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Abstract:
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In the recent years, Denmark has seen a rise in Private Equity (PE) investments. In
theory, these types of investments should not present any reason for discussion.
However, some critics do see many issues concerning PE Funds. One of the most
essential issues is that these PE funds finance most of their investments through debt.
Most often PE Funds are based or situated in tax heavens, which have a very low
taxation on interest or none at all. This gives the investors the opportunity to place
their debt raised in connection with the purchase of the target Company in Denmark
and thereby exploit that they can deduct most of their interest payments, which leads
to the investors having to pay fewer taxes, than what is often required in their home
country. Another big point of discussion is, as the words “Private Equity” indicate, the
PE funds are not legally required to deliver any information, this of course leads to
many of the PE funds being very private in publishing any information and according
to the critics this makes the PE Funds less transparent.
Other people however are of the opposite perception, as they do not see any
irregularities with concerning PE Funds. Nonetheless, the Danish Government is still
eager to legislate on the PE area. In order to prevent further legislation and to enhance
transparency, the Danish Venture Capital and Private Equity Association (DVCA)
released a guidance book for good corporate governance last year, which they highly
recommend the PE funds to follow. This however does not seem to impress the critics
and politician Poul Nyrup Rasmussen has stated -“ I will not stop until our goal for
more restrictive legislation has been realized“, which underline the fact, that the PE
Funds might not avoid further legislation in the future.
The above dispute has indeed evoked my interest as it has been the cause for a lot of
discussion through out the recent years. In this paper, my aim is to examine the roots
of the different point of views of discussion in order to analyze them and thereby find
out if there are valid arguments for either sides of the story. |
