Under Norwegian law, a limited company is a separate legal entity where the owner does not have responsibility for the obligations of the company. The owner’s liability is limited to their part of the share capital invested in the business.
In Norway, limited liability companies can be either: a private limited liability company under the Private Limited Liability Companies Act from 1997 (hereinafter AS), or a public limited liability company according to the Public Limited Liability Companies Act 1997 (hereinafter ASA).
Here we will focus on private limited liability companies under the Private Limited Liability Companies Act from 1997.
When forming an AS, the subscriber(s) of shares in the company (the founder(s)) must draw up a memorandum of incorporation which, as a minimum, must include:
- The company’s articles of association;
- The name, address and identification number of the founders;
- The number of shares to be subscribed by each founder;
- The price to be paid for each share to be subscribed for by the founders;
- The deadline for paying the subscription price for the shares;
- The names of the company’s directors; and
- The name of the company’s auditor (if applicable). The company may, subject to certain conditions, choose not to have an auditor.
Normally the capital contribution is settled in cash.
If a company is to take over assets or become a part of an agreement, the founders must prepare a statement describing each deposit, acquisition or agreement, including the value of each asset. They must declare that the assets to be taken over by the company have a value that is at least equivalent to the agreed consideration, including the face value of the shares to be issued as consideration, with the addition of any premium. The statement must be confirmed by an auditor.
The incorporation of the company shall be reported to the Register of Business Enterprises in Brønnøysund within three months.
Before the incorporation of the company is registered, the company as such cannot take on obligations to third parties, other than those provided by the memorandum of incorporation or provided by law.
3. COMPANY CAPITAL AND CAPITAL CONTRIBUTION
A limited company must have a share capital of at least NOK 30 000.
The share capital must be divided into one or more shares of which the rights attach to the shareholder. All shares must have the same face value.
The company is also required to at all times have equity and liquidity that is sufficient based on the risk and extent of the company’s operations.
The board of directors is responsible for on a regular basis overseeing the equity and liquidity of the company. If the equity is lower than justifiable based on the risk and extent of the company’s operations, the board of directors has must consider the matter, and suggest actions. If they find that no actions are appropriate, they shall propose to dissolve the company.
4. SHAREHOLDERS, TRANSFER OF SHARES
All shares carry equal rights in the company. The articles of association may nevertheless determine that there are several share classes. In such cases, the articles of association shall specify what distinguishes the share classes, and the total par value of the shares within each class.
The board of directors must ensure that a shareholder book is established. In the register of shareholders, the shareholders must be entered in alphabetical order stating their name or business name, date of birth or organization number, digital address, business address or place of residence and any postal address.
The acquirer of a share shall immediately notify the company of its share acquisition.
When a new owner has announced and proved its acquisition of a share, the company shall include the new owner in the shareholder register and indicate the day of its introduction.
The new owner also secures legal protection for the title to shares by notifying the company that the title has passed to a new owner.
Shares may change ownership by sale or otherwise unless otherwise is not provided for by law, the company’s articles of association or an agreement between the shareholders. Acquisition of shares is subject to the consent of the company unless the articles of association stipulate that consent is not required. Consent can only be denied if there is a substantive reason for it. Consent cannot be denied upon change of ownership by inheritance.
5. THE GENERAL MEETING
The general meeting is the highest authority of the company.
The shareholders have the right to attend the general meeting, either by themselves or by proxy of their choice. The right to attend cannot be restricted in the articles of association.
Each share carries one vote unless something else follows from law or the articles of association. The articles of association may provide that the shares in a class of shares are not given voting rights or shall have limited voting rights.
The company must hold the ordinary general meeting within six months of the end of each financial year. To the annual general meeting belongs approval of the annual accounts and any annual report, including distribution of dividends to be considered and decided upon, as well as other matters under the law or the articles of association.
The annual accounts and any annual report and audit report must be sent to each shareholder on their known address no later than one week before the general meeting.
The board of directors may decide to convene an extraordinary general meeting; when the auditor who audits the company’s annual accounts, or shareholders representing at least one-tenth of the share capital, in writing, requires such a meeting to address a specific issue. The board shall ensure that the general meeting is held within one month of the request being made.
Normally resolutions by the general meeting are passed by a simple majority of the votes cast.
However, amendment of the articles of association requires the support of at least two-thirds of a) the votes cast; and b) of the share capital represented at the general meeting.
Qualified majority is also required for resolutions which change the shareholders’ right to dividend, or reduce the company’s assets, and for certain resolutions changing the transferability of issued shares.
In some cases, a resolution requires the consent of all shareholders. One example is a resolution that increases obligations of the shareholders towards the company.
6. MANAGEMENT OF THE COMPANY
The board of directors is a mandatory body for a Norwegian limited liability company.
The board of directors must consist of at least one person, and the board must convene when required. At least 50 % of the board members must reside in Norway or another EEA country.
The board is responsible for the management and running of the company. The board shall ensure proper organization of the business. The board of directors shall, to the extent necessary, determine plans and budgets for the company’s operations. The board of directors shall keep abreast of the company’s financial position and undertake to ensure that its operations, accounting and asset management are subject to satisfactory control. The board shall carry out the investigations it deems necessary in order to perform its duties. The board shall conduct such investigations if required by one or more of the board members.
