On the 1st of January 2014, the Danish legislation made it possible to start a limited liability company where the legal owners of the company only had to commit 1 DKR to start the company, and should the company go bankrupt the owner’s liability was limited to the registered capital. The legal form was called IVS, shortening for Iværksætterselskab (Entrepreneurial company). It was created with the purpose of providing a competitive legal form because of the phasing out of the previous legal form ‘Selskab med begrænset ansvar, S.M.B.A’ (company with limited liability), a hybrid with combined characteristics of a limited company and a partnership. It was necessary to provide a competitive form, as the EU-ruling ‘Centros’ opened the opportunity of establishing a company in a country within an EU-country but running the company through a branch in another EU-country, opening up the opportunity of cherry picking based on the most favorable corporate law. In 2018 the Danish business agency prepared a report on how the IVS had performed since its’ establishment. The report stated, that the Danish tax authority experienced that the companies using the form, in general had high tax arrears compared to other legal forms. Based on the report and the fact that the form was used for purposes not intended, the company form was removed in April 2019. In this report we analyze whether the IVS was in fact a competitive legal form, and if a founder would be better of choosing any of the alternatives available. We conclude that a founder in most cases would be just as well of choosing one of the alternatives. This was partly due to the fact, that the founder would most likely be liable for more than the registered capital, as no third party would provide loans or credit, without any form of collateral, besides the 1 DKK. Furthermore the Danish legislation provides arrangements that grants some of the upsides usually associated with limited liability-companies, including the use of favorable taxation, depending on the use of the company. We also try to analyze how thirds parties providing risk willing capital perceived the IVS. We analyze it using a game theoretical frame work, and we conclude that even though the IVS would be suitable for the purpose, it might be more useful choosing an alternative with a higher required capital, as the third party would be more hesitant doing business with the IVS, compared to the other alternatives. This would either lead to higher prices on capital or lead to no founding of the company at all. We analyze on the effects of the introduction of the IVS in an economical perspective, looking at what the IVS might possibly contribute. We find that the companies most likely did not contribute to innovation in a degree one might have hoped, but they have contributed to a more competitive market. Even though they have contributed to a competitive market, we are not convinced the same effect would not have appeared, had the legal form not existed. At last we try to come up with an alternate proposal for the removal of the legal form, as we think the legislators partially seems to have forgotten the intended purpose of the IVS, when introducing the new legislation. In our proposal we try to come up with a solution that in our opinion still consider the intended purpose, but in some way might still provide an partial answer to the troubles the IVS faced.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||107|