Note: This article describes Danish legal and tax rules specifically.

When selling a business, it's not only the purchase price itself that's at stake. A long list of practical matters need to be wound down, terminated or concluded along the way — and that costs money. We collectively call these wind-down costs: the costs that arise because something in the business can't simply continue unchanged, but needs to be terminated, transferred, or cleaned up when the business changes owner. This applies whether it's a sole proprietorship or one of the larger companies among businesses for sale.

An experienced buyer will know most of these items and ask about them early in the process — often already during due diligence. If you as seller can get ahead of them yourself, it strengthens both the trust in the deal and your negotiating position. This guide walks through the key categories of wind-down costs, what they typically cost, and — not least — who generally pays what.

What are wind-down costs, specifically?

Wind-down costs broadly cover all the costs tied to closing, terminating or concluding matters that shouldn't continue after a sale — as opposed to matters a buyer wants to take over and continue. This can be anything from a lease the buyer doesn't want to take over, to employees who won't continue, leasing agreements on equipment that need winding down, or simply the physical clean-up of premises and fixtures.

Why is it important to map them before listing the business for sale?

If wind-down costs are only discovered late in the process — or after a deal is agreed — they risk becoming a source of conflict, price reductions or delays. If you instead have them sorted from the start, you can specifically decide whether a given obligation should be wound down before the sale, transferred to the buyer, or factored into the pricing itself. This makes the process more transparent for both parties, and it's exactly the kind of preparation that separates a professionally prepared sale process from one that runs into surprises along the way.

The full list: All types of wind-down costs

Here's the complete overview of the most common categories of wind-down costs in a business sale, covered in depth below:

  • Termination of commercial leases, refurbishment and vacating
  • Severance pay and salary during the notice period for employees who don't continue
  • Payout of accrued holiday pay, special savings and bonus/commission upon departure
  • Early-exit costs on leasing agreements (vehicles, machinery, IT equipment)
  • Termination of supplier agreements, subscriptions and service agreements
  • Termination or transfer of insurance policies
  • Disposal of fixtures, inventory and equipment not included in the sale
  • Environmental remediation and physical refurbishment of premises
  • Secure deletion and destruction of data and confidential material
  • Shutdown of IT systems, domains and websites not included in the sale
  • Removal of signage and branding
  • Early repayment of bank loans or credit lines, including any early-repayment fees
  • Legal and accounting fees
  • Broker or intermediary fees
  • Escrow or deposit fees
  • Registration fees for the transfer of real property

Leases: Termination, refurbishment and vacating

If the business has a commercial lease the buyer doesn't want to take over, it needs to be terminated under the rules of the Danish Commercial Leases Act. As a main rule, the notice period is at least 3 months to the end of a month, unless the lease agreement sets out something else. If the landlord wants to use the premises themselves, a notice period of 1 year applies instead, where it's the landlord terminating the tenant.

Upon vacating, a handover inspection typically needs to be carried out, reviewing the condition of the premises. Many lease agreements require the premises to be handed back in the same condition as at takeover — with the exception of normal wear and tear — which can trigger a significant refurbishment bill. The deposit can't be used freely by the landlord to cover this; any deductions need to be specifically documented. If the lease is commercially protected, the tenant may also be entitled to compensation for goodwill, if it's the landlord terminating.

Who pays? Generally, it's the seller's responsibility to wind down a lease the buyer doesn't want to take over, including notice period and refurbishment — unless otherwise agreed. If the buyer instead wants to take over the lease, it's often the cheapest solution for both parties: the lease is transferred instead of terminated, and the cost of refurbishment and a new notice period is avoided entirely.

Employees who won't continue

Under the Danish Transfer of Undertakings Act, employees generally transfer automatically to the buyer with preserved terms and seniority — the transfer itself isn't in itself objective grounds for dismissing anyone. If an employee still won't continue, the ordinary notice period under the Salaried Employees Act needs to be factored in, and — depending on seniority — any severance pay under Section 2a of the Salaried Employees Act: typically one month's salary at a minimum of 12 years' seniority, and three months' salary at 17 years or more. Since seniority can't be interrupted by a business transfer, the employee's total employment period counts, regardless of when in the process the dismissal happens.

For tax purposes, severance pay is only tax-free for the employee up to a fixed basic allowance of DKK 8,000 — an amount not adjusted year by year. If there are several benefits (severance pay and a service anniversary bonus) in the same year from the same employer, there's only one combined basic allowance.

Want to know more about the rules for employees in a sale? You can read our full walkthroughs of dismissing employees in a business transfer and employees' rights under the Transfer of Undertakings Act (currently in Danish).

Who pays? If the seller chooses to let an employee depart before the business is transferred, it's generally the seller's cost. If the buyer instead chooses to dismiss an employee after the takeover, it's the buyer who bears the cost — because the buyer has precisely taken over the employment relationship, the notice period and the full seniority. This split is one of the most common points of negotiation in a deal, and should always be specified in the transfer agreement.

