Loan to owners and members of management – and self-financing

Plesner offers specialist advice about the possibilities and limitations stipulated by legislation in relation to loans to owners and members of management and self-financing.

So far, the Danish corporate laws have prohibited (with some exceptions) that a company grants loans to its owners and the company management and certain closely related persons (prohibition against granting loans to owners and members of management).

Similarly, so far, public and private limited companies have been prohibited from granting loans to or provide security for the financing of shares in the same company or its parent company (prohibition against self-financing).

The purpose of these prohibitions is to protect company creditors and shareholders against loss of company funds, e.g. by loaning company funds on terms unprofitable to the company.

Repeal of the general prohibition against self-financing

The general prohibition against self-financing will be repealed after the all parts of the new Companies Act have entered into force, thus allowing use of the company's free funds to acquire shares in the company. However, this requires that certain statutory provisions are observed.

Relaxation of rules on loans to owners and members of management

Similarly, the rules on loans to owners and members of management will be relaxed once all parts of the new Companies Act have entered into force. Similar to self-financing, such loans are conditional on the observance of certain statutory provisions.