Joint ventures are used in various industries and sectors in Denmark. Joint ventures are particularly prevalent in sectors such as environmental technology, energy technology, food and bioresources, life science and welfare technology, construction and civil engineering, advanced production, robotics and drone technology, and defense, space and security.

These sectors benefit from joint ventures as they allow companies to share risks and liabilities, lower costs through economies of scale, and acquire new skills and capabilities from partner companies, which is especially relevant in industries with high R&D costs.

Internationally, it is common to categorise joint ventures into equity- and non-equity joint ventures. In Denmark, there is, however, no legal definition of these terms.  An equity joint venture can be described as a business arrangement where two or more parties create a new entity by pooling their resources and sharing ownership, profits, and losses. Each party contributes capital and holds equity in the new entity, which operates as a separate legal entity from the partners.  In Denmark, a joint venture will typically be established as an equity joint venture, whilst non-equity joint ventures are not commonly used.

An equity joint venture has several advantages. The most obvious is the possibility of limited liability (e.g. if the joint venture vehicle is a limited liability company (ApS or A/S)). If the joint venture is a limited partnership (K/S), a limited liability partnership (P/S) or a partnership (I/S), there will also be advantages relating to taxation.

The most common corporate vehicle used for equity joint ventures is a limited partnership (Danish: “kommanditselskab, K/S”) or a limited liability partnership (Danish: “partnerselskab, P/S”). In these types of legal entities, a general partner, most often a private limited liability company (Danish: “anpartsselskab, ApS”) is liable for all the joint ventures’ debt, and the other partners have limited liability.  Some corporate vehicles used for equity joint venture are  also formed as a partnership (Danish: “interessentskab, I/S”), which has some of the same characteristics as the P/S and K/S.

Finally, another popular corporate vehicle is the limited liability company (A/S or ApS). The A/S, ApS and P/S are all subject to the Danish Companies Act, whereas K/S and I/S are subject to very little regulation, which ensures flexibility (see the answer to question 4 for additional information).

There is no one-size-fits-all corporate vehicle for joint ventures in Denmark. Thus, the choice of corporate vehicle depends on the project and the parties’ requirements and wishes for the collaboration. The two main factors that typically determine the choice of corporate vehicle are tax and liability.

In a joint venture perspective, the difference between the two forms of limited liability companies (A/S and ApS) is mainly the capital requirements, as A/S have a capital requirement of DKK 400,000 and ApS has a capital requirement of DKK 40,000 (soon to be DKK 20,000), and that an A/S needs to a board of directors of at least 3 members and an ApS does not. In both ApS and A/S share holders’ liability is limited, and they are both subject to the Danish Companies Act, which ensures strict (compared to K/S and I/S), but well known, capital and management requirements.

The limited liability partnership (P/S) is also subject to the Danish Companies Act and have the same requirements as the A/S to the management structure. Limited liability companies (A/S and ApS) are independent legal personalities, while limited liability partnerships (P/S), limited partnerships (K/S) and partnerships (I/S) are not, which means that joint venture partners in a joint venture, which joint venture vehicle is a P/S, K/S or I/S, are taxed directly on their share of the taxable profit in the joint venture vehicle. This can be particularly attractive if the joint venture is initially loss-making, so that the joint venture partners can benefit from the deduction obtained because of the loss. At the same time, the P/S is subject to a known and common set of rules, e.g. for management composition and liability, as the P/S is subject to the Danish Companies Act.

Like the P/S, the limited partnership (K/S) is a transparent entity. The K/S is, however, not regulated by the Danish Companies Act, hence it gives the joint venture partners certain flexibility, while the K/S can still utilise the fact that it is a transparent entity. In both the P/S and the K/S some participants have unlimited liability (the general partner) while others have limited liability (the limited partners). However, the general partner’s unlimited liability will be a de facto limited liability, because the joint venture partners will typically let a limited liability company (typically an ApS) be the general partner.  It is a requirement under Danish law that the general partner must have management and financial powers. The limited partners, however, can still participate in the joint management of the company. The general partner’s management power can, for example, consist of a right to representation on the board, a right to veto certain decisions or a right to veto changes to the company’s articles of association. To secure joint control, Danish legislation allow the limited partners to have similar management powers.

