Corporate governance and directors' duties in Norway: overview

A Q&A guide to corporate governance law in Norway.

The Q&A gives a high level overview of board composition, the comply or explain approach, management rules and authority, directors’ duties and liabilities, transactions with directors and conflicts, company meetings, internal controls, accounts and audit, institutional investors and reform proposals.
To compare answers across multiple jurisdictions, visit the Corporate Governance Country Q&A tool.
The Q&A is part of the Practical Law multi-jurisdictional guide to corporate governance law. For a full list of jurisdictional Q&As visit www.practicallaw.com/corpgov-mjg
Lars-Kaspar Andersen, Kristina Sandanger and Ole Christian Muggerud, Advokatfirma DLA Piper Norway DA
Contents

Corporate entities

1. What are the main forms of corporate entity used in your jurisdiction?

The main corporate entities in Norway are:

  • Private limited liability companies (private LLCs).

  • Public limited liability companies (public LLCs).

  • Partnerships with liability.

  • Sole proprietorships.

Only public LLCs or other similar foreign companies can be listed on a regulated market.

 

Legal framework

2. What is the regulatory framework for corporate governance and directors' duties?

Private LLCs are regulated by the Private Limited Liability Companies Act of 1997.

Public LLCs are regulated by the Public Limited Liability Companies Act of 1997.

The acts have a comprehensive, near identical structure, and most of the regulations are the same. Provisions set out in both acts are referred to as set out in the acts.

The Securities Trading Act of 2007 and ancillary regulations also apply to companies listed on a Norwegian regulated market.

 
3. Has your jurisdiction adopted a corporate governance code?

Norway has a codified legal system with a tradition for relatively detailed company law and statutory regulation. Many rules and principles, which in other jurisdictions can be found in non-statutory codes and provisions, are, in Norway, set out in statutes. Corporate governance is quite extensively regulated in the Private Limited Liability Companies Act of 1997 and the Public Limited Liability Companies Act of 1997 (Acts). The statutory rules on corporate governance are generally mandatory, although some provisions can be modified by the company by providing alternative rules in its articles of association.

Many of the rules are regarded as minimum requirements, and more extensive rules and practice can be employed by a company, as long as this does not conflict with the statutory rules.

The Norwegian Corporate Governance Board (NUES) annually publishes the Norwegian Code of Practice for Corporate Governance (Code) (www.nues.no/en/). The Code is acknowledged as the best practice in corporate governance. It is principally intended for companies that, under the Accounting Act, must provide a report on their corporate governance policies and practices. This mainly relates to companies whose shares are listed on a Norwegian regulated market. The Continuing Obligations of Stock Exchange Listed Companies (Nw: Løpende forpliktelser) determines who must report in accordance with the Code. The Code also stipulates that unlisted companies with shares that are regularly traded may also find that the Code gives appropriate guidance for their ownership.

The Code is based on the "comply or explain principle". Companies must comply with the Code or explain why they have chosen an alternative approach. It is the responsibility of the board to consider each section of the Code and decide how the company will meet the requirements. If a company deviates from the requirements of the Code, the company must provide a justification for the deviation (Accounting Act). The corporate governance report must be included or referred to in the annual director's report.

The Code is well-known and recognised among listed companies, although, non-compliance with the Code is not uncommon. Annual reviews show that, at least large listed companies have become more engaged in good corporate governance and fulfil their reporting obligations at a high level. There are no known current plans to reform the "comply or explain principle" as the basis for the Code. There is, however, a tendency for some of the Code's guidelines to later be codified in statutory law and regulations.

 

Board composition and remuneration of directors

4. What is the management/board structure of a company?

Structure

The board structure of both private and public limited liability companies (LLCs) is unitary. Under Norwegian company law, a company's board of directors has both an overall management function and a supervisory function in relation to the company's activities and the executive managers of the company.

Where the number of employees in a company exceeds certain thresholds, the board must include employee representatives. Companies with more than 200 employees must elect a corporate assembly. The company and a majority of the employees or the trade union can, however, agree not to have a corporate assembly. Several large Norwegian companies have made use of this exemption. It is a matter of debate how practical the corporate assembly is and whether it should be discontinued. There is currently no specific proposal to amend the law.

