Does our company need rules of procedure?

When do we need rules of procedure?
If your company has a board of directors or a supervisory board with more than one member, section 130 of The Company Act requires you to have rules of procedure. This requirement applies to both public limited companies and private limited companies if they have a board of directors or a supervisory board with more than one member. Private limited companies with only a management board are not covered by this requirement and therefore do not need rules of procedure.

What is the purpose of rules of procedure?
The primary purpose of rules of procedure is to outline and define the work of the board of directors or the supervisory board and ensure that it is conducted in an appropriate manner and on an informed basis. It is primarily a practical tool that the board or supervisory board can use to guide its operations and help it fulfil its role. At the same time, rules of procedure are a legally required document for the types of companies that must have them.

What formal requirements are there for rules of procedure?
There are no legal requirements for the content of rules of procedure, as this largely depends on the specific company's size and industry. However, the rules of procedure should always be tailored to the individual company and adapted to its characteristics and needs.

Although there are no formal requirements, several themes are important to include:

• Constitution, quorum, and meeting intervals.
• Guidelines for division of work, authorisation, and instructions.
• Financial control to ensure the company meets applicable audit requirements.
• Confidentiality obligations.

We recommend reviewing the rules of procedure annually to keep them up to date with the company's size and strategy. New members of the board or supervisory board should also be introduced to and sign the rules of procedure.

What are the consequences of not having rules of procedure?
If your company is required to have rules of procedure but fails to comply, you may be fined as outlined in section 367 of the Companies Act. The fine can be imposed on the company itself or the responsible individuals. Your auditor is obligated to check whether you have rules of procedure.

Failure to comply with the requirement for rules of procedure can also impact the assessment of the board's or supervisory board's liability. It should be noted, however, that the rules of procedure are an internal working tool, and failure to comply does not generally constitute a breach of a member's responsibility.

Do we need to publish the rules of procedure?
The board or supervisory board generally has the discretion to decide whether the rules of procedure should be publicly available. However, this does not apply to state-owned public limited companies, which are required to draft rules of procedure and publish them in the Danish Business Authority's IT system no later than four weeks thereafter.

Do you need help with rules of procedure?
If you do not have rules of procedure or would like to update your existing ones, feel free to give me a non-binding call, and we can go over the key topics for your rules of procedure.