As the P/S and K/S, the partnership (I/S) is a transparent entity. All partners, however, have unlimited liability, which is why each partner will establish a limited liability company (usually an ApS due to the lower capital requirements than the A/S). Furthermore, the I/S must contain of at least two participants and is subject to very little mandatory legislation, which like  the K/S gives the I/S flexibility to among other things establish joint control.

The choice of corporate vehicle affects the position of the parties, including tax and liability, the parties’ rights and obligations, and the non-mandatory and mandatory provisions that regulate the collaboration.

Typically, the joint venture will be based on a various of legal documents. The most important one is the joint venture agreement. If the joint venture is an equity joint venture, the joint venture agreement will regulate the parties’ rights and obligations as shareholders in the corporate entity, including the typical provisions which is set out in a shareholders’ agreement. Provisions like right of first refusal, prohibition of sale, right to buy and consent clauses are particularly relevant for joint ventures that are not time-limited to a project. If the joint venture is project oriented, it is typical to have a provision which set out that the parties cannot terminate the agreement for a certain period, as well as provisions regarding termination and dissolution of the joint venture, before and/or when the project is finished.

In an equity joint venture, the parties will usually, establish a new company, hence it is necessary to prepare a memorandum and articles of association that fulfil the requirements of the Danish Companies Act (if the company is a limited liability company (ApS or A/S) or a limited liability partnership (P/S)).  In Denmark, the joint venture agreement will set out rights and obligations in detail, while the articles of association will contain only a subset of these provisions or similar requirements, as well as provisions regarding rights and obligations that the joint venture parties wish to disclose to third parties, or if the parties want the joint venture entity to be bound. Thus, the joint venture agreement does not bind the joint venture entity, nor the management in the entity, but only the parties. To bind the entity and the management, it must be stipulated in the articles of association. This, however, will mean disclosing it to third parties.

One of the requirements is that the memorandum of association must disclose whether a founder or others are entitled to special rights/benefits and whether agreements are entered into with founders or others that impose a significant financial obligation on the company. The special rights/benefits are not limited to those included in the company’s articles of association, but also those rights that only appear in the joint venture agreement. Failure to disclose this might mean that the Danish Business Authority will reject registration of the company.

In the case of an equity joint venture, i.e. where a corporate entity needs to be established and registered, this can normally be done the same day and online. There is no requirement in Denmark for a notary to participate in that process. The time horizon for a joint venture thus depends on how quickly the joint venture parties can agree on the contractual context in the joint venture agreement.

The liability is different depending on which type of corporate vehicle that is chosen as the joint venture entity.

If the joint venture entity is a limited liability company (ApS or A/S) it will shield the joint venture parties for liability, and only limit liability to what the parties have contributed to the entity.

The limited liability partnership (P/S) and the limited partnership (K/S) both have a general partner, which has unlimited liability. This will, however, typically be delt with, by establishing a limited liability company (usually an ApS) to act as the general partner. In that way the P/S and the K/S will de facto be limited in their liability to what the parties have contributed to the general partner (as of 1 January 2025, an ApS must have a share capital of DKK 20.000).

Similar to the general partner in the P/S and the K/S, all partners in a partnership (I/S) have unlimited liability. Therefore, the joint venture parties will often establish a limited liability company (usually ApS, cf. above), to act as their partner in the I/S. The partners in the I/S have a joint and several liability, thus the joint venture parties’ liability is limited to what the joint venture parties have contributed to the two (if two partners) partners (similar to the P/S and K/S regarding the general partner).

In addition to the liability described above, the management may be held liable in case of negligence. In addition, the joint venture parties can – and will often – assume liability for the joint venture’s obligations on a contractual basis.

Depending on the joint venture vehicle and the structure of the joint venture, the parties will have entered into an agreement regarding the financing of the joint venture, both in terms of initial capital and capital requirements in relation to future projects or financing if the joint venture becomes financially distressed.

In terms of share capital, there is a difference between the limited liability companies (ApS and A/S). The minimum requirement is DKK 20.000 for ApS (changed from DKK 40.000 as of 1 January 2025) and DKK 400.000 for A/S. The limited liability partnerships (P/S) have the same share capital requirement as the A/S. There is no minimum requirement for share capital for partnerships (I/S) or limited partnerships (K/S).