The corporate assembly has the power to:

  • Supervise the board and the general manager's management of the company. Members and observers can request information regarding the company's affairs at meetings of the corporate assembly.

  • Conduct inspections.

  • Issue statements regarding the board's proposal of the annual accounts.

  • Adopt resolutions (after proposal from the board):

    • regarding investments that are material to the company's resources;

    • to implement efficiency measures or changes to operations that will involve a major change or reallocation of the labour force.

  • Adopt non-binding recommendations to the board of directors on other matters.

Management

The daily management of a company is carried out by the general manager. Private LLCs can choose to have one or more general managers. If the company does not have a general manager, the board of directors and its chairman are responsible for the day-to-day management of the company.

Public LLCs must have a general manager responsible for the day-to-day management of the company.

Board members

Only individuals (not legal entities) can be appointed as board members. An exception exists for limited liability shipping companies where limited liability partnerships can act as board members.

Employees' representation

Provided a company has not established a corporate assembly, the election of employee representatives is carried out in the following manner. In companies with more than (Private Limited Liability Companies Act of 1997 and Public Limited Liability Companies Act of 1997):

  • 30 full-time or equivalent employees, a majority of the employees can appoint one member and one observer, both with deputies, by and among the employees;

  • 50 full-time or equivalent employees, a majority of the employees can appoint up to one-third and at least two of the members of the board of directors with deputy directors, by and among the employees;

  • 200 full-time or equivalent employees, the employees can elect one member of the board of directors with a deputy director or two observers with deputies, in addition to the representation allowed above in the case of a company with more than 50 employees.

Number of directors or members

The board of a private LLC must have at least one director and the board of a public LLC must have at least three directors.

If a private or public LLC has a corporate assembly, the board of directors must consist of at least five directors.

There is no maximum number of directors. However, the company can impose a minimum and maximum of directors in its articles of association.

 
5. Are there any general restrictions or requirements on the identity of directors?

Age

Only adults (over 18 years) can be elected as members of the board of directors. There are no maximum age restrictions on being a director, but the company's articles of association may draw up such restrictions.

Nationality

The general manager and at least half of the board members must be Norwegian residents, or European Economic Area (EEA) citizens residing within the EEA.

Gender

There are no gender requirements for private limited liability companies (private LLCs).

For public LLCs, the following gender quotas apply. If the board of directors has:

  • Two or three members, both genders must be represented.

  • Four or five members, each gender must be represented by at least two members.

  • Six to eight members, each gender must be represented by at least three members.

  • Nine members, each gender must be represented by at least four members.

  • More than nine members, each gender must be represented by at least 40% of the members of the board.

These rules apply for the election of deputy members of the board of directors. There are also gender requirements for board members elected by the employees.

 
6. Are non-executive, supervisory or independent directors recognised or required?

Recognition

See below, Board composition.

Board composition

It is not a legal requirement for the board to have independent directors. However, the Norwegian Code of Practice for Corporate Governance (Code) stipulates that the composition of the board of directors must ensure that it can operate independently of any special interests. The Code further recommends that a majority of the shareholder-elected members of the board should be independent of the company's executive personnel and material business contacts, and that at least two of the members of the board elected by shareholders should be independent of the company's main shareholder(s).

In public limited liability companies, it is a statutory requirement that the general manager cannot act as a board member. The Code further recommends that:

  • No other executive personnel should be members of the board.

  • Directors of listed companies must be nominated by a nomination committee. The nomination committee's duties are to propose:

    • candidates for the corporate assembly and the board of directors; and

    • fees to be paid to members of these bodies.

  • A majority of the committee should be independent of the board of directors and the executive personnel.

  • The independence of the nomination committee requires candidates for the nomination committee to be put forward by the nomination committee itself. However, the general meeting should elect the chairperson.

Independence

When evaluating whether a member of the board is independent of the company's executive management or its main business connections, the Code stipulates that the company should, among other things, ensure that the individual:

  • Has not been employed by the company in a senior position for the last five years.

  • Does not receive any remuneration from the company besides a regular fee as board member.

  • Does not have any form of business relationship with the company.

  • Is not entitled to any fees as a board member that are dependent on the company's performance or any share options.

