NB: Be aware that due to changed legislation in Denmark, then from 8 April 2019, the IVS is not longer an optional company structure.
Denmark has a relatively new type of limited liability company called an IVS. IVS stands for Iværksætterselskab, and is an entrepreneurial limited company. While, in the past, private limited companies called ApS’s (Anpartsselskab) have been preferred, in recent years, IVS’s have grown in popularity. In this article, we’ll explain why, and we’ll walk you through how to prepare documentation for an IVS.
How does an IVS differ from an ApS?
The biggest difference between an IVS and an ApS is that, while a traditional ApS necessitates a normal capital requirement of 50.000 DKK, all the requirements for the equity capital are already established when you start an IVS company. Basically, all you need is a single Danish Krone (1 DKK) to get your company off the ground, with a second requirement stipulating that 25% of your annual revenue must be saved, until you’ve acquired a reserve of 50.000 DKK.
The equity capital for the IVS can be anywhere from 1-49.999 DKK. Whatever the amount you start with for capital, you must save 25% of your revenue until you’ve deposited 50.000 DKK. You can then change the type of the company to an ApS if you wish, or it can remain an IVS. The rules that regulate IVS’s are more or less the same as those that regulate ApS’s, so the main benefit with an IVS is the capital requirement.
Another difference between the two is that IVS’s require cash equity only, while with other types of companies – like the ApS or the big one, the A/S –, you can also use assets to serve as your deposit in lieu of cash. You can offer anything from a car to a machine as equity – essentially, anything that could be worth the capital you need. But with an IVS, it’s cash only.
So to sum up, while an ApS requires 50.000 DKK to start but allows assets to serve as equity, an IVS requires cash but can be established for 1 DKK. In addition, you are required to save up 25% of your annual revenue with an IVS, until 50.000 DKK has been built in your bank account.
Like the ApS, an IVS is a limited liability company, so if you’ve started, for instance, with 1 DKK, then your liability is limited to 1 DKK. You still need to make an annual report, and you still need to submit a tax declaration, which is no different from an ApS. Additionally, following the same rules as the ApS, no audit is required for the small IVS’s.
What you need to get started with an IVS
So now that you’ve chosen to go the IVS route, what do you need to get started?
✓ Company name
✓ IVS surname for documentation
✓ Choose 5 additional names
✓ Contact details
✓ Choose managing director
✓ Choose board members, where applicable
✓ CPR/CVR number
✓ Date for commencement of IVS activities
✓ Company concept & paragraph statement
✓ Designate signee for legal documents
✓ Amount of equity capital
✓ Letter of incorporation
✓ Company deed
✓ Documentation of proof for equity capital
✓ Register at the Public Owner Registry in Denmark
First and foremost, you must choose a company name. When you write the company name on an invoice or in other daily use, then you must add the surname – IVS (or the full name, “Iværksætterselskab”, if you prefer) – to indicate to everyone that this is an IVS company. You are also allowed to protect up to five additional names for free; names sounding similar to your company name, for instance. Choose something relevant, like the company name and a city. When you register the company, you may register these five additions, as well.
Apart from the company name and the additional names, an address is required, along with the contact details for those who are establishing the IVS. A managing director must also be chosen, and if you want to have a board of management, the members should be designated. Moreover, the CPR number is required if private individuals are establishing the IVS, while the CVR number is required for a company establishing an IVS. Next, you must designate a date for the commencement of IVS activities. This is important. All establishing documents must reflect this date accurately, otherwise there will be errors in processing.
Additionally, develop the company’s concept and write a paragraph stating what, exactly, you want to do with the business. For example, some write that the company’s main objective is to do trading and other related activities. Consider how you want to write about your company and what the scope of the entire business will be.
Now, as for deciding who will sign all legal documents on behalf of the company, normally in Denmark, the managing director’s signature, alone, is needed. If the company enters into a contract – be it anything from signing up with a phone company to leasing a new car – the managing director will hold the pen. But, in some situations, it is wiser to require two managing signatures, especially if you don’t trust the managing director 100%. Designating two managers as signees will provide some security, and this requirement must be written into the documents when you establish the business.
The last decision you must make and include in your documentation is the amount of equity capital you want, which can be anywhere from 1 kr to 49.999 DKK for an IVS. It’s very tempting to go with 1 DKK, but you should keep in mind that if you spend more than 50% of the equity then you must have a shareholder meeting to develop a plan to reestablish the equity. This is a rule. So when you spend your 1 DKK on the first day – paying for the lawyer, the auditor, the people around you who are assisting you in the process – you’ll be required to have a shareholder meeting. Instead, consider looking at what costs you have. For example, if you have 5.000 DKK in costs for establishing the IVS, then at least 10.000 DKK should be declared as equity, because this is around 50% of your projected costs.
A few more practical tips for an IVS
Along with your application for creating this limited liability company, some practical matters must be attended to. One is the letter of incorporation, which in Danish is called a “Stiftelsesdokument”. In this letter, you outline the basics of your company (names of those starting the company, your date of commencement, etc.), and you also attach the company deed, which is essentially all the different things that regulate the company’s activities. To make this simple, download the templates here.
In addition to the letter of incorporation and the deeds, you must also provide some documentation as evidence that you’ve paid the equity capital. If the capital is small (under 25.000 DKK), which it normally is with an IVS, then you can make a statement on your own. For example, if the money has been paid in cash, simply write on a piece of paper that the payment has been made and is held cash in the company. You can also deposit the money in a bank account, and in that case, write a statement that the money has been paid into the bank account.
If the capital is more than 25.000 DKK, you can either get confirmation of this from the bank, or you can ask a lawyer or an auditor to confirm.
In addition to this, after you’ve registered the business, you need to also register at the registry of owners in Denmark or the “public owner registry”. If any single person owns more than 5% of the shares in the IVS, then it needs to be registered.
If you want to have a limited liability company, but you don’t have 50.000 DKK to make a normal ApS, then an IVS is a great alternative. You can find all downloadable documents on our website, and you can also use many of the sites available for establishing one of these businesses.
IVS’s are inexpensive and rather simple, so they’re a great way to jumpstart your company.