolution.

If the management subsequently chooses to submit the annual report, you can request the Danish Business Authority to cancel the compulsory dissolution. However, the annulment will only take place if the management rectifies the situation that triggered the compulsory dissolution.