The board of directors shall supervise the day-to-day management and the company’s operations in general. The board may issue instructions for the day-to-day management. In companies with only one shareholder, the board of directors is to ensure that agreements between the company and the shareholder are written down.
A decision by the board requires that the majority of the board members who participate in the processing of a case have voted in favour. In the case of voting equality, the vote of the chairman is decisive.
The CEO is responsible for the day-to-day management of the company and must comply with the guidelines and instructions given by the board. If the company does not have a general manager, the board is responsible for the day-to-day management. The day-to-day management does not include matters which, according to the company’s circumstances, are of an unusual nature or of great importance. The CEO may otherwise decide on a case by proxy from the board in each case, or when the board’s decision cannot be awaited without significant disadvantage to the company. The CEO must ensure that the company’s accounts are in accordance with law and regulations and that the asset management is satisfactory.
The CEO shall, at least every four months, notify the board of directors of the company’s business, position and profit development. The board, as well as individual board members, may at any time require the CEO to give them a more detailed account of specific matters.
The general meeting elects the auditor. If the company is obliged to audit, it must use a registered or state-authorized accountant. The auditor cannot have an affiliation with the company other than being its auditor. After the review, the auditor shall prepare an audit report to be submitted along with the annual accounts. If the auditor has comments, they must appear in this report.
All limited companies must have an auditor, but one is allowed to dismiss audit if;
- operating revenues are below NOK 6 million, and
- the balance sheet is below NOK 23 million, and
- the average number of employees is less than 10 man-labour years
Limited companies that are parent companies for a group eligible for voluntary audit, the group as a whole must be below the above-mentioned values.
8. DISTRIBUTION OF DIVIDENDS AND OTHER USES OF THE COMPANY’S MEANS
The company may only distribute dividends if after the dividend it has returned net assets that provide cover for the company’s share capital and other restricted equity. The calculation must be made based on the balance sheet in the company’s last approved annual accounts.
The company may only distribute dividends as long as it has a sound equity and liquidity after the distribution.
A decision on the distribution of dividends is made by the general meeting after the board has submitted a proposal for distribution or other use of profits. A higher dividend cannot be decided than the board has proposed or approves of.
9. CREDIT TO SHAREHOLDERS
The company may only provide credit to or provide collateral for the benefit of a shareholder or any of its shareholders within the limits of the funds that the company may use to distribute dividends. Reassuring collateral must be provided for the repayment or redemption requirement. The same applies to credit or collateral for the benefit of a shareholder or unit owner of another company in the same group or any of its affiliates.
The prohibition does not apply to credit with ordinary maturity in connection with business agreements, credit or security for the benefit of the parent company or another company in the same group or credit or security for the benefit of a legal person having a controlling influence over the company, or for the subsidiary of such a legal entity, provided the credit or collateral is to serve the financial interests of the enterprise group.
10. INCREASE OF THE SHARE CAPITAL
The decision to increase the share capital through subscription of shares is made by the general meeting.
A decision to increase the share capital shall at least state:
- The amount the share capital is to be increased by, or, an upper and lower limit may be set;
- The nominal amount of the shares;
- The amount payable for each share;
- Who may subscribe for the new shares;
- The deadline to subscribe for the shares;
- Time and place for settlement;
- From which time the new shares are entitled to dividends;
- Which class of shares the new shares should belong to;
- Estimated costs of the capital increase.
The general meeting’s decision to increase the capital must contain any agreement or provision:
- That shares may be subscribed for with the right or obligation to make deposits with assets other than money, that the share contribution obligation may be settled by set-off, or that shares may be subscribed for under other special terms. The assets concerned must be stated, the depositor’s name and address, the number of shares the company shall issue for the deposit, and the terms and conditions that are to apply;
- That the company shall take over assets other than money for consideration in other than shares. It shall specify the assets concerned, the name and address of the transferor, the remuneration to be paid by the company and the terms and conditions applicable;
- That the company becomes a party to an agreement or that someone has special rights to or benefits from the company. In that case, the conditions to be applied and the name and address of the beneficiary must be stated.
11. DECREASE OF THE CAPITAL
The board of directors must propose to the general meeting if the capital is to be reduced, and necessary amendments made to the articles of association. The board must also propose how the funds should be used.
A resolution to reduce the share capital is made by the general meeting. The amount reduced may only be used to:
- Cover loss that cannot be covered otherwise;
- Distribute to shareholders or delete the company’s own shares;
- Allocate to funds to be used according to a decision by the general meeting.
The resolution shall state the amount reduced and how the amount is to be used. It must also state whether the capital reduction shall be carried out by a redemption of shares or by a reduction in the nominal value of each share. A resolution to distribute funds to the shareholders, deleting own shares or allocating to funds may only be adopted in accordance with proposal or consent from the board of directors.
The resolution to reduce the share capital must be reported to the Norwegian Register of Business Enterprises within two months. If the reduction in share capital requires a creditor’s notice, a creditor period of six weeks applies.
