New bill aims to promote employee ownership

The Ministry of Business and Industry submitted a bill for consultation on 27 June 2025, which will allow for a generational change to a newly established, employee-owned company. If the rules are adopted, it will be possible to implement a generational change to employees without transfer taxation on the business transfer.

The bill aims to promote employee ownership

The new bill, which is part of the Entrepreneurship Package from 2024, introduces a new model for generational change with tax succession. The purpose of the bill is to facilitate both the taxation of owner-managers upon the transfer itself and the employees’ financing of the business takeover.

The Ministry of Business and Industry expects that many business owners will have to transfer their businesses, as approximately 18,300 business owners with five or more employees will reach retirement age before the end of 2036. The Danish business community is therefore facing a significant generational change, and the bill is therefore extremely relevant.

It is expected that the bill will enter into force with effect from 1 January 2026.

The tax legislation framework for generational change in Denmark

Today, Danish tax law allows a company to be transferred by tax succession to children, grandchildren, siblings, siblings’ children, siblings’ grandchildren or a cohabitant with whom the transferor has had a common residence for at least two years. Under certain conditions, the generational change can also be carried out by transfer to close employees, former owners or commercial foundations.

Tax succession means that the transferee takes over the transferor’s tax position. This means, for example, that the transferee takes over the transferor’s purchase price, depreciation basis, speculative intentions, etc. Tax succession thus means that the final transfer tax is postponed.

The proposed scheme

Today, it is not possible to transfer a business with tax succession to the company’s employees, unless these are close employees .

The proposed bill aims to change this by establishing a scheme where the business owner can transfer shares to a newly founded company owned by the employees with tax succession. According to the preparatory work for the bill, the model is intended as a supplement to the existing exit methods, where financing and transaction costs can constitute a barrier to employee takeovers.

It is particularly noteworthy that the model can be used without the employees having to finance the purchase with their own funds – instead, payment of the purchase price can be made with future years’ profits in the transferred company.

The scheme facilitates ownership change processes, while at the same time ensuring the retention and further development of Danish workplaces, where the alternative would otherwise be closure or sale to foreign buyers. The continuity and stability of the company is thus strengthened by anchoring ownership of the company in the employee circle.

The design of the scheme

If a business owner wishes to carry out a generational change to an employee-owned
business, the business owner must first make an offer to all employees in the participating company. Access to join must apply to the entire group of employees, and conditions associated with joining, such as payment of deposits, must be based solely on objective criteria such as seniority, annual salary or working hours.

If the employees accept the offer and the resulting valuation of the company, an employee-owned company is immediately established, in which the capital shares in the participating company are paid in. It is assumed that at least five participants, who together constitute more than half of the employees in the participating company and any subsidiaries, must participate in the establishment of the employee-owned company.

The employee-owned business must be established as a limited liability entity (AMBA or FMBA) and have the purpose of wholly or partly owning the company in which the employees are employed. An existing business cannot be used, and each participant in an employee-owned business must have one vote at the company’s general meeting.

Upon the first transfer of shares, at least 25% of both the shares and voting rights in the participating company must be transferred. The employee-owned company must have both administrative and economic rights corresponding to the transferred shares – this means, among other things, that the shares must not be subject to restrictions on the right to dividends or to vote.

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