Usually, the joint venture agreement will contain provisions stating that any loan to a joint venture partner must be paid first, before distributing any dividend. If the funding takes the form of a contribution in kind of assets (non-cash) in return for equity, an auditor’s report will be required if the joint venture entity is a limited liability company (ApS or A/S) or a limited liability partnership (P/S). Partnerships (I/S) and limited partnerships (K/S) are exempted from this.

If loans are made to the joint venture, they must be made at arm’s length to ensure that the loan, including interest, is made at a fair market price.

For partnerships (I/S) and limited partnerships (K/S) there are in general no law that protects the minority shareholders.

Limited liability companies (ApS and A/S) and limited liability partnerships (P/S) are all subject to the Danish Companies Act, which include provisions that protect minority shareholders.

However, deviations from the Danish Companies Act’s minority protection rules can largely be agreed in the joint venture agreement.

Typically, the joint venture partners will have regulated any minority shareholder rights in the joint venture agreement. This could include a tag-along right, a right of first refusal, a right to veto a decision or similar provisions, or provisions that give a minority shareholder a right to appoint a member to the board of directors.

General duties

The board of directors of a limited liability company (ApS and A/S) or a limited liability partnership (P/S) has several important duties under the Danish Companies Act. They must ensure satisfactory bookkeeping and financial reporting, establish procedures for risk management and internal controls, receive regular reports on the company’s financial situation, ensure that the executive management fulfils its duties, and ensure that the company always has sufficient capital and liquidity to meet its obligations. In addition, the board of directors must prepare rules of procedure if the board consists of more than one member (in A/S and P/S the board must consist of at least 3 members). The purpose of the rules of procedure is to ensure that the board fulfils its duties.

A similar duty, although to a more limited extent, for the management of limited partnerships (K/S) and partnerships (I/S) may be derived from the duty of loyalty, but this is not stipulated by law.

The joint venture agreement typically summarizes which decisions the directors can/must make, and which decisions the joint venture parties must agree upon. In reality each joint venture partner appoints one or more members to the management, and it will be a precondition that they will also comply with the joint venture agreement. By law, the management’s obligations are, however, to the company and not the individual shareholder.

Conflict of interests

Furthermore, the Danish Companies Act prohibits the management for participating in decision in which they have a conflict. Usually, the rules of procedure will also regulate more exact when a member of management has a conflict. A director or board member who has a conflict is obliged to inform the other management members and not participate in the decision.  If it later comes to light that a decision has been made where a member of management has had a conflict, this decision may be invalid, and management may be held accountable.

Duty of confidentiality

The duty of confidentiality and the board’s general fiduciary duties to the company also entail several restrictions on the possibility to disclose information. For limited liability companies (ApS and A/S) and limited liability partnerships (P/S), the Danish Companies Act regulates the confidentiality for the management. The duty of confidentiality is limited to trade secrets that could harm the company if disclosed. If the information in question concerns the mutual position of the joint venture partners, it will therefore not immediately be covered by the duty of confidentiality. However, the disclosure of such information to the joint venture partners could be in violation of competition law rules.  A violation of the competition rules could be if one of the joint venture partners is a competitor to the joint venture itself and receives confidential information.

Usually, a manager will be prohibited from competing again the joint venture. A board member might have the same competition restriction. The Danish legal literature has discussed whether a competition ban can be deduced from the duty of loyalty. This is especially the case for partnership (I/S) and the managers duty of loyalty to the joint venture entity.  The fiduciary duty can mean that a joint venture partner has a duty to keep secret the information they come into possession of (e.g. trade secrets). Such a duty of confidentiality and the fiduciary duties are therefore interrelated. At the same time, if one or more of the joint venture partners compete with the joint venture, there may be a significant risk of breach of competition rules.

In general, the joint venture management depends on the joint venture vehicle. If the joint venture vehicle is a limited liability company (ApS) the parties are only required to have a management of 1 person and is not required to have a board of directors. If the joint venture vehicle is a limited liability company (A/S) or a limited liability partnership (P/S) then it is a requirement that the joint venture vehicle both have a management and a board of directors or a supervisory board. It is only few companies in Denmark that use a supervisory board. For A/S and P/S the board of directors must consist of at least 3 members.

