Denmark

Background and relevant legislation

The main act is the Act on Screening of Certain Foreign Direct Investments, etc. in Denmark (the ‘Investment Screening Act’) and the corresponding executive orders, which entered into force on 1 July 2021 and applies to investments and 'special financial agreements' closed on or after 1 September 2021. The Investment Screening Act is enforced by the Danish Business Authority ('Authority'). 

The Investment Screening Act contains two separate screening mechanisms that both screen whether direct or indirect foreign investments constitute a threat to Denmark's national security interest or public order, i.e. a mandatory prior authorisation regime in 'particularly sensitive sectors' and a voluntary cross-sectoral notification regime.

In addition, there are a number of sector-specific investment screening regulations that supplement the Investment Screening Act, including the Act on War Material; the Act on the Continental Shelf and Certain Pipeline Installations on Territorial Waters; the Act on Security in networks and Services; and the Act on Supplier Security in the Critical Telecommunication Infrastructure.

The scope of the investment screening act

The Investment Screening Act only applies to investments regarding companies in Denmark. Thus, a transaction involving a foreign target is not subject to the regime even if the foreign target has sales into Denmark. 

While there exists an intra-group exemption, the Authority interprets this exemption very strictly as a result of which the practical significance of the exemption is very limited. In reality, most internal reorganizations, for example the insertion of a new foreign intermediary holding company, are subject to the application of the Investment Screening Act.

The mandatory authorisation regime

As for transactions, the mandatory prior authorisation regime applies to all investments from non-Danish companies and citizens as well as Danish domiciled companies controlled or otherwise owned by foreigners or foreign entities. The regime applies if such an investor acquires a 'qualifying holding' of least 10% of the (i) shares, (ii) voting rights, or (iii) 'similar control by other means' in a Danish company active within one of five 'particularly sensitive sectors'. 'Similar control by other means' covers control over shares or voting rights through agreements, veto rights over certain material decisions, right to appoint board members, asset deals, etc. In addition, a filing is required if the foreign investor increases its 'qualifying holding' to the following thresholds 20%, 1/3, 50%, 2/3, or 100%.

The five 'particularly sensitive sectors' are defined as companies active in:

1. the national defence industry
2. IT security services or the processing of classified information
3. manufacturing of dual-use items (as defined in Article 2(1) of Council Regulation (EC) 2021/821)
4. critical technology other than the types mentioned above
5. critical infrastructure 

‘Critical technology’ is defined as:

1. Artificial intelligence or machine learning for autonomous vessels, human imitation, analytics of positioning data, biometric identification
2. Advanced Industrial robotics, including for production robots or for use in the health sector and advanced drone technology
3. Semiconductors used for integrated circuits, including technologies supporting their production
4. Technologies for the protection of cyber and information security with regard to accessibility, integrity and confidentiality in IT systems as well as defence against cyberattacks
5. Space technology for launch of satellites, persons, etc., including communication technologies which support such activities
6. Technologies for industrial energy storage, conversion or transport
7. Quantum technology in connection with quantum computers, quantum sensors, quantum cryptography and quantum communication
8. Nuclear technology, except products used in the health sector
9. Nanotechnology, including advanced graphene materials
10. Biotechnology within synthetic biology
11. 3D-prints for production of components for industrial use

However, there is an exemption for technology developed or manufactured for the purpose of selling products to consumers if such products are readily available, including toys and consumer goods.

‘Critical infrastructure’ is defined as ‘infrastructure - including facilities, systems, processes, networks, technologies, assets and services - that are necessary to maintain or restore functions that are of essential importance’. Overall, the Authority has interpreted this sector very broadly and found that suppliers and sub-suppliers to the infrastructure providers may be covered. The sectors/areas that have certain underlying functions of essential importance are:

1. energy
2. information and communication technology
3. transport
4. emergency preparedness and civil protection
5. health
6. drinking water and food
7. wastewater and waste collection
8. finance and economies
9. meteorology
10. exercise of public authority in general
11. general crisis management

In practice, it can be very difficult to analyse whether an investment is considered as within 'critical technology' or 'critical infrastructure'. Thus, for these sectors the Authority allows a 'pre-screening' where the Authority issues an opinion as to whether the investment is covered by the regime – and thus whether an investment requires a full filing – or not.

In addition to the mandatory regime applicable to actual investments and acquisitions, non-EU/EFTA entities entering into so-called ‘special financial agreements’ such as joint ventures, supply agreements and operating or service agreements with companies active within the five 'particularly sensitive sectors' are covered by the mandatory regime, if the foreign investor gains control of or significant influence over the Danish entity.

The mandatory regime also applies to 'greenfield' investments. However, the investment is exempt if (i) the newly established company is not a subsidiary of a foreign investor, and (ii) the foreign investor's investment (both inflow of equity, certain loan financing etc.) does not exceed DKK 75 million in the first three fiscal years after establishment.

The voluntary notification regime

In addition to the mandatory regime, a separate voluntary notification regime applies to non-EU/EFTA investors who directly or indirectly acquire control of at least 25% in Danish companies. Unlike the mandatory regime, this is a cross-sectoral regime that applies to any Danish entity, if the transaction or 'special financial agreement' may pose a threat to national security or public order.

Review procedure and enforcement

The two-phased review procedure is identical for both regimes. In the first phase, the information required is less detailed, and the Authority has 45 calendar days to process the case starting from the day on which the Authority has declared the filing complete. Most cases are concluded in phase 1. If the Authority finds that a transaction may pose a threat to national security or public order, the Authority initiates an in-depth phase 2 examination that entails a new 125 calendar day review period (starting from the renewed declaration of completeness, after the parties have provided additional information and a completed EU Form B). If the Authority is not able to approve the investment or 'special financial agreement' (with or without remedies), the Authority submits the transaction or 'special financial agreement' to the Minister for Industry, Business and Financial Affairs to decide. However, failure to issue a decision within these deadlines does not constitute automatic approval.

If an investment is subject to the mandatory authorisation regime, closing is not permitted before the transaction or 'special financial agreement' has been approved. However, investments or 'special financial agreement' subject to the voluntary notification regime may be closed before approval, unless the Authority imposes a temporary injunction against closing. If a transaction or 'special financial agreement' has not been approved and the authorities find that it is a threat to national security or public order, the authorities may issue an order to unwind the investment. As of September 2024, only one known transaction has been prohibited, but that transaction was subsequently authorized upon re-filing. The Investment Screening Act is currently not sanctioned with fines. 

The responsibility for filing lies with the foreign investor and joint filings can be submitted in case of multiple investors or targets. There is currently no filing fee. The process is strictly confidential: no public announcements are made and the general rules on access to documents (the Danish Access to Public Administration Files Act) do not apply to the Investment Screening Act. However, the Authority will share information with other relevant sectoral Danish ministries and authorities. In a phase 2 procedure, the Authority will also share the EU Form B with the other EU Member States.

Bart Creve, Partner (Copenhagen)
bcr@kromannreumert.com

Andreas Riis Madsen, Associate, Advokat (Aarhus) 
anrm@kromannreumert.com

Simon Emborg Kristensen, Assistant Associate, Advokatfuldmægtig (Aarhus)
siek@kromannreumert.com