Order on Mergers of Cooperative Banks, Savings Banks and Limited Liability Companies Authorized to Conduct Credit Institution Business

Order on Mergers of Cooperative Banks, Savings Banks and Limited Liability Companies, which have permission to conduct credit institution business

Pursuant to Section 205, Nos. 2 and 3, of the Act on Financial Business, cf. Consolidation Act No. 1447 of 11 September 2020, and under the authority granted in accordance with Section 1, No. 1, of Order No. 44 of 19 January 2015 on the delegation of powers to the Danish Financial Supervisory Authority, the following is prescribed:

Scope of Application

Section 1. This Order applies to the following:

1. A merger between two cooperative banks or two savings banks, with one of the cooperative banks or savings banks as the continuing credit institution.
2. A merger between a cooperative bank or a savings bank and a limited liability company that has permission to conduct credit institution business, with the limited liability company as the continuing credit institution.
3. A merger between a savings bank and a limited liability company that has permission to conduct credit institution business, with the savings bank as the continuing credit institution.
4. A merger between a cooperative bank and a savings bank, with the savings bank as the continuing credit institution.

Merger

Section 2. In the case of a merger under this Order, Sections 236, first sentence, 237, subsection 1, subsection 3, Nos. 1-9, and subsection 4, 238, subsection 1, 239, subsections 1 and 3, 241, subsection 1, first sentence, and subsections 2-4, 242, first sentence, 243, 244, subsections 1, 3, 5 and 6, 245, subsection 1, subsections 4-6, subsection 7, Nos. 1-4, 6 and 7, and subsection 8, 246, subsection 1, first and second sentences, and subsection 5, 247, subsections 1-3, 248, subsection 1, 249, 250, subsection 1, Nos. 1-3, and subsections 2-4, and 251, subsections 1 and 2, of the Companies Act shall apply, subject to Section 3.

Subsection 2. In situations covered by Section 1, No. 2, Section 247, subsection 4, of the Companies Act shall also apply.

Subsection 3. In the case of a merger under this Order, Section 252 of the Companies Act shall apply. However, the second sentence of Section 252 of the Companies Act shall only apply in relation to the provisions of the Companies Act covered by subsection 1 of this provision, and with the adjustments resulting from Section 3, subsection 1, of this Order.

Section 3. In the case of a merger under this Order, the following adjustments to the Companies Act's rules on mergers shall apply:

1. The Companies Act's reference to limited liability companies shall be understood as cooperative banks and savings banks, respectively, where this is relevant.
2. The Companies Act's reference to the central management body shall be understood as the board of directors insofar as it concerns cooperative banks and savings banks.
3. The Companies Act's reference to the general meeting shall be understood as the representative body in reference to the corporate body and representative body members in reference to the specific meeting insofar as it concerns savings banks.
4. The Companies Act's reference to shareholders shall be understood as members insofar as it concerns cooperative banks, and shall be understood as representative body members insofar as it concerns savings banks, subject to Nos. 7 and 13-16.
5. The Companies Act's reference to shares shall be understood as membership certificates or membership capital, respectively, insofar as it concerns cooperative banks, and shall be understood as guarantee certificates or guarantee capital, respectively, insofar as it concerns savings banks.
6. The Companies Act's reference to limited liability companies shall be understood as cooperative banks and savings banks, where this is relevant.
7. In Section 236, first sentence, Section 249, subsection 1, and Section 250, subsection 1, No. 3, of the Companies Act, shareholders or the shareholders shall be understood as guarantors insofar as it concerns savings banks.
8. In Section 237, subsection 3, No. 4, of the Companies Act, dividends shall be understood as remuneration insofar as it concerns savings banks and cooperative banks.
9. In Section 239, subsection 3, of the Companies Act, the Act on Annual Accounts shall be understood as the Order on Financial Reports for Credit Institutions and Securities Brokerage Companies, etc.
10. In Section 243, subsection 1, first sentence, Section 244, subsection 5, Section 245, subsection 1, first sentence, Section 247, subsection 2, and Section 251, subsection 2, first sentence, of the Companies Act, the Danish Business Authority shall be understood as the Danish Financial Supervisory Authority.
11. In Section 244, subsections 1 and 3, of the Companies Act, the Danish Business Authority shall be understood as the Danish Business Authority and the Danish Financial Supervisory Authority.
12. In Section 244, subsection 5, first sentence, of the Companies Act, "in the Danish Business Authority's IT system" shall be understood as "made available by the Danish Financial Supervisory Authority in the Official Gazette".
13. In Section 245, subsection 7, of the Companies Act, "made available to the shareholders at the company's registered office or website, unless these unanimously decide that the documents in question shall not be presented to the shareholders prior to or at the general meeting" shall be understood as "made available to guarantors and representative body members at the savings bank's registered office or website", insofar as it concerns savings banks.
14. In Section 245, subsection 8, of the Companies Act, shareholders shall be understood as guarantors and representative body members insofar as it concerns savings banks.
15. In Section 246, subsection 1, second sentence, of the Companies Act, the shareholders shall be understood as "those entitled thereto".
16. In Section 247, subsection 2, of the Companies Act, "Shareholders who own 5 percent of the share capital" shall be understood as "5 percent of the representative body members", insofar as it concerns savings banks.
17. In Section 249, subsection 1, of the Companies Act, "and if they have reserved their rights to this at the general meeting" shall be understood as "and if they have reserved their rights to this by notification to the representative body no later than before the representative body meeting", insofar as it concerns savings banks.