If the joint venture vehicle is a limited partnership (K/S), then the general rule is that the general partner must have managerial powers. In reality, however, the limited partners will also have management powers that is regulated in the joint venture agreement. For a partnership (I/S), there are no restrictions to the structure of the management.

Within the above framework, there is freedom to structure the joint venture’s management as one sees fit.

There is a fiduciary duty between the joint venture parties. This fiduciary duty may require a joint venture partner to act in a certain way. There is, however, no exact legal definition of the limitations to this duty.

There is also typically an agreed duty of loyalty, such as not discrediting the other party nor the joint venture. However, there are no precise legal boundaries for this duty either.

Yes. In this case the joint venture may be subject to the Danish Investment Screening Act and Foreign Direct Investment regulation.

Agreements between a foreign investor and public or private non-commercial research institutions require authorisation in case the activities of the joint venture concern R&D relating to the defence sector, IT security, critical technology or critical infrastructure.

In addition to the above, there are national legislation as well, especially in relation to the defence sector that also might apply, such as the Danish Offensive Weapons Act or the Danish War Material Act.

If the joint venture is subject to any of the rules above, the joint venture might be required to obtain an approval from the Danish authorities.

It is relevant to consider whether the joint venture can be seen as a concentration, and whether the joint venture is governed by the Danish Competition Act, article 6, regarding restrictions. The joint venture agreement will typically regardless regulate and impose on the joint venture partners a competition clause, e.g. that the joint venture partners must not compete in the same market as the joint venture vehicle.

Joint venture as a “concentration”

One of the most important reflections in relation to competition law is to consider, whether the joint venture constitutes a concentration under the EC Merger Regulation, article 3 (4), which is incorporated in the Danish Competition Act, article 12 a (2). This is the case, if the joint venture (i) is jointly controlled by two or more undertakings (joint control), (ii) fulfils all the functions of an autonomous economic entity and (iii) is set up to operate on a ’lasting basis’. Furthermore, it is a requirement, that the joint venture exceeds the thresholds mentioned in the Danish Competition Act, article 12.

If the joint venture constitutes a concentration and the thresholds in article 12 are met/exceeded, the Danish Competition and Consumer Authority must approve the merger after the merger agreement has been signed, but before the merger is implemented.

From 1 July 2024, the Danish Competition and Consumer Authority is authorised to ex officio require a concentration to be notified even if it does not exceed the thresholds. This applies if (1) the parties involved have a total annual turnover in Denmark of DKK 50 million and DKK 50 million, and (2) the agency assesses that the concentration may significantly impede competition, by creating a dominant position. If a concentration fulfils these conditions, the Danish Competition Authority may require notification and approval before implementation.

For further details about the approvement process, including timeline, payment to the Danish Competition Authority etc., please see the Danish Competition Act, chapter 4.

Restrictions

The Danish Competition Act, article 6, prohibits companies from entering into agreement that have the purpose or effect of restricting competition. If the joint venture partners coordinate their competitive behaviour in a joint venture, it may be covered by the prohibition. Joint venture is explicitly mentioned as an example of a cooperation that may be covered by article 6. Non-compete clauses, in which the joint venture partners are prohibited to compete against the joint venture entity are lawful, if they are considered as ancillary restraints. These clauses are permissible if they are directly related to and necessary for the execution of a lawful transaction, such as the establishment of a joint venture.

In general, the joint venture partners must take great care and be aware of when restrictions are lawful or not.  If the joint venture is autonomous (it is not sufficient that a legal entity is formed), the joint venture will normally fall under the merger rules, cf. above. If, on the other hand, the joint venture cannot be categorized as autonomous, there is a risk that the contractual restrictions on competition may qualify as a concerted practice or a cartel. Cartels are always illegal, while concerted practices violate competition rules if they have the object or effect of restricting competition.

Thus, there is a great deal of uncertainty as to what applies if the joint venture is not considered to be operating independently, whereas if the merger rules apply, the authorities will have to approve the joint venture and thus the competition law arrangement.

