How Invoicing and Contracts Work When Purchasing a Business in Denmark

Understanding the Basic Structures: Share Deal vs. Asset Deal

When purchasing a business in Denmark, the way invoicing and contracts are structured depends heavily on whether the transaction is a share deal or an asset deal. This distinction affects not only which contracts are signed, but also how invoices are issued, who is liable for VAT, and how payment is documented.

In a share deal, the buyer acquires the shares of the company (for example, an ApS or A/S), meaning the legal entity remains the same, only the ownership changes. In this case, there is no invoice for “the business” as such; instead, there is a share purchase agreement (SPA) and payment is typically documented by a closing statement, bank confirmations, and sometimes a specific receipt or settlement document. VAT is normally not charged on the sale of shares, which distinguishes this clearly from invoicing for goods or services.

In an asset deal, the buyer purchases specific assets and sometimes liabilities from the seller's business, such as inventory, equipment, intellectual property, customer contracts, and goodwill. Here, a proper sales invoice is usually issued by the seller to the buyer, reflecting the transfer of identified assets and possibly business as a going concern. VAT treatment, allocation of price to different assets, and payment terms are central points that must be clearly captured in both the asset purchase agreement (APA) and the invoices.

The Central Contract: Share Purchase Agreement (SPA) or Asset Purchase Agreement (APA)

The core of any Danish business acquisition is the main purchase agreement. It is this document that defines the transaction structure, the pricing, the payment schedule, obligations of each party, and the conditions for completion. While many commercial and legal nuances exist, from an invoicing and documentation perspective certain sections are especially critical.

A Share Purchase Agreement will specify the number of shares being transferred, the purchase price, the mechanism for adjusting that price (for example, based on net debt or working capital), the timing of payment, and how these payments are evidenced. Rather than a traditional invoice, the SPA and the related closing documents together form the contractual and financial record.

In an Asset Purchase Agreement, the schedule of assets and liabilities is crucial. Often, annexes specify the individual items: machinery, stock, trademarks, customer lists, software licenses, and even leasehold improvements. The contract should closely correspond to the invoice content, ensuring that the invoice reflects the agreed allocation of the purchase price among those asset categories. This allocation can have tax implications for both sides, making precise drafting essential.

Key Contractual Clauses Affecting Invoicing and Payment

A well-drafted Danish business purchase contract includes clauses that directly influence how and when invoices are issued and how they are settled. Payment terms are an obvious example. The agreement should specify if the purchase price is paid in one lump sum on closing, in installments, or conditionally, for instance through an earn-out based on future financial performance.

Price adjustment mechanisms also interact with invoicing. If the final price depends on completion accounts or a locked-box mechanism, the contract should clearly describe how any upward or downward adjustments will be documented. In asset deals, this may involve credit notes or supplementary invoices; in share deals, it is more commonly handled through adjustment statements referenced back to the SPA.

Interest and default terms are another crucial area. The contract typically stipulates what happens if payment is delayed, including any interest that accrues and how such amounts are to be invoiced. In the Danish context, compliance with the Danish Interest Act and standard commercial practices for late-payment interest should be considered.

The Role of Due Diligence in Shaping Contracts and Invoices

Financial, legal, and tax due diligence carried out before signing directly influences the structure of contracts and the final invoicing. Through due diligence, buyers gain insight into the target's assets, liabilities, contracts with customers and suppliers, tax position, and accounting policies. Any discrepancies or risks discovered here may lead to adjustments of the purchase price, special indemnities, or escrow arrangements.

For example, if due diligence uncovers that some assets are not correctly recorded or that there are contingent liabilities, the contract might separate these into distinct categories with specific prices or warranties. In an asset deal, the resulting invoice must follow this segmentation. In a share deal, the SPA might contain detailed warranty and indemnity provisions instead of line-item invoicing, but still, the buyer will rely on the contract as the primary financial document rather than an invoice.

VAT, Transfer of a Going Concern, and Danish Tax Rules

In Denmark, VAT treatment in business transfers depends on how the deal is structured and whether the transaction qualifies as a transfer of a going concern (TOGC). When a business or an independent part of a business is transferred as a going concern and the buyer continues the same type of activity, the transaction may fall outside the scope of VAT. In such cases, even in an asset deal, the invoice will often be marked to reflect that the transaction is considered a transfer of a going concern and thus not subject to VAT.

However, not every asset deal qualifies. If only specific assets are transferred without the operational capacity to continue the business, Danish VAT may apply to those assets at the standard rate, with particular rules for real estate, financial assets, and intangible rights. The contract has to precisely define what is transferred and for what price; the invoice then follows, applying VAT only where appropriate. Misclassification can lead to disputes with the Danish Tax Agency (Skattestyrelsen), so tax advice and thorough drafting are advisable.

In share deals, the purchase of shares is generally exempt from VAT. This means no VAT is charged on the purchase price, and no invoice in the typical VAT sense is required. However, professional services connected to the transaction-lawyers, accountants, corporate finance advisers-will issue VAT invoices to the buyer or seller depending on the engagement terms.

