Implications of Companies Filing Late Annual Reports in Denmark

What are the Implications of Companies Filing Late Annual Reports in Denmark in 2024?

Annual reports are essential documents for limited liability companies like the ApS and the A/S in Denmark.

These annual reports provide comprehensive visions of a company’s financial performance, operational activities, and compliance with legal requirements.

They serve as an evident source of information for stakeholders.

In this blog, we will look at the potential implications and consequences that limited liability companies in Denmark (ApS and A/S) may face for submitting their annual reports late.

Understanding the risks associated with late filing can help business owners take proactive measures to ensure compliance and avoid unnecessary penalties or reputational damage.

Deadline for Submitting Annual Reports (ApS and A/S)

The Legal Deadline for Submitting Annual Reports in Denmark

The submission of annual reports for limited liability companies in Denmark (ApS and A/S) is administered by the Danish Financial Statements Act (in Danish “Årsregnskabsloven”).

According to the Danish Financial Statements Act (DFSA), limited liability companies must turn in their annual reports to the Danish Business Authority (Erhvervsstyrelsen) within six months after the end of their financial year.

For most companies that follow the calendar year as their financial year (1 January to 31 December), the deadline for submitting the annual report is 30 June of the following year.

However, it’s important to note that companies with different financial year-end dates will have a conforming deadline that will fall six months after their financial year-end.

Importance of Adhering to the Deadline

Following the legal deadline for submitting annual reports is of utmost importance for limited liability companies in Denmark for these reasons:

1. Compliance with regulations: The DFSA requires the timely submission of annual reports in Denmark. Failure to comply with this legal requirement institutes a violation of Danish company law, which can result in legal penalties or even criminal charges in severe cases;
2. Transparency and accountability: Annual reports serve as a significant source of information for stakeholders about the company’s financial performance, operations, and compliance with relevant laws and regulations. Late filing can destabilise transparency and raise concerns about the company’s commitment to accountability, potentially eroding trust and damaging its reputation;
3. Accessing financing: Lenders and investors often rely deeply on a company’s annual reports as part of their due conscientiousness process when evaluating possible financing or investment opportunities. Late filing may be interpreted as a red flag, indicating potential financial or operational matters, making it more difficult for the company to secure financing or negotiate favourable terms;
4. Shareholder confidence: Late filing of annual reports can raise concerns about transparency and accountability for companies with shareholders, potentially leading to disagreements or legal actions from shareholders who depend on timely and accurate financial information to make informed decisions about their investments.

Annual Report Submission Requirements in Denmark in 2024

What is an annual report?

An annual report is a comprehensive document that provides a detailed overview of a company’s financial performance, operations, and compliance with relevant laws and regulations during a specific financial year.

It serves as a significant means of transparency and accountability, which allows stakeholders to assess the company’s financial health, strategic direction, and overall management.

For limited liability companies in Denmark, the annual report typically consists of the following key components:

1. Management’s review: This section includes an overview of the company’s activities, significant events, future plans, and any other relevant information that provides context for the financial statements;
2. Financial statements: This is the core component of the annual report and includes the company’s income statement, balance sheet, and explanatory notes;
3. Auditor’s report: For companies subject to statutory audit requirements, an independent auditor’s report must be included, providing an opinion on the fairness and accuracy of the financial statements;
4. Other disclosures: Depending on the company’s specific circumstances, additional disclosures may be required, such as information on corporate governance, risk management, controlled transactions, shareholder loans, or environmental and social responsibility initiatives.

What are the legal requirements for limited liability companies in Denmark in 2024?

In Denmark, the preparation and submission of annual reports for limited liability companies are governed by the Danish Financial Statements Act (Årsregnskabsloven).

This act outlines specific requirements and guidelines that companies must follow ensuring compliance with Danish accounting and reporting standards.

