Company with personal liability

If you have a personally owned business, such as a sole proprietorship, a personally owned small business (PMV), or a partnership (I/S) with individuals in the ownership circle, ceasing business operations is fundamentally straightforward. In principle, it only requires deregistering the business with the Danish Business Authority (Erhvervsstyrelsen).

If you operate a business with personal liability, the process of closing the business usually, involves several key steps. Here is a general outline of the closure procedure for a business with personal liability:

  1. Decision and Resolution:
    • As the business owner, make the decision to close the company.
    • Hold a meeting or take the necessary legal steps to pass a resolution to close the business.
  2. Inform Stakeholders:
    • Notify employees, customers, suppliers, and other relevant stakeholders about the decision to close the business.
    • Provide clear information on the timeline for closure and any relevant details.
  3. Dealing with Assets and Liabilities:
    • Assess and inventory the company’s assets and liabilities.
    • Develop a plan to sell or transfer assets and settle outstanding debts.
  4. Legal Requirements:
    • Comply with any legal requirements for business closure in your jurisdiction.
    • File the necessary paperwork with government authorities, such as deregistration or dissolution documents.
  5. Employee Matters:
    • Address employment contracts, including providing required notice periods or severance packages.
    • Ensure compliance with labor laws and regulations regarding employee termination.
  6. Tax Obligations:
    • Settle any outstanding tax obligations with the appropriate tax authorities.
    • Cancel or transfer relevant tax registrations.
  7. Closure Documentation:
    • Prepare and maintain documentation related to the closure process, including financial records, legal documents, and communication with stakeholders.
  8. Final Accounts:
    • Close the company’s bank accounts and finalize financial accounts.
    • Obtain any necessary clearances or certificates from regulatory bodies.
  9. Record Keeping:
    • Retain business records for the required period as per legal and regulatory obligations.

Remember that the specific steps and requirements may vary based on the legal and regulatory framework in your jurisdiction. It’s advisable to seek professional advice to ensure a smooth and legally compliant business closure.

Limited liability company

A solvent limited liability company can be dissolved in one of the following ways:

  • Informal dissolution
  • Liquidation
  • Dissolution by declaration

The decision to close the company can be made by the company itself or through a compulsory dissolution based on a request from the Danish Business Authority.

Decision made by the company’s management.

The company’s decision to dissolve the company must be made by the company’s management and decided upon by the company’s shareholders at the general meeting.

Compulsory dissolution upon request from the Danish Business Authority

A compulsory dissolution occurs when a company is forced to close and thereby cease to exist as a legal entity. According to company Act, a company must fulfill various obligations. In cases of non-compliance with these obligations, the Danish Business Authority has the option to request the court to dissolve the company.

Most compulsory dissolutions arise from:

  • The company failing to submit an approved annual report to the Danish Business Authority on time.
  • The company not having the management or registered address as prescribed by law or in the company’s articles of association.
  • The company not registering legal and beneficial owners.
  • The company not appointing an auditor in situations where it is required to undergo an audit.
  • The company not addressing lost share capital.

The Danish Business Authority initially requests the company to rectify the situation and provides a deadline for compliance. If the company does not respond to this request, the Danish Business Authority asks the court to enforce compulsory dissolution.

Compulsory dissolution of a company can, unless the company is resumed or is insolvent, occur in the following ways:

  • Informal dissolution
  • Liquidation

The court decides on the dissolution of a company through informal dissolution if the company does not possess assets to finance the dissolution process or if there is no one willing to provide security for these costs. In an informal dissolution, the company is dissolved without undergoing a formal dissolution process.

The court decides on the compulsory dissolution of a company through liquidation if it is assessed that the company has assets of such value that they can cover both the costs of the dissolution process and all claims from creditors against the company.


Liquidation is a process by which a capital company, i.e., a limited liability company, is wound up and dissolved. Liquidation can occur voluntarily following the shareholders of the company’s decision.

If the shareholders of the company decides to go through liquidation or if, in the case of a compulsory dissolution, the company has assets of a value sufficient to cover the costs associated with the dissolution process, the liquidation must take place according to the rules stipulated in the Company Act.

Selection of a liquidator

After the decision to enter liquidation has been made, a liquidator must be appointed. The liquidator must be an adult, natural person who is not under guardianship and has not been a member of the company’s board.

Once appointed, the liquidator takes over the management of the company and is tasked with liquidating the company’s assets and settling its creditors. The liquidation process must be reported to the Danish Business Authority in this regard.

The process for a voluntary liquidation

Subsequently, the liquidator encourages all of the company’s creditors to submit their claims to the liquidator. The liquidator then disposes of the company’s assets and pays all creditors with claims against the company. The process must run for a minimum of three months before it can be concluded, allowing creditors time to submit their claims.

Upon the completion of the liquidation, the liquidator prepares a liquidation account, demonstrating that all creditors have been paid, and all assets have been sold. The liquidation account serves as the company’s final financial statement, covering the period from the latest annual report until the conclusion of the liquidation.

The company holds a final general meeting where the liquidation account is approved, and the liquidation is officially concluded. Subsequently, the company ceases to exist, and the shareholders receive any dividend —what remains after creditors have been paid, and liquidation expenses have been covered.

Dissolution by declaration/ Payment declaration

Dissolution by payment declaration is a fast, simple, and typically cost-effective method for closing companies with no activity and uncomplicated affairs. The method can also be applied to companies that have voluntarily entered into liquidation. However, it cannot be used for companies subjected to compulsory dissolution.

The simplicity of the method is counterbalanced by the fact that shareholders (owners) are personally, jointly, and severally liable for all debts, whether due or not, that existed at the time of issuing the payment declaration. This includes debts not known at that time.

The dissolution of the company through the payment declaration occurs when the shareholders decide to implement it.

Subsequently, the company’s management ensures the necessary filings with the tax authorities, notifies the Danish Business Authority of the cessation of business obligations, obtains a tax receipt from the tax authorities, and prepares a payment declaration stating that all debts of the company have been settled, and the company has been decided to be dissolved.

Once both the tax receipt and payment declaration are obtained, the company can be registered as ceased.

Get professional advice from a law firm.

At Virtus Law, we have many years of experience advising our clients on both solvent dissolutions and dissolutions in cases where the company, upon settling its assets and liabilities, may prove to be insolvent and instead needs to be handled according to the insolvency rules for company dissolution.

Our extensive experience and expertise in corporate law and insolvency law enable us to quickly understand your case and find the best solution for you.

If you require our assistance, please contact attorney Michael Schlichter.

/Authored by Assistant Attorney Thomas Bjerregaard