Danish business with others

Danish business with others

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Page 3. “Danish business with others”

Danish businessEstablishing a Danish business with others

Rather  than  establishing  a  fully  owned  subsidiary, you may want to establish business in cooperation with  a  local  partner. This  can  be  done  directly  by establishing a joint venture, a limited liability company, a partnership or a limited partnership; or indirectly by the appointment of a commercial agent or a distributor or by setting up a network of franchisees.

Joint ventures

Many companies which lack sufficient capital, skills or  market  knowledge  to  break  into  a  new  market would  prefer  to  establish  a  joint  venture  or  other strategic alliance. Joint ventures would have no legal status of their own but could be organised as limited liability  companies  or  partnerships. Your  choice  of organisation  type  would  depend  on  commercial  as well as tax considerations. A joint venture must address all major issues by way of a shareholders’ or partnership agreement, including initial and future funding,  management  structure,  intellectual  property rights, distribution of profits and termination.

In the event the joint venture is established as a limited  liability  company,  it  would  be  subject  to  the applicable company legislation

Conducting business as a partnership

If two or more persons decide to run a business together  they  have  established  a  partnership. There are two types of partnerships: partnerships and limited partnerships. In a limited partnership the liability of at least one of the partners would be limited to the amount invested in the partnership by the said partner.

The partners may be foreign citizens and are not required to be resident in Denmark. There is no obligation to appoint a managing director or an accountant. If none of the partners in a trading or limited partnership are residents in Denmark, a person authorised to accept service in Denmark must be appointed.

Generally,  the  partnership  agreement  would  regulate  the  shares  in  income  of  profits  and  losses.

Where a partnership agreement is silent in this respect, profits and losses are divided equally among the partners. The partners are taxed on the partnership’s profits.

Appointment of a commercial agent

If  you  only  have  limited  knowledge  of  the  Danish market,  the  first  step  of  establishing  a  business would normally be the appointment of an intermediary, be it either a commercial agent or a distributor.

While the parties to a distributorship agreement enjoy the freedom of contract, an agency relationship is governed by the Danish Commercial Agency Act.

The Agency Act is partly mandatory, including provisions protecting the commercial agent with regards to the period of notice prior to termination and the possible payment of indemnity upon termination of the relationship.

The  potential  rights  for  the  commercial  agent  to claim an indemnity upon termination (if and to the extent  that  certain  qualifying  conditions  are  met) may  be  considered  a  disadvantage  for  a  company wanting  to  start  exporting  to  Denmark.  However, there are certain advantages from operating through a commercial agent: in particular, the establishment of close and direct customer contact and the ability to control resale prices without having to consider competition  law.  As  long  as  the  commercial  agent operates as an intermediary without assuming any financial  obligations,  the  legal  relations  between  a supplier and the commercial agent is not influenced or prohibited by competition law.

There  is  a  grey  zone  between  self-employed  commercial agents and employed sales people. In case of ordinary employment, the principal will have to pay national insurance contributions, withhold and pay  tax  on  the  salary  paid  and  make  holiday  payments. To avoid this, the principal shall make sure that the commercial agent is truly independent and self-employed.

Appointment of a distributor

As  an  option,  rather  than  commercial  agents,  the company  may  want  to  appoint  a  distributor  who buys the products in his own name and at his own expense for reselling to the market. When appointing a distributor, the parties enjoy the freedom of contract without having to consider rotective mandatory legislation.

When appointing a distributor, competition law shall be applicable, in particular the EU Commission Regulation 330/2010 on vertical restraints.

Franchising or selective distribution

As an option, rather than appointing an intermediary,  be  it  a  commercial  agent  or  a  distributor,  you could consider establishing a franchise system or a selective distribution system.

The establishment of a network of franchisees or selected distributors implies a more direct establishment on the market at the retail level. Such an establishment should be limited to business concepts that  are  well-structured  and  highly  developed  for the local market conditions.

In relation to these distribution systems, Danish legislation does not include any statutory provisions. Only  general  statutory  provisions  and  competition law aspects need to be considered.

A franchise is a right granted by a franchiser to use certain intellectual property rights, in exchange for direct or indirect fees, for the purpose of marketing particular goods or services.

Page 3 “Danish business with others”

Read More. Go to:

  1. Establishing Business in Denmark
  2. Buying a Danish business
  3. Danish business with others
  4. Denmark Employment
  5. Property and Environment in Denmark
  6. Intellectual Property in Denmark
  7. Danish Business Environment
  8. Profit and tax in Denmark
  9. Denmark Company Liquidation
  10. Denmark company formation

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