Some of the key legal requirements for annual reports include:

1. Adherence to the Danish Financial Statements Act (DFSA) or International Financial Reporting Standards (IFRS);
2. Inclusion of all mandatory components, such as financial statements, management’s review, and auditor’s report (if applicable);
3. Approval of the annual report by the company’s management and board (if applicable) at the Annual General Meeting of shareholders (also called the AGM in short);
4. Submission of the approved annual report to the Danish Business Authority (called “Erhvervsstyrelsen”) within the prescribed deadline.

Submission Deadlines: Six Months after the end of the Financial Year

As mentioned earlier, the Danish Financial Statements Act (DFSA) requires that limited liability companies must submit their annual reports to the Danish Business Authority within six months after the end of their financial year.

For instance, companies that follow the calendar year (1 January to 31 December) as their financial year must have their deadline for submitting the annual report is 30 June of the following year.

It’s important that this deadline applies to the submission of the complete and approved annual report to the Danish Business Authority.

Companies may have internal deadlines and processes for preparing, reviewing, and approving the annual report before the final submission.

Moreover, failure to comply with these requirements can result in legal penalties, reputational damage, and potential difficulties in accessing financing or maintaining good standing with the Danish Business Authority.

Initial Steps When Deadline is Missed

The Role of the Danish Business Authority

The Danish Business Authority (Erhvervsstyrelsen) plays a significant role in monitoring and administering the timely submission of annual reports by limited liability companies in Denmark and also regulate the implications of Companies Filing Late Annual Reports in Denmark.

As the regulatory body responsible for overseeing compliance with the Danish Financial Statements Act (DFSA), the Danish Business Authority has established procedures to address cases where companies fail to meet the submission deadline.

Description of the Demand Letter Sent to the Company’s Digital Mailbox “e-Boks”

The Danish Business Authority will initiate a process to prompt the company to take disciplinary action if a limited liability company misses the deadline for submitting its annual report.

This process begins with the issuance of a demand letter, which is sent to the company’s digital mailbox (“e-Boks”).

The demand letter serves as a formal notification and includes the following details:

8-day Warning Period

The demand letter provides an initial 8-day warning period for the company to submit the overdue annual report.

During this period, no penalties or fines are imposed, allowing the company a short grace period to rectify the situation immediately.

During this warning period, the company should evaluate the reasons for the delay, gather the necessary financial information, and work towards completing and submitting the annual report as soon as possible.

Prompt action is essential to mitigate the potential consequences of non-compliance.

4-week Grace Period

If the company fails to submit the annual report within the 8-day warning period, the demand letter grants an additional 4-week grace period.

This extended grace period is designed to give the company sufficient time to prepare and submit the annual report while avoiding immediate penalties.

During the grace period, the company should prioritise the completion and submission of the annual report, addressing any outstanding issues or challenges that may have contributed to the initial delay.

It is crucial for the company to communicate with the Danish Business Authority, providing updates on the progress towards compliance and seeking any necessary guidance or assistance.

It’s important to note that the Danish Business Authority closely monitors the company’s compliance during these grace periods.

If the company still fails to submit the annual report by the end of the 4-week grace period, the Danish Business Authority will proceed with imposing penalties and escalating the matter further.

Financial Penalties for Late Submission

What are the potential fines imposed by the Danish Business Authority in 2024?

When a company fails to submit its annual report on time in Denmark, the Danish Business Authority imposes financial penalties to encourage compliance with reporting obligations.

These fines are intended to incentivise timely compliance and deter repeated violations of the Danish Financial Statements Act.

Detailed Breakdown of Fines Imposed on Management

The fines for late submission of annual reports in Denmark are primarily levied on the company’s management, which includes the members of the executive management board (the directors) and the supervisory board (if applicable).

The fines escalate based on the number of months the annual report is overdue:

500 DKK for the first month late

If the annual report is not submitted within the initial 8-day grace period granted by the Danish Business Authority, each member of the management will be fined 500 DKK for the first month of non-compliance.

2.000 DKK for the Second Month Late

If the annual report remains outstanding after the first month, the fine increases to 2.000 DKK per management member for the second month of non-compliance.

3.000 DKK for the Third Month Late

In the event that the annual report is still not submitted after two months, the fine escalates further to 3.000 DKK per management member for the third month of non-compliance.

