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The Danish Venture Capital and Private Equity Association (DVCA) has issued new guidelines for ownership and good corporate governance. The guidelines are an important step towards addressing public concerns for more transparency in private equity operations and investments. The Danish LO was consulted on the guidelines. National union centre, LO Denmark, has been meeting with the DVCA as a step towards an ongoing dialogue with the association on labour related matters.



The DVCA guidelines will apply to Danish private equity investments. Private equity firms have been encouraged to follow guidelines such as recommended in the Walker report.The Walker report which was released earlier this year in response to growing public calls for more transparency on the private equity world, put an onous on individual firms to self regulate and follow established guidelines such as those of the relevant Venture Capital Association. The Walker report does not go as far as the Danish proposal which builds in consultation of the workforce.



Some points of interest from the guidelines:



"General



Private equity funds are to prioritise good and open ongoing collaboration with the company’s employees through information, consultation and negotiation with union representatives and other employee representatives.



The private equity fund and/or company must keep union representatives or other employee representatives updated through the company’s works council, employee-elected board members etc. concerning any plans the fund may have for the company that may be of material significance to employees.



Information must also always be provided in accordance with applicable legislative requirements and stock exchange rules.



Internal communication in connection with a private equity fund’s acquisition of companies



In connection with the acquisition of a company, the company’s employees are to be informed of the new owner’s plans for the company and of the opportunities and consequences that the change of ownership will have for employees. This is to happen as early as possible and in accordance with relevant legislative requirements and stock exchange rules.



Communication materials, messages etc. should be formulated in collaboration with representatives of the company to ensure relevance and backing within the organisation.



A plan for internal communication in connection with the acquisition of a company is expected to contain the following:



- Description of what is to be communicated to whom and when

- Timetable for employee meeting(s) to present the new owners

- Plan for following up on employee meetings, including follow-up on topics that employees can reasonably be expected to want answers to

- Internal releases (elaboration of press release, possibly including the owners’ reasons for deciding to sell to the new owners)

- Q&A list that as far as possible answers the questions that can be expected from employees and other stakeholders

- Relevant internal communication, which is to be made as widely available as possible, either by using existing channels or by establishing new ones (intranet, newsletter etc.)



The private equity fund and/or company must also ensure that the company can fulfil its obligations under applicable labour agreements and legislation to ensure that union representatives or other employee representatives are informed and involved in matters of material significance to employees’ terms of employment as early as possible.



Communication in connection with a private equity fund’s sale of a company



A plan for internal and external communication in connection with divestment is to be an integral part of the divestment strategy, and is to be developed in conjunction with the buyer of the company.



In principle, the buyer assumes responsibility for communication concerning the takeover of the company once the agreement is entered into. The private equity fund is as far as possible to ensure that DVCA’s guidelines for communication are observed during the sale process, regardless of whether the company’s new owner is a member of DVCA."





The complete document of guidelines can be viewed at: http://www.dvca.dk/sw334.asp