  • Does not have a conflicting relationship with the executive personnel, other directors or shareholders.

  • Has not within the past three years had a relationship either of employment or partnership with the accounting firm currently auditing the company's annual accounts.

Duties and liabilities

General management of the company. The directors are responsible for the general management of the company and must ensure that the business is properly organised. The board must adopt plans and budgets for the activities of the company. The directors must keep themselves informed about the company's financial position and ensure that its activities, accounts and management of assets are subject to adequate control.

Supervisory responsibility. The directors also have supervisory responsibility of the daily business of the company. The directors can give instructions and issue guidelines for the company's business. This is not a compulsory obligation, but will often be part of the supervision of the management of the company.

Duty of care. The directors have a fiduciary duty to perform their general management and supervisory responsibilities in the best interests of the company. They must:

  • Act with due diligence and the care of a good merchant (see Question 16) towards the company.

  • Exercise reasonable care, skill and diligence commensurate with their knowledge and abilities.

  • Have professional knowledge of all aspects relevant to taking management decisions.

    An important specific obligation is to ensure that the company has adequate equity and liquidity in terms of the risk and scope of the company's business. The board will have a duty to act if the equity or the liquidity of the company is no longer sound or if the equity is less than half the share capital of the company. In such cases the board must:

    • ensure that a shareholders' meeting is convened within a reasonable period of time;

    • give the shareholders' meeting an account of the company's financial position; and

    • propose measures to ensure that the company meets the statutory requirements.

If the board of directors does not find grounds for proposing such measures, or if such measures cannot be implemented, the board of directors must suggest the company be dissolved at the general meeting.

The obligation to ensure that the company at all times has adequate liquidity was introduced as a part of the process of simplifying Norwegian company law. By the amendments that entered into force on 1 July 2013, certain restrictions on the company's ability to distribute dividends and group contributions were repealed and replaced by the equity and liquidity standard. The introduction of the liquidity standard involves greater responsibility for the board of directors and implies stricter requirements for the board's assessment of the financial position of the company, especially when resolving to propose the distribution of dividend or group contributions. In such cases, the board must conduct an independent assessment of whether the company, after the distribution, has both sound equity and liquidity, taking into account the risk and scope of the company's business. 

Other specific key obligations. The management and supervision provisions in the Private Limited Liability Companies Act of 1997 and Public Limited Liability Companies Act of 1997 (Acts) are drafted widely. The Acts and other applicable laws, however, set out more detailed and specific obligations for directors. Some of the key obligations include:

  • Organising the accounting and filing of annual accounts.

  • Filing tax returns, trading statements and value added tax (VAT) returns.

  • Calling and preparing shareholders' meetings.

  • Appointment of the managing director.

  • Dealing with matters that concern investments that are significant compared to the company's resources, or matters that are unusual or of great importance for the company.

The board can be held liable in accordance with the general provisions on directors' liability if they do not comply with their duties (see Question 16).

 
7. Are the roles of individual board members restricted?

There is no restriction on the role of individual board members in the case of private limited liability companies. In public limited liability companies, the general manager must not be a member of the board of directors (see also Question 6, Board composition).

 
8. How are directors appointed and removed? Is shareholder approval required?

Appointment of directors

The members of the board of directors are elected by the general meeting. This does not apply for members that are elected by the employees or by the corporate assembly (see Question 4, Employees' representation).

Removal of directors

A director elected by the general meeting or corporate assembly can only be removed by a resolution of the body that elected the director. Additionally, a member of the board of directors can choose to resign from his position on special grounds.

 
9. Are there any restrictions on a director's term of appointment?

Directors serve for a term of two years. The period of office can be fixed for a shorter or longer term in the articles of association, but not for a term of more than four years. However, the directors can be re-elected. The Norwegian Code of Practice for Corporate Governance recommends that the term of directorship in listed companies should not exceed two years. When considering whether to re-elect members of the board, the value of continuity should be balanced against the need for renewal and independence.

 
10. Do directors have to be employees of the company? Can shareholders inspect directors' service contracts?

Directors employed by the company

There are no requirements for directors elected by the general meeting to be employees of the company. Employee representatives must, however, be employed by the company.