This is the maximum fine per director.

Cumulative Impact on Multiple Management Members

The financial penalties for late submission of annual reports can have a significant cumulative impact for companies with multiple management members.

For example, if a limited liability company has three members on its executive board, the total fines would be calculated as follows:

1. First month late: 3 management members × 500 DKK = 1.500 DKK
2. Second month late: 3 management members × 2.000 DKK = 6.000 DKK
3. Third month late: 3 management members × 3.000 DKK = 9.000 DKK

In this scenario, if the annual report is three months overdue, the combined fines for the three management members would amount to 9.000 DKK in total.

Fine for late submission of Corporate Income Tax Return

Also, it is worth noting that very often when the annual report is late, also the Corporate Income Tax Return is late.

Submitting the Corporate Income Tax Return late will impose an additional fine of up to 5.000 DKK.

This fine is for the company and not the director.

Potential Legal Consequences

Compulsory Liquidation Process

In cases of persistent and severe non-compliance with the Danish Financial Statements Act, the Danish Business Authority (Erhvervsstyrelsen) has the authority to initiate a compulsory liquidation (forced dissolution) process against the company.

Compulsory liquidations are the most serious implications of Companies Filing Late Annual Reports in Denmark.

This process may ultimately lead to the forced dissolution of the company if compliance is not achieved.

The process typically unfolds as follows:

What are the steps leading to the forced dissolution of the company?

The path towards forced dissolution of a limited liability company due to non-compliance with annual report submission requirements involves several steps:

1. Notification of non-compliance: The Danish Business Authority issues a formal notification to the company, informing them of their non-compliance with the Danish Financial Statements Act and the potential consequences, including compulsory liquidation;
2. Deadline for compliance: The notification will specify a deadline, typically 4 weeks, for the company to submit the overdue annual report and rectify the non-compliance;
3. Failure to comply within the deadline: If the company fails to submit the required annual report by the specified deadline, the Danish Business Authority will initiate compulsory liquidation proceedings;
4. Petition to the Bankruptcy Court: The Danish Business Authority files a petition with the relevant Bankruptcy Court (called “Skifteretten”), requesting the court to order the compulsory liquidation of the company;
5. Court hearing: The Bankruptcy Court will schedule a hearing, during which both the Danish Business Authority and the company’s representatives (if present) can present their cases;
6. Court ruling: After reviewing the evidence and hearing arguments from both sides, the Bankruptcy Court will issue a ruling. If the court deems the non-compliance to be severe and unjustified, it will order the compulsory liquidation of the company;
7. Appointment of a liquidator: Upon the court’s ruling, an independent liquidator will be appointed to oversee the liquidation process. The liquidator is typically a licensed insolvency practitioner or a lawyer specialising in insolvency proceedings;
8. Liquidation process: The appointed liquidator will take control of the company’s assets and operations. They will assess the company’s financial situation, settle outstanding debts and liabilities, and distribute any remaining assets to the shareholders according to their respective ownership stakes;
9. Dissolution of the company: Once the liquidation process is complete and all assets have been distributed or liabilities settled, the company will be officially dissolved and cease to exist as a legal entity.

NB: Read how an already initiated compulsory dissolution process can be reversed

The role of the Bankruptcy Court

Throughout the compulsory liquidation process, the Bankruptcy Court (“Skifteretten”) may play a supervisory role, particularly in cases where legal proceedings are initiated or when the appointment of a liquidator is necessary.

The court may issue orders, hear arguments from the parties involved, and make decisions regarding the administration and winding up of the company’s affairs.

Additionally, the Bankruptcy Court may adjudicate disputes arising during the liquidation process, determine the validity of claims made by creditors, and ensure that the liquidator fulfils their duties in accordance with the law.

Impact on Management

Personal Liability of Management Members

In Denmark, the members of a limited liability company’s management, including the executive board and supervisory board (if applicable), bear personal liability for the timely submission of annual reports.

