New rules on severance pay to members of the management of AIFMs
Published 8 March 2023
Category: AIFs
On 8 February 2023, the Danish Government presented a proposal for amendments in the Danish financial regulation, including the Danish Alternative Investment Fund Managers Act.
The proposal lays down more detailed rules for severance pay and the payment of salary during the notice period. The main purpose is to prevent or reduce the payment of “golden handshakes” to managers in cases where the manager is liable for the distress of a financial undertaking, or where the manager has participated in the management of a financial undertaking which is involved in financial crime.
Of relevance to alternative investment fund managers (“AIFM”), the amendments in the Danish AIFM Act includes:
- a disclosure requirement for particularly large severance schemes, i.e. more than the total of two years’ salary including pension;
- a requirement that remuneration during an agreed period of notice to a member of the management of an AIFM, which is not matched by a normal work commitment, shall be paid monthly over the period of notice as opposed to be capitalized and paid out at the time of resignation;
- a requirement that the severance pay of a member of the management board of an AIFM i) shall reflect the performance of the position and shall not reward misconduct or non-performance, (ii) shall be paid in monthly instalments equal to the amount of the recipient’s average monthly salary, including pension, during the last financial year and (iii) shall be paid out after a potential remuneration during the notice period has been paid in full;
- an obligation for the board of directors to suspend the payment of severance pay if it considers that the manager has engaged in conduct during his employment, which may be regarded as constituting serious mismanagement, and to withhold payment of severance pay if the AIFM is charged with criminal offences attributable to the manager, or if the AIFM becomes aware that the manager is charged with criminal offences committed in the course of his employment by the AIFM;
- an obligation for the board of directors to demand repayment of any severance pay paid out in whole or in part before the board of directors became aware of the conduct or circumstances mentioned above.
The above rules may not be derogated from by agreement and non-compliance with the disclosure requirement is punishable by fine.
The proposal includes similar rules for banks, mortgage-credit institutions, investment management companies and insurances companies as well as rules contributing to increase the criminal and tort liability of the management of such financial undertakings in cases of gross mismanagement and negligent behavior. In addition, the proposal contains amendments to the rules on fit & proper assessment of members of the management and key employees of such financial undertakings to ensure the right balance between the requirements for the management and the need to ensure that the recruitment base is not unduly restricted.
Next step: If enacted, the proposal is expected to enter into force on 1 July 2024. However, special transitional rules will apply to severance pay schemes.
The proposal is available (in Danish) here.
Tags: Danish RegulationDisclosure RequirementsManagement Remuneration
Also tagged ‘Danish Regulation’
New green investment scheme consultation
On 21 December 2023, the Danish Financial Supervisory Authority published a draft executive order on a new green investment scheme for consultation.
Danish RegulationSustainabilityRevision of the Investment Screening Act has entered into force
On 1 July 2023, a revision of the Investment Screening Act (the “Act”) entered into force. The revision revolves around two areas: public contracts and administrative procedures.
Danish RegulationGovernanceNew rules on more flexible fit & proper assessments adopted
On 18 April 2023, the Danish Parliament adopted the proposal to amend the financial regulation presented by the Danish Government, which includes amendments to the rules on fit & proper assessments.
Danish RegulationGovernanceNew rules on severance pay to managers of AIFMs adopted
On 18 April 2023, the Danish Parliament has adopted the proposal to amend the Danish financial regulation, including the Danish Alternative Investment Fund Managers Act.
Danish RegulationDisclosure RequirementsManagement RemunerationPublic consultation of the Investment Screening Act has ended
On 8 March 2023, a proposal for changes of the Investment Screening Act (the “Act”) was submitted for public consultation. The Act has been in effect since 1 September 2021, and based on the experiences with the Act this far, as well as the situation in and around Denmark, amendments to the Act have been deemed necessary.
Danish RegulationGovernanceRequirements for Gender Composition in Managements have Tightened
On 1 January 2023 new rules have imposed stricter requirements for targets and policies on the gender composition of managements. These rules cover both large Danish companies (covered by accounting class C), including state-owned and some listed companies (covered by accounting class D), as well as certain companies within the financial area
ComplianceDanish RegulationSustainabilityEU Legislation Takes Action Against Greenwashing
Lately, EU has sharpened its focus on preventing greenwashing as well as strengthening the sustainability reporting requirements. One step, among others, is the recent passing of the CSRD. Another is a proposal published in March 2022 by the European Commission with amendments for the Directive 2005/29/EC on Unfair Commercial Practices (UCPD) as well as the Directive 2011/83/EU on Consumer Rights.
Cross-BorderDanish RegulationSustainabilityAmendments to the Danish Corporation Tax Act and the Danish Tax Assessment Act have entered into force
Following the amendments, enacted on 9 June 2022, the corporate tax rate applicable to financial companies has increased from 22 percent to 25.2 percent as per 1 January 2023 and will increase to 26 percent in 2024.
Danish RegulationManagement RemunerationHigher Corporate Tax Rate for Danish Financial Companies and Deductibility Cap on Salary Expenses
On 6 April 2022, the Danish Government presented a proposal for an amendment of, among others, the Danish Corporation Tax Act.
Danish RegulationManagement RemunerationCommission Delays Application Date for the ESG Disclosure and Taxonomy Regulations
The Commission has postponed the date of application of the detailed regulatory technical standards (RTS) under the ESG Disclosure Regulation and the Taxonomy Regulation by six months from 1 January 2022 to 1 July 2022.
ComplianceCross-BorderDanish RegulationCommission Clarifies Questions of Interpretation Regarding ESG Disclosures
The Commission has answered a number of questions from the European Supervisory Authorities (ESAs) regarding the ESG Disclosure Regulation.