Yes. Limited liability companies (ApS and A/S), limited liability partnerships (P/S), limited partnerships (K/S) and partnerships (I/S) are all subject to the rules of disclosing the ultimate beneficial owners.  A beneficial owner is always a natural person.  Generally, it is a person who has a beneficial ownership of more than 25% (not a clear limit, but an indication of what sufficient control is) of the votes in a company or otherwise exercises sufficient control over the company (for instance a party’s right to appoint the majority of the board of directors).

For limited liability companies (ApS and A/S) and limited liability partnerships (P/S) the Danish Companies Act governs that these entities must identify and disclose the ultimate beneficial ownership of the company, along with at least once a year investigation of whether there are changes to the ultimate beneficial ownership.

For limited partnerships (K/S), the limited partners are as a starting point, the individuals who exercise the traditional managerial and economic rights in the company, such as voting rights at the general meeting and receiving dividend payments in relation to their participation in the business. If the K/S concludes that none of the limited partners can be categorized as an ultimate beneficial owner, the K/S must register its management as ultimate beneficial owners.

For partnerships (I/S) the ultimate beneficial ownership  will depend on the partnership agreement (for instance if one partner has the right to appoint the majority of the management).

The Danish Business Authority has made a comprehensive guide on determining who is the beneficial owner depending on the corporate vehicle.

Initially, a decision must be made on the intellectual property rights that may be developed after the parties enter into the joint venture, including what will happen to such IPR when the joint venture is dissolved. This will, however, usually be addressed in the joint venture agreement, and only be relevant if the purpose of the joint venture is not meant to be a permanent, ongoing collaboration.

It is crucial for the joint venture parties to identify and address any pre-existing IP that each party brings into the joint venture. It is also important that the joint venture agreement addresses who will assume the ownership of any IP that is developed during the joint venture.

Usually, licensing agreements will be entered into to outline how each party can use the IP. In that regard, protecting trade secrets and confidential information is vital. This often involves implementing non-disclosure agreements (NDAs) and other confidentiality measures to safeguard sensitive information.

In relation to the termination of a joint venture, a typical issue will be who has the ownership for product X of the joint venture, if this has not been explicitly agreed upon before or during the joint venture collaboration. An issue like that may disrupt an exit.

When transferring employees from a joint venture partner to the joint venture, it depends on a specific assessment of whether the transfer can be seen as a transfer, which is subject to the Transfer of Undertakings Act.

If the Act applies to the transfer, the employee is entitled to join the joint venture, and the joint venture may be obliged to assume any rights and obligations towards the employees.  This means that the employees’ existing terms of employment, including salary, seniority and other rights, must be preserved in the transfer. Any collective agreements applicable to the employees must also be transferred to the new joint venture.

Dismissal due to the transfer of a business or part thereof shall not be deemed to be reasonably justified by the circumstances of the business, unless the dismissal is due to economic, technical or organisational reasons resulting in changes in employment.

As with other listed companies, there are increased disclosure requirements compared to unlisted companies, as well as regulation regarding acting on inside information. However, no special joint venture requirements apply if a joint venture partner is listed.

There are several tax considerations to address. The key tax considerations to address for the joint venture parties and the joint venture vehicle itself are:

• Tax residency and structure/corporate form
• Are there any double taxation treaties which apply?
• Transfer pricing
• Joint taxation (taxation with parents companies)
• How is the taxation if comparing a national joint venture to an international joint venture (within EU) or a joint venture with one party from EU and one party outside of EU?

Furthermore, if the joint venture parties expect the joint venture to be loss-making to begin with, it can be important to ensure that the joint venture is a transparent entity (limited liability partnership (P/S), a limited partnership (K/S) or a partnership (I/S)) so that the joint venture partners can utilise the deduction. It is also a given that some types of companies are subject to lower taxation than others, including the country in which the joint venture operates, or where the company has its headquarters.

The distribution of profits depends on the joint venture vehicle. For limited partnership (K/S) or partnerships (I/S) only the joint venture agreement will regulate the limits. For limited liability companies (ApS or A/S) or limited liability partnerships (P/S) dividend and profits can be distributed to the joint venture partners if the joint venture entity has sufficient free reserves, i.e. as long as the company has sound capital resources. The board of directors can be held liable if the company does not have adequate capital resources.