This means that the fines and penalties for late filing are imposed directly on the individual management members, rather than the company itself.

Additionally, the Danish Financial Statements Act (DFSA) holds management members personally responsible for ensuring compliance with annual reporting requirements.

Failure to fulfil this obligation can result in significant financial consequences for individual managers.

Risk of being quarantained as a director

In case the late filing results in a compulsory dissolution or even bankruptcy of the company, it is very likely that the director will be quarantained for 2 years.

It means that the person can still be a shareholder in the company, but no longer can act as the director during the quarantine.

In Denmark, having a proxy director is illegal, so if you are both the majority shareholder and director of your company, a situation involving a quarantine could severely impact your daily ablity to conduct business as well as result in costs for hiring a director.

Risk of piercing the veil of the limited liability structure

In situations where a compulsory dissolution ends in a bankruptcy due to the misconduct of the director, in addition to the risk of being quarantined as director, it is also worth considering the risk of piercing the veil of the limited liability structure due to the misconduct, which can result in personal liability for the director for losses.

Tax Implications and penalties if the Company Pays the late fines

The late fine imposed on a director is a personal fine.

If the company pays the fines for a director who is also majority shareholder, it could be considered a shareholder loan, resulting in taxation for the majority shareholder, and result in further penalties (interest) for issuing an illegal shareholder loan according to the Companies Act.

The fine should be paid from the personal bank account belonging to the director.

You can read more about why shareholder loans are problematic here

Reputation Risks for Individual Managers

Beyond the financial implications, late submission of annual reports in Denmark can also have reputational consequences for individual managers.

A company’s failure to comply with reporting requirements may be perceived as a sign of mismanagement or lack of accountability, which can damage the professional reputation of the managers involved.

The reputational damage resulting from late filings can impact individual managers’ professional standing and credibility within the business community.

It may hinder career advancement opportunities, damage relationships with key stakeholders, and undermine trust in their leadership abilities.

Furthermore, if the non-compliance with annual reporting requirements leads to more severe consequences, such as compulsory liquidation or legal proceedings, the individual managers may face scrutiny and criticism from stakeholders, including shareholders, creditors, and regulatory authorities.

Possible Exemptions and Postponements

While the Danish Financial Statements Act (DFSA) requires strict compliance with annual report submission deadlines, there are limited scenarios where companies may be granted exemptions or postponements.

These provisions are designed to accommodate exceptional circumstances that may make it challenging for companies to meet the statutory deadlines.

Criteria for Exemptions (e.g., acute illness)

In Denmark, limited liability companies may be eligible for exemptions from certain reporting obligations under exceptional circumstances.

The criteria for exemptions typically include:

1. Acute illness or incapacity: If key personnel responsible for preparing and submitting the annual report are incapacitated due to acute illness or injury, the company may qualify for an exemption from the reporting requirements. Documentation, such as medical certificates or doctor’s notes, may be required to support the exemption request;
2. Force majeure events: Exceptional events beyond the company’s control, such as natural disasters, severe weather conditions, or political unrest, may warrant exemptions from reporting obligations. Evidence demonstrating the impact of the force majeure event on the company’s ability to comply with reporting deadlines may be necessary;
3. Technical or administrative issues: Unforeseen technical or administrative issues, such as system failures, data breaches, or government shutdowns, that impede the timely preparation and submission of the annual report may justify exemptions. Documentation detailing the nature and duration of the issues may be requested;
4. Other circumstances: In rare cases, other exceptional circumstances that significantly hinder the company’s ability to fulfil reporting obligations may be considered for exemptions. Each case is evaluated based on its merits, and documentation supporting the justification for the exemption may be required.

Required Documentation for Postponements

In cases where a company anticipates challenges in meeting the annual report submission deadline due to legitimate reasons, they may request a postponement from the Danish Business Authority.

To apply for a postponement, the company must submit a formal request to the Danish Business Authority, along with supporting documentation that justifies the need for an extension.