ComplianceCross-BorderDanish RegulationReclassification of Tax Transparent Entities
On 19 and 20 April 2021, the Danish tax authorities published two rulings from the Tax Assessment Council (in Danish: Skatterådet) regarding reclassification of tax transparent entities
Danish RegulationNew Danish Act on Screening of Foreign Direct Investments
The new act on control of foreign direct investments (the “Act”) was adopted on 4th May 2021. The Act introduces a new framework for government screening of foreign investments and certain types of agreements with Danish companies.
ComplianceCross-BorderDanish RegulationRules Concerning the Tax Treatment of Equity Compensation to Employees in Startups
On 21 August 2020, the Danish Ministry of Taxation published for consultation a draft proposal according to which previously adopted amendments to the Danish Tax Assessment Act concerning the tax treatment of equity compensation to employees in “start-ups” will enter into force on 1 January 2021.
Danish RegulationVenture CapitalEntry into Force: Guidance Signal Excluding Certain Alternative Investment Funds from VAT Exemption on Management Fees
On 7 May 2020, a guidance signal which excludes certain alternative investment funds from VAT exemption on management fees entered into force.
Danish RegulationManagement RemunerationGuidance Signal Excluding Certain Alternative Investment Funds from VAT Exemption on Management Fees is Adopted by the Danish Tax Agency
On 7 November 2019 the Danish Tax Agency presented its guidance signal concerning the rules on VAT exemption for management fees for management of investment undertakings.
Danish RegulationManagement RemunerationProposal to Increase Certain Requirements for Managers under the AIFM and AML Act Published for Consultation
On 28 August 2019 the Danish FSA (in Danish: Finanstilsynet) published for consultation a draft proposal to change, among others, the Danish AIFM Act and the Danish AML Act.
ComplianceDanish RegulationKYC / AMLWhistleblowingJapan Deemed a Sector Specific, Safe Third Country by the Danish DPA
Transfer of personal data from Denmark to (private) organisations in Japan that are subject to the APPI will not require prior approval from the DPA.
ComplianceDanish RegulationGDPRDanish Company Faces Prosecution and a Fine of DKK 1.5 mill. for GDPR Violation
On 11 June 2019, the Danish Data Protection Agency ("DPA") has reported a Danish furniture company to the Danish police for not deleting information on approx. 385,000 customers.
ComplianceDanish RegulationGDPRDanish Parliament Strengthens Registration Requirements of Ultimate Beneficial Owners
On 2 May 2019, the Danish Parliament adopted amendments to the Danish Companies Act, which implements part of the 5th EU Anti-Money Laundering Directive.
Beneficial OwnershipComplianceDanish RegulationDisclosure RequirementsKYC / AMLFine of DKK 1.2. mio. Recommeded for Taxi Company’s Storage of Costumer Phone Numbers
On 25 March 2019, the Danish Data Protection Agency submitted a notice to the Danish police regarding a Danish taxi company’s violation of GDPR for storage of customer phone numbers.
ComplianceDanish RegulationGDPRProposal to Strengthen the Registration of Ultimate Beneficial Owners
On 13 March 2019, the Danish Government presented a proposal for an amendment of various acts including the Danish Companies Act which implements part of the 5th EU Anti-Money Laundering Directive concerning the registration of ultimate beneficial owners.
Beneficial OwnershipComplianceDanish RegulationDisclosure RequirementsKYC / AMLGuidance Signal Excludes Certain Alternative Investment Funds From VAT Exemption on Management Fees
On 8 March 2019, the Danish Tax Agency published a draft guidance signal for public hearing. If implemented, the guidance signal will exclude certain alternative investment funds from VAT exemption on management fees.
Danish RegulationManagement RemunerationNew Proposal to Implement Authority to Enforce the PRIIPS-Regulation Into Danish Law
On 27 February 2019, the Danish Government presented a proposal for an amendment of the Danish AIFM Act giving the Danish Financial Supervisory Authority competence to enforce the PRIIPs regulation.
ComplianceDanish RegulationDisclosure RequirementsKID / PRIIPSWhistleblowingEU Court of Justice Issues Ruling in Danish Beneficial Ownership Cases
The CJEU judgments will likely have a big impact on international group structures and will also contribute to the interpretation of the anti-abuse principles of EU law and the "beneficial owner" concept.
Beneficial OwnershipDanish RegulationOther updates
National versions of guidelines on funds’ names now published
On 21 August 2024, the European Securities and Markets Authority (“ESMA”) published their guidelines on funds’ names (the “Guidelines”) in versions translated into all the official EU-languages.
ESMASustainabilityRegistration of “sustainability auditors” is now possible
On 1 June 2024, the new rules on requirements to companies’ sustainability reporting (entailed by CSRD) entered into force.
CSRDSustainabilityMeasures to support corporate sustainability reporting
In July, the European Securities and Markets Authority (“ESMA”) published measures to support corporate sustainability reporting.
CSRDESMAESRSSustainabilityESMA opinion on sustainable investments: Facilitating the investor journey
On 24 July 2024, the European Securities and Markets Authority (“ESMA”) published an opinion: “Sustainable investments: Facilitating the investor journey – a holistic vision for the long term” setting out ESMA’s long-term vision on the functioning of the Sustainable Finance Framework.
ESMASustainabilityThematic review of pension funds subject to SFDR article 8
The Danish Financial Supervisory Authority initiated an inspection of three pension funds’ disclosing pursuant to SFDR article 8 in November 2023.
ComplianceDisclosure RequirementsSustainabilityEU’s new Anti-Money Laundering package announced
On 19 June 2024 EU’s new Anti-Money Laundering package was announced. The new AML package has been long in the making, and the Commission presented its package of legislative proposals as early as July 2021.
KYC / AML