The Danish entrepreneurial company type is being abolished - this is how you can close yours

If you want to avoid compulsory dissolution, you will have to close or convert your entrepreneurial company (IVS) before 15 October 2021. Whether it is the best solution for you depends on how your IVS looks today.

How to close your IVS

A solvent IVS can be closed in three different ways:

1. Dissolution by payment declaration
2. Liquidation
3. Compulsory dissolution

On the other hand, if the company is insolvent, i.e., if the company cannot pay its bills, it must instead be closed according to the rules in the Danish Bankruptcy Act.

In addition, you may also terminate the company by a merger or demerger of the company.

How to dissolve your IVS by payment declaration

To dissolve your company by payment declaration, the owners of your IVS must declare to the Danish Business Authority that all the company's outstandings have been settled and that the IVS has been dissolved. You must pay both outstandings that are due for payment and outstandings that are due after the company has been dissolved. The process is very short, and the company can often be closed within a few weeks.

Suppose the company has debts that were not paid at the time of the payment declaration. In that case, the owners are personally, jointly, and indefinitely liable for any outstandings that were not paid at the time of the payment declaration. This applies regardless of whether the outstandings were due and whether the owners were aware of the existence of the outstandings. Therefore, resolution by payment declaration is the best solution for you if you are an owner of a smaller company or a company without many suppliers.

All owners must sign the payment declaration, and it must contain all the owners' names and addresses. In addition, you must obtain and enclose a statement from the Danish Tax Agency in which the agency confirms that there are no existing tax and duty requirements for your IVS.

You must submit the payment declaration so that the Danish Business Authority receives it no later than two weeks after you signed it. If you do not have time to obtain the declaration from the Danish Tax Agency, you may submit the payment while notifying them that you will forward the declaration from the Danish Tax Agency to the Danish Business Authority at a later time. After signing the payment declaration, you have four weeks to send the declaration.

How to close your IVS in liquidation

If you want to close your IVS in the event of liquidation, you choose one or more liquidators who must ensure that you have paid all debts in the company and shut down operations. The advantage of liquidation is that the company's management is not liable for the company's debt after the liquidation. Liquidation is, therefore, a good solution for companies that do not have an overview of all their creditors, but the process also takes longer than dissolution by payment declaration.

For the IVS to enter into liquidation, the owners must make the decision at a general meeting. You must notify the Danish Business Authority of the decision to enter into liquidation no later than two weeks after the decision has been made at the general meeting. The Danish Business Authority announces that the company has entered into liquidation and the company's creditors then have three months to notify the liquidator of their claims.

After you have paid the creditors' claims, excess amounts can be paid as dividends to the company's owners. Once you have distributed the dividend, you can conclude the liquidation process at a general meeting. Here, the owners decide, once again, that the company shall be liquidated and approve the liquidation accounts. You must notify the Danish Business Authority of the liquidation no later than two weeks after the final decision on liquidation has been made and the liquidation accounts have been approved. The approved liquidation accounts and general meeting minutes must be attached to the notification.

IUNO's opinion

Getting your company closed by compulsory dissolution, is something most people prefer to avoid, as it signals bad company management. As the deadline for closing your IVS is close, IUNO recommends that you, as an owner of an IVS, find out as soon as possible whether you want to close or transform your company. If you wish to close the company, you must quickly decide which type of closure makes the most sense for the company.

If you want a quick and efficient closure, closing the company by a payment declaration would be a good choice. However, keep in mind that the owners will then be personally liable for any outstandings in the company. If the company has a lot outstandings and the owners do not want to put their personal economy at stake, liquidation will probably be a better choice.

[Bill on the amendment of the company law and the law on authority for temporary derogation of companies' duties concerning company and accounting matters in connection with Covid-19 of 29 December 2021]