The documentation may include:

1. A detailed explanation of the circumstances that prevent timely submission of the annual report;
2. Evidence of ongoing efforts to prepare the annual report, such as work-in-progress documents or correspondence with auditors or advisors;
3. A proposed timeline for completing and submitting the annual report;
4. Any other relevant supporting materials that substantiate the company’s request for a postponement.

What are the limited scenarios where postponements are granted?

Postponements of annual report submission deadlines in Denmark are granted only under limited scenarios where compliance with reporting obligations is genuinely impractical or impossible due to exceptional circumstances.

These scenarios may include:

1. Significant changes in ownership or management structure: If the company has recently undergone a substantial change in ownership or management, which has caused disruptions or delays in the preparation of the annual report, a postponement may be granted;
2. Complex financial transactions or restructuring: Companies involved in complex financial transactions, mergers, acquisitions, or restructuring processes may require additional time to ensure accurate and complete reporting;
3. Unexpected emergencies: Sudden and unforeseen emergencies, such as natural disasters, accidents, or health crises, that disrupt normal business operations and prevent the timely completion of the annual report;
4. Force majeure events: Extraordinary events beyond the company’s control, such as acts of terrorism, civil unrest, or government interventions, that render compliance with reporting deadlines impractical or impossible.

Proactive communication with the Danish Business Authority and adherence to established procedures are key to successfully obtaining exemptions or postponements and avoiding the consequences of late submission of annual reports.

Broader Implications of Late Submission in Denmark

Late filings can have a ripple effect on various aspects of a company’s operations, reputation, and stakeholder relationships.

Damage to Company’s Reputation with Banks and Trading Partners

Late submission of annual reports can have detrimental effects on a company’s reputation, particularly with banks and trading partners.

These key stakeholders rely on timely and accurate financial information to assess the company’s creditworthiness, financial health, and reliability as a business partner.

1. Loss of trust: Banks and trading partners may perceive late submission of annual reports as a sign of poor financial management, lack of transparency, or even potential financial distress. This can erode trust and confidence in the company’s ability to meet its financial obligations;
2. Negative perception: Late filings may signal to banks and trading partners that the company is disorganised, negligent, or indifferent to regulatory requirements. This negative perception can impact future lending decisions, credit terms, and business relationships;
3. Increased scrutiny: Companies with a history of late submissions may face increased scrutiny from banks and trading partners, leading to more stringent requirements, higher interest rates, or reduced access to credit and trade finance facilities.

Risks of Reduced Investor and Creditor Confidence

Investors and creditors heavily rely on timely and accurate financial information to make informed decisions about their investments or lending activities.

Late submission of annual reports can erode investor and creditor confidence in the company, as it raises concerns about the company’s ability to provide transparent and up-to-date financial data.

1. Investor scepticism: Delayed annual reports may raise concerns among investors about the company’s financial stability, management credibility, and commitment to transparency. This can lead to scepticism, reluctance to invest, or even divestment from the company’s securities;
2. Credit risk assessment: Creditors, including banks, bondholders, and suppliers, use annual reports to evaluate the company’s credit risk and determine credit terms, loan covenants, and trade credit limits. Late submissions may hinder accurate credit risk assessment and result in more conservative lending or trade terms;
3. Market perception: Late filings can create negative perceptions in the financial markets, affecting the company’s stock price, credit ratings, and overall market reputation. This can impact the cost of capital, investor sentiment, and long-term competitiveness in the marketplace.

Lack of Timely Financial Data for Effective Company Management

Annual reports serve not only as a compliance requirement but also as a critical tool for effective company management.
The financial data and operational insights presented in these reports inform strategic decision-making, budgeting, forecasting, and performance evaluation processes.

1. Strategic Planning: Annual reports provide essential insights into the company’s financial position, profitability, and cash flow dynamics, enabling management to formulate and execute strategic plans effectively;
2. Resource Allocation: Timely financial information guides resource allocation decisions, such as budgeting, investment prioritisation, and cost management, ensuring optimal use of company resources and alignment with strategic objectives;
3. Risk Management: Late submission of annual reports hampers management’s ability to identify and mitigate financial risks promptly, potentially exposing the company to liquidity challenges, operational disruptions, or compliance issues.

