Iværksætterselskaber

Abstract

With the adoption of the Danish Company Act no. 616 of June 12th 2013 it has been possible as of January 1st 2014 to establish a variation of the Danish private limited company called entrepreneur company, IVS, with a share capital of 1 - 49.999 DKK. This reduction of the share capital for the Danish entrepreneur companies eases the requirements compared to the traditional private limited companies, thus making it more attractive to conduct entrepreneurship as a company.
The purpose of this thesis is to analyze the applicable law in the Danish Company Act chapter 20 a, concerning these new entrepreneur companies and its derivative effects on other issues regarding the Company Act. Furthermore, the thesis will analyze which types of funding an entrepreneur company legitimately can use to raise capital, which difficulties these companies may have in association with the acquisition of capital and which alternative financing methods these companies may be forced to use to acquire capital.
A number of special provisions concerning the entrepreneur companies have been adopted with law no. 616 of June 12th 2013. In this context the Danish company Act chapter 20 a, state that the share capital of these companies, can only be interposed and increased in cash.
Due to the reduction of the share capital, the entrepreneur companies have to transfer at least 25 percent of the net profit to a special reserve to ensure that these companies in time will acquire the financial resources of private limited companies. In this context the companies are not allowed to pay dividends to the shareholders before this statutory reserve combined with the share capital constitutes at least 50.000 DKK after which the company can also choose to re-register to a private limited company.
In addition to the analysis of the applicable law in the Danish Company Act chapter 20 a, the thesis will include results of status reports regarding entrepreneur companies.
Finally, the thesis highlights that entrepreneur companies find it difficult to raise capital from banks due to the low share capital and therefore depend on either retained profit or capital from its shareholders. Because of these difficulties in raising capital it can be beneficial for the entrepreneur companies to use alternative financing methods such as family loans, State-funded funds, business angels or crowdfunding.