Additionally, if the share capital is divided into share classes, one class of shares may have preference regarding dividend. There is no limit to the number of classes of shares in a company, but it is a requirement that all shares in the same class are treated equally.

The joint venture agreement will regulate how to handle a deadlock, and what defines a deadlock situation.

Typically, each party will have the right to trigger a deadlock. This is initially done by notifying the other party, after which a conflict escalator is regulated. The parties are first ‘required’ to participate in 1-2 negotiation meetings or alternatively mediation through arbitration to resolve the situation.

If this does not resolve the deadlock, the deadlock can ultimately be resolved by termination of the joint venture. This can for instance be done in a bidding round between the joint venture partners where assets and contracts, which the joint venture has entered into goes to the highest bidder. Finally, the joint venture vehicle will be dissolved by a solvent liquidation.

In a joint venture agreement, exit and termination clauses are important elements.

Typically, a joint venture agreement will contain an exit clause, if relevant considering the nature of the joint venture. This will usually be the case, if the joint venture entity independently accumulates added value (e.g. goodwill) as in an operating company. The exit clause will typically be structured as a drag-along and tag-along clause (similar to the one you will find in a shareholders’ agreement).

Termination clauses are often found in joint venture agreement. If the real value of the joint venture depends on the joint venture partners (in terms of the assets, personnel etc. that the partners have contributed to the joint venture), there may be no accumulated added value in the joint venture entity, hence in terms of termination of the joint venture a liquidation of the joint venture entity is more common. Usually, the termination clause only applies after a non-termination period has expired. Thus, the party will be able to terminate the joint venture initiating a bidding round and/or liquidation (similar to the procedure regarding deadlocks).

The restrictive covenants can mainly be divided into three groups: (i) non-compete (ii) non-solicitation regarding employees in the joint venture and (iii) non-solicitation regarding customers.

A non-compete covenant prohibits the joint venture parties from competing against the joint venture.  As long as the clause does not go beyond protecting the goodwill of the joint venture, the clause is legal for the entire period the individual joint venture party is engaged in the joint venture.  As a result, the non-compete covenant may end up having a duration that is significantly longer than what could be considered proportionate for non-compete clauses in acquisitions under the circumstances.

A non-solicitation covenant regarding employees in the joint venture, which typically prohibits the joint venture parties to hire an employee employed in the joint venture. This type of clause will be subject to Danish legislation (the Danish Employment Non-Competition Act), and in general not legal.

A non-solicitation covenant regarding customers in the joint venture, which typically prohibits the joint venture parties to contact the joint venture’s customers. Restrictions on competition in the form of customer clauses may be legal and thus exempt from the prohibition in the Danish Competition Act if they are considered to constitute an ancillary restraint related to a legal agreement, merger or joint venture. However, one should take great care to have such a covenant in the joint venture agreement, as it may be in violation of the competition rules.

Typically, a dispute will concern the interpretation of the joint venture agreement or if the agreement needs to be assessed if it contravenes with mandatory legal rules. It is especially relevant to discuss the governing law and venue if the joint venture is international. Therefore, the joint venture agreement might not always be regulated by the same governing law than the joint venture vehicle.

In general, there is freedom of contract in relation to dispute resolution mechanism (venue) in the joint venture agreement. This clause, though often overlooked, can significantly impact the viability of raising a claim in the event of a dispute. It is standard that a dispute must be resolved by arbitration and that the arbitration proceedings is subject to strict confidentiality.

In general, there is freedom of contract in relation to choice of law in the joint venture agreement. Thus, it is limited what legal restrictions that apply, and it is possible to agree that the choice of law in the joint venture agreement is not the same law that governs the joint venture corporate vehicle. However, it often makes sense to let the company’s registered office determine the choice of law.

Key market trends affecting joint ventures in Denmark include a strong focus on sustainability and green technologies, particularly in the energy sector with initiatives like Power-to-X (PtX) technology. Additionally, there is a growing interest in digital transformation and innovation, driving collaborations in tech and logistics. Over the next year, these trends are expected to intensify, with increased investment in green energy projects and digital infrastructure. The regulatory environment will likely continue to support these developments, which may paw the way for more joint ventures.