If the entire amount of the reduction is to be used to cover losses that cannot be covered in any other way, the reduction may be carried out without creditor notification.
If the share capital is increased at the same time as a capital reduction by subscribing for new shares with paid in share capital, and the share capital becomes at least at the same level as before the reduction, the capital reduction may be done without creditor notification.
12. MERGER AND DEMERGER
A merger is when a company transfers all of its assets, rights and liabilities to another company, and the shareholders in the transferring company receive a consideration in the form of shares in the acquiring company, or such shares plus an additional payment which must not exceed 20 per cent of the total consideration.
The boards of directors of the merging companies must prepare a joint merger plan. The merger plan must meet specific requirements, such as identifying the companies involved, stating the date the merger shall take effect, stating the consideration which shall be contributed to the shareholders in the assigning company or companies, stating conditions for exercising rights as shareholders and identifying other rights benefitting owners, board members or directors.
When the merger plan is finalized, the board of directors of each company must prepare a written report on the merger and the effects it will have on the company. The report must also give an account of the significance of the merger to the employees of the company. Employee representatives in the merging companies must be given information and shall have the right to be informed and for consultation in accordance with the provisions in the Employment Protection Act.
The merger plan must be adopted by the general meeting in each of the companies involved in the merger, alternatively in some cases; by the boards of directors. No later than one month following the adoption of the plan, the resolutions must be filed to the Norwegian Register of Business Enterprises. Creditors that have any objection to the merger must report to the company within six weeks of the announcement.
When the period for objections has expired for all companies participating in the merger, and potential objections have been dealt with, the acquiring company shall notify the Norwegian Register of Business Enterprises on behalf of all participating companies that the merger shall take effect.
When the merger has been registered;
- the assigning company is deemed liquidated,
- the acquiring company is deemed incorporated or the share capital in the company is increased,
- the assigning company’s assets, rights and obligations have been transferred to the acquiring company and
- the shares in the assigning company are exchanged for shares in the acquiring company.
Other effects as provided in the merger plan will also take effect.
Demerger is when a company is divided into two or more parts. The transferring company (the existing company) may transfer all of its assets to two or more acquiring companies (demerger at dissolution), to the effect that the original company ceases to exist. The alternative is that the transferring company retains part of the assets itself (demerger with capital reduction), while other parts are transferred to one or more other entities. The acquiring company may either be formed by demerger or by transferring the share capital to an already existing company.
The board of directors of the transferring company must prepare and sign a demerger plan, at least containing the same information as in a merger plan described above. The plan must also describe the distribution of the company’s assets, rights and obligations between the transferring company and the acquiring company or companies, and the distribution of shares and other considerations between the shareholders in the transferring company.
The demerger plan must be adopted by the general meeting of the company that is about to demerge. If the demerger is to an existing company, the plan must also be adopted in the acquiring company.
The resolutions must be filed to the Norwegian Register of Business Enterprises no later than one month following the adoption of the plan. Creditors that have any objection to the demerger must report to the company within six weeks from the announcement.
When the period of objections has expired, and potential objections have been dealt with, the company shall notify the Norwegian Register of Business Enterprises that the merger shall take effect.
13. DISSOLUTION AND WINDING-UP
Dissolving a Norwegian AS is done in two steps. First, one must adopt and report the resolution to wind up the company. When the six-week creditor deadline is over, one can report deletion.
The general meeting resolves to dissolve a company by the same majority as is required for an amendment to the articles of association and based on a proposal from the company’s board of directors.
When it has been resolved to dissolve the company, the general meeting shall elect a liquidation board which shall replace the board of directors and general manager.
The resolution to dissolve the company must be filed to the Norwegian Register of Business Enterprises. Objections from creditors must be reported to the company within six weeks from the announcement.
The general meeting decides that the company is to be deleted. They can do this after the six-week creditor deadline is over. In the event of a decision on deletion, the general meeting must approve of the final settlement. This must be audited if the company has not registered a decision to opt out of auditing. Deletion must be reported to the Register of Business Enterprises no later than one year after registration of the resolution decision.
In Norway, partnerships are regulated in the Norwegian Partnership Act of 1985.
There are different kinds of partnership entities in Norway. The main differences are how potential liability is distributed among the partners.
In a general partnership (ANS) all partners are jointly and severally liable for the partnership’s liabilities.
In a pro rata partnership (DA) each partner is responsible for a part of the total liability of the partnership.
In a limited partnership (KS) one or more partners (general partner) have joint and severally responsibility for the partnership’s liability, and the limited partners are liable only up to a specific amount of their investment. The general partner may be a limited liability company (AS), but it must hold at least 10% of the KS.
15. BRANCHES (NUF)
An NUF is a Norwegian branch of a foreign enterprise. The Norwegian branch is not an independent corporate body, but is part of the foreign enterprise, and the foreign enterprise is responsible for the operations of the Norwegian branch.
There is no equity requirement for establishing an NUF. Foreign companies that conduct business in Norway have a duty to register in the Norwegian Register of Business Enterprises.
The NUF must have a contact person. It is not required that the contact person is domiciled in Norway, but he / she must be a Norwegian or have a D-number.