Shareholders' inspection

There are no legal requirements for directors to have service contracts. However, it is quite common for the company to enter into service contracts with directors in order to determine their remuneration for services provided outside their positions as board members. Such agreements may be subject to shareholders' approval in accordance with Question 21.

 
11. Are directors allowed or required to own shares in the company?

Directors are allowed to own shares in the company, but are not required to do so. The Code encourages directors to own shares in the company. The Securities Trading Act imposes strict notification and disclosure obligations on directors owning shares in listed companies.

 
12. How is directors' remuneration determined? Is its disclosure necessary? Is shareholder approval required?

Determination of directors' remuneration

Directors' remuneration is determined by the general meeting after a proposal from the board of directors. The Code encourages the board to consider appointing a remuneration committee in order to help ensure thorough and independent preparation of matters relating to compensation paid to the executive personnel.

Most commonly, the remuneration is approved following the remuneration period, but it can also be determined in advance.

Disclosure

Remuneration for the board of directors must be disclosed in the annual accounts.

Shareholder approval

See above, Determination of directors' remuneration.

General issues and trends

Remuneration of directors in Norway has historically been quite prudent. The remuneration of the best paid chairmen of listed companies is rarely above NOK1 million annually.

 

Management rules and authority

13. How is a company's internal management regulated? For example, what is the length of notice and quorum for board meetings, and the voting requirements to pass resolutions at them?

Meetings of the board of directors must always be convened when requested by a director or the general manager. Notice of a board meeting must be announced in a suitable manner and with the necessary advanced notice.

The board of directors forms a quorum when more than half of the directors are present or otherwise participate in the proceedings. The company's articles of association may provide stricter requirements. Even though more than half of the board members are present, the board of directors cannot adopt resolutions without all the board members having been given a reasonable opportunity to participate in the meeting.

A resolution of the board of directors requires the supporting vote of a majority of the directors who participate in the consideration of the matter. In the event of a tie, the chairman of the board has the casting vote.

The board of directors must deal with matters in physical meetings unless the chairman of the board finds that the matter can be dealt with in another adequate manner, such as by written resolution or conference call.

Public limited liability companies (LLCs) must hold one physical meeting per year in order to approve and adopt the annual accounts and the directors' report. If the board of directors is responsible for the appointment of the general manager, the fixing of salary or other remuneration of the general manager must be dealt with in a meeting. The same applies if the board of directors fixes the salaries and other remuneration of other senior employees.

 
14. Can directors exercise all the powers of the company or are some powers reserved to the supervisory board (if any) or a general meeting? Can the powers of directors be restricted and are such restrictions enforceable against third parties?

Directors' powers and restrictions

As a general rule, the board of directors jointly has the authority to represent and sign on behalf of the company in all matters. The board of directors or the company's articles of association can determine that each director, the general manager or named employees alone or jointly have the right to represent the company. The directors or others with authority to sign on behalf of the company cannot be restricted to certain matters or specific amounts. If internal restrictions are given, such restrictions will normally not be enforceable against third parties.

However, the Private Limited Liability Companies Act of 1997 and the Public Limited Liability Companies Act of 1997 (Acts) do introduce a right for other company bodies, such as the general meeting, to instruct the board in specific matters. The board should follow these instructions unless the business of the company dictates otherwise. The board's powers may also be restricted in the articles of association by introducing conditions that specific matters (for example, entering into specific agreements) require the prior approval of the general meeting.

If the board of directors exceeds its authority the relevant transaction will not be binding on the company in so far as the company can document that the other party understood or ought to have understood that the authority was being exceeded and that it would be dishonest to complete the transaction. Restrictions contained in the articles of association will therefore normally bind third parties, as opposed to internal restrictions set by the general meeting.

A number of specific matters are subject to the approval by the general meeting or another company body. These matters are typically changes in the articles of association, share capital, the board, mergers and demergers and resolutions to dissolve the company.

 
15. Can the board delegate responsibility for specific issues to individual directors or a committee of directors? Is the board required to delegate some responsibilities, for example for audit, appointment or directors' remuneration?

The board can give a director the authority to handle specific matters but the board cannot delegate its ultimate responsibility.