Subsection 2. In addition to the requirements in Section 237 of the Companies Act, the merger plan must contain information and provisions regarding the rights granted to all members in the terminating cooperative bank insofar as it concerns cooperative banks, and which are granted to the guarantors in the terminating savings bank insofar as it concerns savings banks.

Subsection 3. If the terminating savings bank has no guarantors (deposit-taking savings banks), Sections 237, subsection 3, Nos. 3, 4 and 7, 238, subsection 1, second sentence, 241, subsection 4, 249 and 250, subsection 1, No. 3, and subsections 3 and 4, of the Companies Act shall not apply to the merger. In situations where the terminating savings bank has no guarantors (deposit-taking savings banks), the valuation report, cf. Section 241, subsection 1, first sentence, and Section 245, subsection 7, No. 6, of the Companies Act, shall not concern remuneration.

Cooperative Bank Reserve

Section 4. In a merger under Section 1, No. 2, the general meeting of the terminating cooperative bank, where the members do not own the cooperative bank reserve, shall decide how the cooperative bank reserve shall be used.

Subsection 2. The general meeting may decide:

1. to allow the cooperative bank reserve to support the operations of the continuing credit institution, or
2. to use the cooperative bank reserve in accordance with the purpose in the dissolution provision of the cooperative bank's articles of association.

Section 5. In a merger under Section 1, No. 2, the cooperative bank reserve passes to the continuing credit institution when the members own the cooperative bank reserve, subject to Section 8.

Section 6. In cooperative banks where the cooperative bank reserve is partially owned by the members, Section 4 shall apply to the parts of the cooperative bank reserve that are not owned by the members, and Section 5 shall apply to the parts of the cooperative bank reserve that are owned by the members.

Savings Bank Reserve

Section 7. In a merger under Section 1, No. 2, the representative body of the terminating savings bank, as part of the decision to carry out a merger, shall make a decision on one of the following models regarding the savings bank reserve:

1. Shares in the continuing limited liability company, which has permission to conduct credit institution business, corresponding to the value of the contributed assets after deduction of the savings bank's liabilities, subject to Section 9, subsection 1, shall be transferred to a foundation, the purpose of which shall be either the consolidation of the continuing credit institution or support for public benefit and charitable purposes, or both purposes in combination. If the foundation's purpose is to consolidate the continuing credit institution, the foundation is considered a commercial foundation, and Section 209 of the Act on Financial Business shall apply to the foundation. If the foundation's purpose is to consolidate the continuing credit institution, it must be ensured in the foundation's articles of association that the reserves built up in the savings bank, which are transferred to the foundation, are used for public benefit and charitable purposes, if the purpose of consolidation were to cease. The foundation's status as either a commercial or non-commercial foundation is otherwise determined by the Danish Business Authority in accordance with the Act on Commercial Foundations.
2. That a restricted savings bank reserve corresponding to the value of the contributed assets after deduction of the savings bank's liabilities, subject to Section 9, subsection 1, is established in the continuing limited liability company, which has permission to conduct credit institution business. The restricted savings bank reserve can be used to cover deficits that are not covered by amounts that can be used for dividends in the limited liability company. In the event of a later merger of the limited liability company with another credit institution, the continuing credit institution assumes the savings bank reserve on the same terms that applied until the merger. In the event of the dissolution of the limited liability company, the savings bank reserve shall be used for public benefit and charitable purposes, and the detailed rules for this shall be established in the representative body's decision to establish the restricted savings bank reserve. Distribution to shareholders in the event of the dissolution of the limited liability company can only take place when the savings bank reserve has been used for public benefit or charitable purposes. Section 213 of the Act on Financial Business shall apply to the restricted savings bank reserve.
3. Establishment of a foundation, cf. No. 1, in combination with a restricted savings bank reserve, cf. No. 2. The distribution between the foundation and the restricted savings bank reserve shall be stated in the merger plan.

Consideration

Section 8. Members in the terminating cooperative bank shall be offered as consideration for their membership certificates:

1. exchange at market price for shares, membership certificates or guarantee certificates in the continuing credit institution,
2. cash redemption, or
3. a combination of Nos. 1 and 2.

Subsection 2. If members are offered cash redemption, this shall be done with an acceptance period that expires before the merger plan is signed, so that the capital situation in the terminating cooperative bank is known after any redemption when the merger plan is signed. Cash redemption, however, only takes place upon the implementation of the merger and is conditional upon this. Redemption can only take place to the extent that provisions in the financial regulation do not hinder this. This also applies in the case of a combination of cash redemption and exchange for shares or guarantee certificates in the continuing credit institution.

Subsection 3. The board of directors of the terminating cooperative bank may decide that the members' redemption of membership capital, which is not covered by subsection 1, when the redemption takes place after the publication of the merger, is conditional on the merger being carried out.

Section 9. Guarantors in the terminating savings bank shall be offered as consideration for their guarantee certificates:

1. exchange at market price for shares in the continuing credit institution,
2. cash redemption, or
3. a combination of Nos. 1 and 2.

Subsection 2. Cash redemption to the guarantors shall be offered before the merger plan is signed, so that the capital situation in the terminating savings bank is known after any redemption when the merger plan is signed. The board of directors of the terminating savings bank may decide that the guarantors' withdrawal of guarantee capital, when the withdrawal takes place after the publication of the merger, is conditional on the merger being carried out.

Subsection 3. Based on the savings bank's latest audited accounts, and based on the year's profit and free reserves to date before payment of business on guarantee capital, the representative body of the terminating savings bank determines the size of the remuneration of the terminating guarantee capital.

Subsection 4. Subsections 1-3 do not apply when the terminating savings bank has no guarantors (deposit-taking savings banks).

Legal Effect of Merger

Section 10. The merger is considered implemented when the conditions in Section 250, subsection 1, Nos. 1-3, of the Companies Act and the conditions in this Order are met, and when the Minister for Business has granted permission for the merger in accordance with Section 204 of the Act on Financial Business.

Subsection 2. Upon the implementation of the merger, the terminating credit institution is considered dissolved, and all rights and obligations are considered to have passed in their entirety to the continuing credit institution.

Entry into Force

Section 11. This Order enters into force on 1 January 2022.

Subsection 2. The following Orders are repealed:

1. Order No. 954 of 26 September 2012 on the merger of a savings bank with a limited liability company, which has permission to conduct credit institution business.
2. Order No. 1368 of 21 December 2012 on the merger of savings banks.
3. Order No. 1307 of 19 November 2013 on the merger of a savings bank with a limited liability company, which has permission to conduct credit institution business, with the limited liability company as the continuing credit institution.
4. Order No. 265 of 5 April 2018 on the merger of a cooperative bank with another credit institution.

The Danish Financial Supervisory Authority, 23 November 2021 Jesper Berg / Jens Østergaard