Holiday pay, special savings and bonus upon departure

Beyond the severance pay itself, accrued but untaken holiday days, any special savings, and any accrued bonuses or commissions often need to be settled. These are items easily overlooked in a busy sale process, but which can amount to a non-trivial sum, particularly in businesses with many employees or commission-based pay.

Who pays? Follows the normal split: obligations accrued up to the transfer date are generally the seller's responsibility, while what's accrued after the takeover is the buyer's. In practice, this is often handled through a working capital adjustment (see below) rather than as a separate item.

Leasing agreements: Vehicles, machinery and IT equipment

Commercial leasing agreements are generally non-cancellable during the agreement period. If the business needs to exit a leasing agreement early — for example because the buyer doesn't want to take over a particular vehicle or machine — the leasing company will typically demand compensation, often in the form of the remaining payments for the rest of the agreement period, or a separate exit fee. An often cheaper alternative is to transfer the leasing contract itself to another party — including the buyer of the business — on the same terms, duration and payments, which requires approval from the leasing company, but typically only triggers a minor fee.

Who pays? If the buyer doesn't want to take over the leased asset, it's normally the seller's cost to wind down the leasing agreement. If the buyer instead takes over the asset and the leasing agreement, the future payments naturally follow the buyer — and the exit cost is avoided entirely. It's therefore often an advantage for both parties to actively investigate whether leasing contracts can be transferred rather than terminated.

Supplier agreements, subscriptions and service agreements

Most businesses have a range of ongoing agreements that don't necessarily need to continue after a sale — software licenses, phone and internet subscriptions, alarm and cleaning agreements, insurance and similar. Many of these can be terminated with ordinary notice, but some contain minimum terms or penalties for early termination, which should be specifically reviewed.

Who pays? Agreements that shouldn't continue are generally terminated by the seller before the transfer. If an agreement should continue, it's instead transferred along with the business, and the obligation naturally follows the buyer.

Physical clean-up: Fixtures, inventory, data and signage

A sale often creates a need for physical clean-up: disposal of fixtures and equipment the buyer doesn't want to take over, clearing inventory, secure deletion or destruction of confidential material and data, and removal of signage and branding, if the business's name or visual identity doesn't come with the deal. If the lease requires it, there may also be genuine environmental remediation of land or premises upon vacating.

Who pays? Normally the seller's responsibility and cost, unless otherwise agreed — particularly because it's often a prerequisite for the lease to be handed back correctly, and for the business to be transferred "clean" to the buyer.

Advisor and transaction costs

Both buyer and seller typically need professional advice through a sale process — a lawyer for the transfer agreement, an accountant for reviewing accounts and tax matters, and possibly a broker or intermediary for the sale process itself. Market practice in Denmark is that each party generally pays its own advisors, while any shared costs — for example fees to an independent escrow agent holding part of the purchase price as security — are either split evenly or allocated by specific agreement between the parties.

Who pays? Each party its own advisor is the clear main rule. Shared costs should always be clarified and written explicitly into the transfer agreement, so no doubt arises afterward.

How wind-down costs factor into the deal itself

Most business deals — both in Denmark and internationally — are based on a so-called "cash-free, debt-free" principle: the seller keeps the business's surplus cash, but must in return deliver a normalized level of working capital at takeover. If the actual working capital differs from the agreed level on the takeover date, the purchase price is adjusted accordingly. Many wind-down costs — including owed holiday pay, unresolved supplier debt items and similar — are in practice handled precisely through this net working capital adjustment, rather than as separate negotiation points.

Costs that only surface after the takeover — for example a follow-up bill from a previously terminated lease, or a claim from an employee dismissed before the sale — are typically handled through warranties and indemnification in the transfer agreement: the seller warrants a number of matters as of the transfer date, and must indemnify the buyer if the warranties turn out not to hold. Part of the purchase price is often withheld for a period (escrow) as security for exactly this kind of subsequent claim.

Frequently asked questions

Do I as seller need to terminate all leases and agreements myself before the business is sold?

Not necessarily. If the buyer wants to take over a lease, a leasing agreement or a supplier agreement, it's often an advantage for both parties for the agreement to be transferred rather than terminated. It's only the matters the buyer doesn't want to continue that typically need to be wound down before the transfer.

Can I dismiss employees before selling the business to save on salary?

An upcoming business transfer isn't in itself objective grounds for dismissal. If you want to reduce staff, it needs to happen under ordinary employment law rules, independent of the upcoming sale.

How do I find out how large the wind-down costs actually are before I list the business for sale?

Systematically review all ongoing agreements — leases, leasing, suppliers, insurance and employment relationships — and assess for each one whether it should be terminated, transferred, or continue unchanged. It's the same exercise a buyer will carry out during due diligence anyway, so you save time by having the answers ready yourself.

Want help mapping your business's wind-down costs before listing it for sale? Book a no-obligation call with us.

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