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Denmark’s Financial Regulatory Bodies: Understanding the Scope of the Investment Screening Act
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As Denmark continues to attract foreign investment, it is essential for businesses and investors alike to understand the scope of the country’s financial regulatory bodies. The Danish Investment Screening Act was implemented on July 1, 2021, with new amendments coming into force on July 1, 2023. Despite this, many are still unclear about the scope of the act.
Mandatory Screening
The act gives Danish authorities the power to prohibit investments in Danish targets and the completion of certain contracts if they pose a threat to national security and public order. The scope of the act includes mandatory screening of investments made by foreign investors in Danish companies or special financial agreements with companies operating within sensitive sectors.
Sectors Covered
- Defense
- IT Security
- Dual-Use Items
- Critical Technology
- Critical Infrastructure
Factors for Mandatory Screening
The determination of whether an investment falls under mandatory screening depends on three factors:
Factor 1: Foreign Investor
- A foreign entity or citizen
- A Danish entity owned by a foreign entity or citizen
Factor 2: Investment or Special Financial Agreement
- Results in direct or indirect control of the Danish company
Factor 3: Sector and Activities
- The target operates within sensitive sectors (listed above)
These factors are cumulative, meaning all three must be fulfilled for the investment to be subject to screening.
Screening Process
If an investment or agreement falls under mandatory screening, it may not be completed prior to obtaining approval from the Danish Business Authority. The authority will initiate a two-phase screening process:
Phase 1: Initial Screening (45 days)
- Conclusion on whether the investment or agreement poses a threat to national security and public order
Phase 2: Detailed Screening (125 days)
- Review of the investment or agreement in more detail
Consequences of Non-Compliance
Failure to apply for the required authorization or obtain approval prior to completion can result in the authority reviewing the investment up to five years after its completion and potentially deeming it must be reverted.
Contact Information
For any questions regarding Denmark’s financial regulatory bodies and the Investment Screening Act, please contact: Tina Aae Jeppesen
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