On 7 January 2020 Nasdaq Copenhagen announced an update to its issuer rules, introducing a requirement that a request for de-listing by an issuer of shares must be approved by 90% of the votes cast and share capital represented at a general meeting of the issuer in question. The new rules constitute a significant change compared to previous practice and case law, where an issuer generally was entitled to de-listing upon request, and take effect as of 15 February 2020.

With the introduction of the Danish Capital Markets Act, de-listing at the request of an issuer ceased to be regulated by Danish legislation as of 3 January 2018. The previous rules stated that an issuer was generally entitled to de-listing, provided that such would not likely be of significant detriment to the interests of the investors or the proper functioning of the market. In a landmark decision of 15 August 2016, the Danish Company Appeals Board had ruled that the usual consequences of a de-listing, i.e. different disclosure obligations and access to trade on a regulated market, did not constitute such significant detriment. Accordingly, de-listing could generally be resolved by the general meeting of the issuer, with a majority of no more than 2/3 of the votes cast and share capital represented.

Following the introduction of the Capital Markets Act, Nasdaq Copenhagen announced that the previous practice would be upheld for the time being, but that the need for regulation in the issuer rules would be considered.

These rules have now been adopted as new Rule 2.9.1 – 2.9.4, and generally require that the following conditions must be met, before Nasdaq Copenhagen will grant a request by an issuer for de-listing of shares:

1. The resolution must have been adopted by the general meeting of shareholders and passed by at least 90% of the votes cast as well as at least 90% of the Share Capital represented at the general meeting.
2. Disclosure must have been made of the notice of the general meeting, the agenda setting out the proposed resolution, the main consent of the proposed resolution and a description of the consequences for the shareholders of the de-listing.
3. The shareholders must receive an offer to dispose of their shares during a period of at least four weeks after the approval of the de-listing. The shareholders must be offered a reasonable level of compensation and its terms must be stated in the notice of the general meeting. Nasdaq Copenhagen reserves the right to deny a request for de-listing in case of an obviously unreasonable offer price.

It should be noted that similar restrictions are not imposed with respect to other types of instruments.

The above requirements do not apply where a request for de-listing is made in the following cases:

1. If a shareholder is entitled to acquire all outstanding shares by way of compulsory redemption. Pursuant to the Danish Companies Act, a single shareholder must thus possess more than 9/10 of the total votes and shares of the issuer.
2. If the shares are being admitted to trading or are admitted to trading on another regulated market or equivalent market.
3. If the Issuer ceases to exist as a result of dissolution, merger, de-merger or bankruptcy.

The reason for the previous legislation being repealed was that it was considered to over-implement EU legislation and was not deemed necessary to uphold investor protection. It is therefore interesting that while the intent of the legislation was to de-regulate the area and reduce the burdens on businesses, Nasdaq Copenhagen has chosen to increase regulation and requirements.

When considering the new rules, it is also important to make a distinction between de-listing and compulsory redemption of shares. De-listing does not affect the ownership rights or other rights attaching to the shares, and it is therefore natural that this has so far not been subject to special majority requirements. On the other hand, compulsory redemption results in the ownership rights being transferred, thus requiring a shareholder wishing to carry out such to hold more than 90% of the votes and shares of the issuer. Nasdaq Copenhagen’s new rules are obviously inspired by provisions of Danish company law that require a lesser majority, i.e. 90% of the votes and shares represented on the general meeting and not the total issued shares. However, these provisions generally relate to limitations in rights attaching to the shares, and are thus not comparable to a de-listing scenario.

Also, from a principal legal perspective, the introduction of the rules raises a number of concerns with respect to other Danish legislation, and the extent the new provisions can be implemented on a contractual basis without statutory authority. From a Danish capital markets law perspective, the rules may thus be considered measures similar to restrictions on the transferability of shares, which are generally not permitted. Also, Danish company law outlines the provisions that require the 90%-majority, and it is questionable whether these may be expanded by way of an agreement without the consent of the general meeting, thus limiting the rights of the majority of shareholders. The unique position of Nasdaq Copenhagen as the sole regulated market in Denmark also raises competition law issues, especially since the rules may be construed as especially burdensome termination provisions in a contract between the private company Nasdaq Copenhagen and the issuer. With respect to general principles of Danish contract law, it is questionable whether such specific restrictions on de-listing can be upheld, considering that it affects a majority of shareholders and that the decision to list shares is not subject to similar requirements.

We note that the rules leave room for legal arbitrage, since asset sales, mergers and de-mergers are not comprised by the 90% majority requirement.