Danish Entrepreneurs' Establishment of Limited Liability Companies with Low Share Capital and the Establishments' Impact on Denmark's Gross Domestic Product

Abstract

This thesis is an analysis of whether the current opportunities to form different companies in Denmark are efficient from the perspective of the Danish state with regards to maximizing Denmark’s gross domestic product and if deemed not to be efficient, how the legislation should be changed. This thesis is set out in three different analyses consisting of a legal analysis, an economic analysis and an integrated analysis which takes the conclusions from the first two analyses and suggest how to optimize Denmark’s gross domestic product through a possible change in the Danish Company Act. The legal analysis examines what the cheapest option for establishing a company in Denmark is after the abolition of entrepreneurial companies with just DKK 1 in share capital. The legal analysis examines the benefits and drawbacks of forming a company in Denmark with the lowest share capital, which is the Danish Limited Liability Company with a minimum of DKK 40,000 in share capital. Furthermore, the legal analysis assesses which opportunities Danish entrepreneurs has if they do not want or are unable to inject DKK 40,000 in share capital. In this part of the legal analysis, the legal systems with regards to establishing a company on the Faroe Islands, in Germany and in Sweden, respectively, will be assessed along with the benefits and drawback of establishing a company in each of those countries. Using neoclassical theory, the economic analysis explores the effects on Denmark’s gross domestic product if a Danish entrepreneur decides to establish his company outside Denmark. The economic analysis draws on the conclusions made in the legal analysis of each countries’ legal framework on establishing a company to examine the economic consequences for both the entrepreneur and Denmark, if the entrepreneur decides to form his company in either Denmark, on the Faroe Islands, in Germany, in Sweden or not at all. At last, the thesis contains a game to illustrate the payoffs for both the entrepreneur and Denmark under the current Danish Company Act. Finally, the master’s integrated analysis examines if it is possible to increase Denmark’s gross domestic product by changing the current legal framework. This is done to give the entrepreneur incentives to form the company in Denmark rather than establishing the company on either the Faroe Islands, in Germany, in Sweden or not at all. By setting up a new game, the master concludes that the Danish legislator should reduce the share capital of the Danish Limited Liability Company to increase the entrepreneur’s incentives to establish a company in Denmark which in turn increases Denmark’s gross domestic product.