The IVS abolished: what did it mean, and what do you do today?

The entrepreneurial company (iværksætterselskab, IVS) was a popular business form for entrepreneurs who wanted the limited liability of a private limited company (ApS) without the requirement of a large starting capital. From 2014 to 2019 you could form an IVS with just DKK 1 in capital.

But in 2019 that came to an end. The IVS form was abolished, and existing IVS companies had to either re-register as an ApS or close within a deadline that expired in 2021. That deadline has long since passed, and today it is no longer possible either to form a new IVS or to re-register an old one. This guide explains what happened, what it meant for owners, and which business forms you can choose instead today.

What was an IVS?

The IVS was introduced in 2014 as a business form with limited liability and a very low capital requirement, inspired by similar "mini-companies" in other European countries.

With DKK 1 in capital you could form a company with limited personal liability. In return, at least 25% of the company's profit had to be set aside on an ongoing basis to a bound reserve until the reserve and the share capital together reached the capital requirement for an ApS.

The IVS quickly became widespread among startups and solo entrepreneurs. But the form also brought challenges:

• Many IVS companies were in reality "empty shells" with no activity
• Creditors and banks often regarded an IVS as less credible than an ApS
• The Danish Business Authority saw an over-representation of IVS companies in cases of fraud and missing financial reporting

The result was the 2019 amendment that abolished the IVS as a business form.

What happened to existing IVS companies?

The abolition and the re-registration deadline

From April 2019, no new IVS companies could be formed. Existing IVS companies were given a transitional period to re-register as an ApS. Because of COVID-19 the deadline was extended from 15 April 2021 to 15 October 2021.

The rules for re-registration were relaxed at the same time: an IVS could be re-registered as an ApS simply by increasing the share capital to a minimum of DKK 40,000 (then the capital requirement for an ApS; today DKK 20,000). It was thus enough to pay in the difference between the IVS's registered share capital and the DKK 40,000. There was no longer a requirement that equity at least matched the share capital, so companies with negative equity could also re-register. An auditor's statement on the presence of the capital was no longer necessary for a cash contribution; only for a contribution in kind (assets rather than cash) did a valuation report have to be prepared.

Compulsory dissolution of IVS companies that missed the deadline

IVS companies that had not been re-registered as an ApS by the deadline were sent for compulsory dissolution before the probate court. This affected thousands of companies, and the consequences for owners could be serious:

• Compulsory dissolution is carried out through the probate court
• If you continue operations in a company under compulsory dissolution, you can become personally liable for debt incurred afterwards
• In serious cases it can lead to a bankruptcy disqualification (konkurskarantæne)

Can I still re-register my IVS?

No. The re-registration deadline expired in the autumn of 2021, and it is no longer possible today to convert an IVS to an ApS. The IVS no longer exists as a business form; all companies have either been re-registered as an ApS or compulsorily dissolved.

If, exceptionally, you still have unresolved matters after a dissolved IVS, for example a claim of personal liability or a pending probate case, you should seek legal advice as soon as possible. Contact a lawyer specialising in company law and insolvency.

What do you do with a company under compulsory dissolution?

Continuing operations in a compulsorily dissolved company is not just a problem; it can be a criminal offence. The consequences can be:

• Personal liability for debt incurred after the company was sent for compulsory dissolution
• Criminal prosecution for unlawfully continuing the business
• Bankruptcy disqualification if the case ends in bankruptcy

Under certain conditions a compulsorily dissolved IVS could previously be reinstated, but only together with a re-registration as an ApS and under the general rules of the Companies Act on reinstatement. Since re-registration is no longer possible, this route is in practice closed. Contact a lawyer immediately if you are unsure about your company's status.

Choose the right business form today

If you are considering starting a business now, the choice is typically between a sole proprietorship and an ApS.

Sole proprietorship

If you are a solo entrepreneur with a limited risk of debt and liability, a sole proprietorship (personlig virksomhed) can be a simpler and cheaper alternative:

• No minimum capital
• No corporation tax (you are taxed on the profit as personal income, possibly under the business tax scheme)
• No annual report to the Danish Business Authority for most
• But: full personal liability for the business's debt

ApS: the preferred form with limited liability

For most entrepreneurs with some turnover and risk, the ApS is the right business form:

• Minimum capital: DKK 20,000
• Limited personal liability (with exceptions, including personal guarantees and negligent conduct)
• Corporation tax: 22% of the company's profit
• Professional credibility towards customers, banks and investors

If you form an ApS, there is a set procedure: choosing the company name, paying in the share capital of at least DKK 20,000, drawing up the articles of association and the memorandum of formation, and registering with the Danish Business Authority. The registration fee for forming a company online is DKK 670.

Frequently asked questions about the IVS

Is an IVS still legal in Denmark?

No. The IVS was abolished as a business form in 2019. No new IVS companies can be formed, and existing IVS companies had to be re-registered as an ApS by the autumn of 2021 at the latest. Companies that did not manage it have been compulsorily dissolved.

Can I still re-register my IVS as an ApS?

No. The deadline for re-registration expired in 2021 and the option is closed. The IVS no longer exists as a business form.

What did a re-registration require while it was possible?

The company had to increase its share capital to a minimum of DKK 40,000, amend the articles of association (including the company designation from IVS to ApS) and pass a resolution at a general meeting with a two-thirds majority. The resolution had to be notified to the Danish Business Authority before the deadline.

What do I do if my old IVS was compulsorily dissolved?

Contact a lawyer specialising in company law and insolvency. There may be unresolved questions about personal liability, debt and possible bankruptcy proceedings that should be handled professionally.

Which business form should I choose today?

For most entrepreneurs with limited risk, a sole proprietorship is the simplest to start, while an ApS gives limited liability and greater credibility. The choice depends on your risk, capital and plans for the business.

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The content of this article is for guidance only and does not constitute legal advice. Company-law questions depend on the specific circumstances of the company. Contact a lawyer specialising in company law if you are unsure about your situation.