Company Handovers to Commercial Foundations by Bill 29 2020-21

Malene Krog & Nicole Scott Brown

Student thesis: Master thesis


The Danish government want to increase handovers to commercial foundations to strengthen the Danish economy and secure workplaces in Denmark. Due to a general assumption, that an increase in companies owned by commercial foundations contribute to the Danish welfare, thereby maintaining jobs in Denmark and contributing to charities in the Danish society. Today the legislation for generational handovers to commercial foundation does not allow for succession in terms of tax. Legislation on this area has not always been so strict. Many of today’s successful commercial foundations are established before 1999, where the new reform, Pinsepakken, was introduced. Pinsepakken put an end to generational handovers to commercial foundations with succession in terms of tax. To address the lack of handovers to commercial foundations the Ministry of Taxation in Denmark issued in 2020 a law proposal for a new model, ‘Successionsmodel’, allowing handovers to commercial foundations without taxation of the shareholder once again. In the thesis we analyze the current models for handovers to commercial foundations and thereby derive if they are an attractive way of doing handovers. By analyzing the pros and cons of the new law proposal, it is possible to compare the Successionsmodel to the existing models.
One of the current models for handovers cause a high taxation for the shareholder and is therefore not commonly used. The other model, Holdingmodellen, allows the shareholder to hand over the shares to the foundation without taxation as long as the foundation has a charitable purpose. The new model allows the same tax-reliefs for the shareholder as Holdingmodellen and a tax-free handover is without discussion the most preferable for the shareholder. Even though there is no taxation of the shareholder in the Successionsmodel the foundation obliges to pay 22 pct. of the capital gain on the shares being handed over, also called founder tax. There are several ways of paying the founders tax and it can be done without any real payments which makes the founder’s tax disadvantage quite small.
The Holdingmodel is the only way to handover to a foundation without any taxation for the shareholder or the foundation. With the Successionsmodel the foundation obliges to pay founders tax, but there is still no taxation of the shareholder. In the Successionsmodel the shareholder has the opportunity to keep some of the influence in the company which, for some shareholders, is highly valued. Even though there is founder tax the possibility of keeping influence is making the Successionsmodel attractive.
The thesis results in a comparison of the models where different perspectives is held up against each other. There is no unambiguous solution to which model the shareholder should use for the handover to a commercial foundation. It all depends on the company and the shareholder situation.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2020
Number of pages117