The broader implications of late submission of annual reports in Denmark extend beyond regulatory compliance to impact the company’s reputation, investor and creditor confidence, and effectiveness of company management.

Best Practices for Timely Submission in Denmark in 2024

Importance of Proper Planning and Organisation

Ensuring the timely submission of annual reports requires proper planning and organisation within the company.
Leaving the preparation and submission process until the last minute can lead to errors, omissions, and potential delays.

Prioritising this task and allocating sufficient time and resources can help companies minimise the risks associated with late filings.

1. Clear deadlines: Establishing clear deadlines for the preparation and submission of annual reports in Denmark is essential. Aligning these deadlines with regulatory requirements and internal schedules can help companies provide a framework for accountability and ensure that all stakeholders are aware of their responsibilities;
2. Resource allocation: Adequate resource allocation is paramount to the timely completion of annual reports. This includes allocating sufficient personnel, time, and technological resources to facilitate the reporting process effectively. Consider factors such as the availability of key staff members and external consultants to support the reporting process;
3. Regular monitoring: Regular monitoring of progress towards annual report completion is vital. Implementing checkpoints and review mechanisms allows companies to track the status of key tasks, identify potential bottlenecks, and address any issues promptly. This proactive approach minimises the risk of delays and ensures that the reporting process stays on track.

Measures to Ensure Timely Preparation and Submission of Annual Reports in Denmark

To ensure timely preparation and submission of annual reports, companies can implement several measures and best practices aimed at streamlining the reporting process and minimising the risk of delays:

1: Maintaining Accurate Accounting Records

Accurate and up-to-date accounting records are the foundation for preparing reliable annual reports.

Companies should implement robust processes for recording financial transactions, reconciling accounts, and maintaining supporting documentation throughout the financial year.

This not only facilitates the annual report preparation process but also ensures compliance with applicable accounting standards and regulations.

2: Engaging Professional Assistance (accountants, auditors) if needed

While some companies may have in-house expertise for preparing annual reports, others may benefit from engaging external professionals, such as accountants or auditors.

These professionals can provide valuable guidance, ensure compliance with reporting standards, and streamline the preparation process, reducing the risk of errors or omissions that could lead to delays.

3: Implementing Internal Processes and Reminders

Establishing clear internal processes and setting reminders can help companies stay on track for timely annual report submission.

This may include:

1. Defining roles and responsibilities for various tasks involved in the preparation process;
2. Creating a detailed timeline with milestones and deadlines for each step;
3. Setting up automated reminders or calendar notifications to ensure key dates are not missed;
4. Implementing version control and review processes to facilitate collaboration and minimise errors;
5. Conducting regular progress meetings to identify and address any potential roadblocks or challenges.

Timely submission of annual reports is fundamental to maintaining regulatory compliance, preserving reputation, and supporting effective decision-making within companies operating in Denmark.

Proactive management of the reporting process is key to ensuring transparency, accountability, and long-term success in the Danish business environment.

Late submission of annual reports can have significant implications for limited liability companies in Denmark, including financial penalties, legal consequences, reputational damage, and operational challenges.

Adhering to the legal deadline for annual report submission is paramount for limited liability companies in Denmark.

Timely compliance with reporting obligations enhances trust and credibility with stakeholders, including banks, investors, creditors, and trading partners and helps avoid financial penalties, legal consequences, and reputational damage.

If your company faces challenges with annual report preparation and submission, seeking professional advice can be invaluable.
Consider the following measures:

1. Maintain accurate accounting records. Implement robust accounting practices and software systems to ensure the accuracy and completeness of financial data;
2. Implement internal processes and reminders. Establish clear internal processes, roles, and responsibilities, and utilise reminder systems to stay on track with reporting deadlines;
3. Engage professional assistance (accountants, auditors) if needed. Qualified accounting professionals and external auditors can provide expertise and support in preparing and reviewing annual reports.




(This blog was updated: 30.6.2024)




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