Management's responsibilities in Denmark
- 3 minute read
- Legal & Corporate Law
Management responsibility is a central part of corporate governance in Denmark, and it entails both legal and practical obligations for members of the board of directors and the executive management. In 2025, the focus on responsibility is intensified, especially with regard to ESG obligations and risk management. Here, you will get an overview of the definition, requirements, and consequences of mismanagement.
Definition of management responsibility
Management responsibility implies that members of the company’s management must act responsibly and legally in their decisions. This responsibility is primarily regulated by the Danish Companies Act, which establishes clear frameworks for both the board of directors and the executive management.
Relevant sections of the Danish Companies Act
Together, these sections form the basis for management responsibility in Danish limited liability companies, define the legal framework for the duties and responsibilities of management, and ensure a clear division of roles between strategic management (board of directors) and daily operations (executive management).
Section 111: Defines two possible management structures for limited liability companies:
- 1) The company may be managed by a board of directors that handles the overall and strategic management. For daily management, the board of directors must appoint an executive management, which must consist of one or more persons (directors) – either the board of directors’ own members or persons who are not on the board of directors. However, the majority of the board of directors members in an A/S must be persons who are not directors – and a director in an A/S cannot be chairman or deputy chairman of the board of directors.
- 2) The company may be managed by an executive management. In an A/S, however, the executive management must be appointed by a supervisory board that supervises the executive management. And members of the executive management cannot sit on the supervisory board.
- In an A/S, a board of directors or a supervisory board must consist of min. 3 people.
- In ApS with employee-elected members of the highest management body (§ 140), there must be a board of directors or a supervisory board.
💡 Explanation: This section gives companies flexibility in choosing a management structure and ensures that there are clear roles and responsibilities for the management.
Section 115: The board of directors must be responsible for the overall and strategic management and ensure a sound organization, including:
- Satisfactory bookkeeping and financial reporting.
- Procedures for risk management and internal controls.
- Receive ongoing reporting on the company’s financial conditions.
- That the management follows the board of directors’ guidelines and performs its duties properly.
- That the company’s capital resources are sound at all times and that there is sufficient liquidity to meet current and future obligations as they fall due.
💡 Explanation: The board of directors has overall responsibility for strategic management and control of the company’s operations.
Section 117: The executive management’s responsibilities depending on management structure:
- In companies managed as described in section 111(1)(1), the executive management shall be responsible for day-to-day management based on guidelines and instructions from the board of directors.
- In companies managed as described in section 1(2), the executive management shall be responsible for both the overall and strategic management as well as the day-to-day management, and shall also ensure sound organization of the company.
💡 Explanation: Depending on the management structure, there will be different management responsibilities.
Section 118: The management board is responsible for:
- Ensuring correct bookkeeping in accordance with legislation, including the Danish Bookkeeping Act.
- Ensuring sound asset management.
- Ensuring sound capital resources, including sufficient liquidity to meet current and future obligations.
💡 Explanation: This section emphasizes the executive management’s responsibility for the company’s financial health and compliance with legislation.
Section 119: The company’s management must ensure that a general meeting is held no later than 6 months after a capital loss is ascertained – i.e. that the company’s equity constitutes less than half of the share capital.
💡Explanation: The management’s responsibility in connection with any capital loss lists a number of formal requirements – read more about it here.
Section 130: Requires that the board of directors or supervisory board of a capital company with several members must draw up rules of procedure.
- The rules of procedure must be based on the company’s business and needs. This may include provisions on the constitution, division of labour, supervision of management, bookkeeping, minutes, confidentiality, alternates, control of accounts and accounting procedures, etc.
- The board of directors’ (or supervisory board’s) rules of procedure in an A/S must be published with the Danish Business Authority no later than 4 weeks after being drawn up. This also applies when an A/S becomes a state-owned A/S or when the rules of procedure of a state-owned A/S are changed.
💡 Explanation: This section ensures that management has clear guidelines for their work and areas of responsibility.
Section 361: Establishes that founders and members of the management are liable for damages they have intentionally or negligently caused to the company, capital owners or third parties during the performance of their duties. These can be, for example, auditors, appraisers, bookkeepers and investigators.
💡 Explanation: This section establishes the personal liability that management members have for their actions and decisions in the company.
Board of directors' responsibilities
In short, the board of directors has overall responsibility for the strategic direction and control of the company.
The board of directors must act according to the culpa principle, which means that negligence that has caused damage or can be documented to have led to loss can lead to personal liability. It is ultimately up to the courts to decide whether a board member should be liable for damages.
Business judgement rule
The business judgment rule refers to a liability standard for decisions that are based on business judgment. It is used to assess when a board member can exercise business judgment (and potentially misjudgment), but without becoming liable for damages from this.
In short, it is an expression of the fact that it can be completely legitimate for board members to make decisions that involve a certain risk, based on judgment – as long as the decision overall appeared reasonable and justifiable when it was made.
Of course, there must not have been any action in violation of the law, and decisions taken based on these judgments must be made on a sound basis and in the company’s interests.
Executive management's responsibilities
In short, the executive board is responsible for the day-to-day operations and implementation of the board’s strategic decisions. In this way, the executive management is a link between the day-to-day operations and the strategic management.
This includes managing the operations responsibly, ensuring proper bookkeeping and financial reporting, and preparing reports for the board, which can be used as a basis for sound decision-making at the board level. In addition, the executive management is also responsible for storing company documents for at least 5 years from the end of a financial year. This rule came as part of the Control Package, which came into force on 1 January 2021.
Consequences of non-compliance
Failure to comply with management responsibilities can have serious consequences:
- Personal liability: Members are liable with their private assets (section 361).
- Compensation claims: Raised by capital owners, creditors, or third parties.
- Litigation: Increased tendency to file lawsuits, especially in the field of ESG violations.
- Loss of reputation: Poor management can damage the company’s credibility.
How can companies protect themselves?
To minimize risk, liability insurance can be taken out for both the board and management. In addition, companies should implement internal control systems and clear risk management procedures. These measures protect not only the company but also individual members from potential legal problems.