Payment Structures: Upfront, Deferred, and Earn-Outs

Business acquisitions in Denmark often use more complex payment structures than a simple lump-sum transfer. Contracts may provide for an initial payment on closing, combined with deferred payments, promissory notes, or earn-out provisions tied to future revenue or profit.

In an asset deal, each payment typically triggers an invoice or a reference back to the original invoice. The main invoice may show the full agreed price, while subsequent partial payments are accounted for as settlement of that invoice, or the seller may issue separate invoices according to the schedule outlined in the APA. Careful coordination between the finance departments of buyer and seller ensures that the accounting records reflect the economic reality of the deal.

In share deals, the SPA and closing documents form the main financial record, but some parties choose to issue a pro forma invoice or a settlement statement to support internal bookkeeping. For earn-outs, contracts need to describe how financial results will be measured, when the earn-out is calculated, and how those additional payments are documented. From an accounting perspective, these are often treated as adjustments to the original purchase price, and the contractual language should support that treatment.

Escrow, Retentions, and Guarantees

To manage risk, Danish business purchase contracts frequently include escrow mechanisms, holdbacks, or bank guarantees. These structures do not change the total agreed price but alter the cash flow and the way payments are documented.

An escrow involves part of the purchase price being paid into a third-party account at closing, to be released later when conditions are met. The contract should state whether the seller may invoice the full purchase price at closing or only the net amount received, and how the release of escrow funds will be documented. Some parties treat the escrowed amount as paid from a contractual standpoint at closing, even if the cash is not yet in the seller's bank account.

Retentions or holdbacks, often used to cover potential warranty claims or working capital adjustments, are usually documented in the SPA or APA as a reduction of the immediately payable price. When the holdback is released, there may be a need for a supplementary invoice, credit note, or at least a formal settlement document to reflect the change in the amount actually paid.

Transitional Services and Ongoing Invoicing Post-Closing

It is common in Danish business transfers that the seller continues to provide certain services to the buyer after closing, especially in situations where systems, licenses, or staff cannot be moved instantly. These arrangements are usually governed by a Transitional Services Agreement (TSA), which runs alongside the main purchase agreement.

Under a TSA, regular invoices are issued-often monthly-by the seller to the buyer for services such as IT support, payroll processing, or administrative assistance. These invoices follow standard Danish VAT rules for services and are separate from the main purchase price. The TSA must clearly specify the pricing model, whether fixed, variable, or cost-plus, and the invoicing and payment deadlines. Without a well-written TSA, disputes can easily arise over the level and cost of services during the transition period.

Documentation at Signing and Closing

Document flow is intensive at both signing and closing of a Danish business acquisition. At signing, parties usually exchange the executed SPA or APA, ancillary agreements such as TSAs, lease assignments, employment transfer agreements, and any financing documents. Invoices are seldom issued at this stage, unless a deposit or break fee is payable, in which case a specific invoice or payment request may be prepared.

At closing, the documentation becomes directly relevant for invoicing and accounting. For asset deals, the seller may issue the main invoice on or immediately after closing, referencing the APA and the annexes detailing the assets. For share deals, a closing memorandum, funds flow schedule, and bank confirmations together provide the evidence of payment and transfer of ownership. These closing documents are critical for auditors and for internal control, even if they do not resemble standard invoices.

Accounting and Record-Keeping Considerations

Both buyer and seller must ensure that contracts and invoices are consistent with Danish bookkeeping regulations and accounting standards. For the seller, the sale of a business or assets must be recorded with reference to the contractual documentation and the invoices, distinguishing between proceeds, gains or losses, and any VAT liabilities.

For the buyer, the purchase price allocation is key. In asset deals, the invoice breakdown into individual asset categories helps allocate cost correctly between tangible fixed assets, intangible assets, inventory, and goodwill. In share deals, the acquisition cost of the shares is recorded as a financial asset, and any later adjustments due to earn-outs or disputes should be documented through addenda to the SPA or separate settlement agreements.

Proper archiving of all related documentation-SPAs, APAs, TSAs, closing statements, escrow agreements, and invoices-is indispensable. Danish law requires that accounting material be kept for a set number of years, and in case of tax inspections or audits, the authorities will expect a clear and consistent trail linking contracts, invoices, and payments.

Bringing It All Together in Practice

The interaction between invoicing and contracts when purchasing a business in Denmark is a matter of aligning legal form, tax rules, and practical accounting needs. The way the transaction is structured-share deal versus asset deal, lump sum versus staged payments, with or without earn-outs-determines which documents serve as the primary financial evidence.

For both parties, it is important that the main agreements clearly define the payment obligations and refer to the documents that will evidence payment, such as invoices, closing statements, or escrow release notices. VAT treatment must be evaluated early and reflected consistently across contracts and invoices to avoid later disputes. Transitional arrangements, guarantees, and post-closing adjustments all require tailored language in the contracts and a clear plan for how and when they will be invoiced or otherwise documented.

By treating contracts and invoicing as two sides of the same transaction, and by ensuring they are fully aligned with Danish legal and tax requirements, buyers and sellers can significantly reduce the risk of misunderstandings, accounting errors, or regulatory challenges in the critical process of transferring a business.