For large public limited liability companies (LLCs) there is a statutory requirement to establish an audit committee. It is also recommended that smaller companies consider this. The Norwegian Code of Practice for Corporate Governance further recognises that some matters are better dealt with by committees such as a nomination committee and/or a remuneration committee, however, the members of the board of directors remain responsible for their decisions. Accordingly, where board committees are appointed, their role must be seen as preparing matters for a final decision by the board as a whole.

 

Duties and liabilities of directors

16. What is the scope of a director's duties and personal liability to the company, shareholders and third parties?

General duties

For an overview of the general duties of the board of directors, see Question 6.

The liability of directors is based on the general rule of negligence. A director who intentionally or negligently causes damage to the company, a shareholder or third parties can be held liable for the loss caused by such behaviour.

The directors must always act with the care of a good merchant. This standard is based on both a subjective and an objective evaluation of the behaviour. The subjective part relates to the general knowledge, skill and experience that the individual director has. It is always expected that a director will perform his obligations in accordance with his individual qualifications. The objective part relates to the general knowledge, skill and experience that can reasonably be expected of a person carrying out the functions of a director.

The Private Limited Liability Companies Act of 1997 and the Public Limited Liability Companies Act of 1997 (Acts) set out several specific obligations for directors. A breach of the specific obligations would likely be considered negligent behaviour.

Directors can be held both criminally liable and economically liable for loss created by negligent behaviour. Criminal liability can be imposed by intentional or negligent contravention of the Acts and ancillary regulations.

The general rule is that the directors are severally liable for the loss caused by their negligent behaviour. However, the liability is joint if several directors are personally liable for the same loss.

Theft and fraud

No specific regulations exist in relation to directors' liability for theft and fraud. However, a director (or any other person) can be held criminally liable or liable for damages if he has contributed to the cause of the theft or fraud.

A legal entity can also commit a crime under Norwegian law and the company itself may be fined for the criminal actions.

Securities law

A director (or any other person) can be held criminally liable if he wilfully or negligently violates specific obligations under the Norwegian Securities Trading Act, such as the regulations regarding:

  • Misuse of inside information.

  • Market manipulation.

  • Prospectus rules.

Daily fines or violation penalties can also be imposed on the company or persons who have contributed to violations of other specific provisions in the Norwegian Securities Trading Act. Such penalties are considered to be administrative sanctions, but can, however, involve considerable amounts.

Insolvency law

The directors must file for bankruptcy if the company is insolvent.

In addition to liability towards third parties, a director who intentionally or through gross negligence fails to declare bankruptcy is liable to fines or imprisonment for a term not exceeding two years if the company is insolvent, and:

  • Such failure entails a disposition or disbursement that cannot be annulled, and this considerably reduces the creditors' prospects of obtaining payment.

  • The company's business is clearly running at a loss and the directors must realise that the company will not be able to give the creditors payment in full within reasonable time.

In general, the directors should act with sufficient due care when the company is in financial difficulties as this can lead to additional duties and liabilities. The Criminal Code sets out further liabilities in relation to an insolvent company or a company in debt.

Health and safety

No specific regulations exist in relation to the directors' liability for health and safety issues. However, a director (or any other person) can be held criminally liable or liable for damages if he contributed to the cause of health and safety issues.

Environment

No specific regulations exist in relation to the directors' liability for environmental issues. However, a director (or any other person) can be held criminal liable or liable for damages if he contributed to the cause of environmental issues.

Anti-trust

No specific regulations exist in relation to the directors' liability for anti-trust issues. However, a director (or any other person) can be held criminally liable or liable for damages if he contributed to the cause of anti-trust issues.

As of 1 January 2014, only individuals can be prosecuted under the Competition Act, although to date, criminal sanctions have rarely been imposed on individuals. In relation to the adopted changes in the Competition Act, the Ministry has indicated that criminal prosecution and sanctions should be more frequently used. The Norwegian Competition Authority (NCA) has taken due notice of this policy change, but still makes clear that imprisonment will be reserved for aggravating circumstances and/or when there is no leniency application lodged with the NCA.

Cyber-crime

No specific regulations exist in relation to the directors' liability for cyber-crime. However, a director (or any other person) can be held criminally liable or liable for damages if he contributed to the cause of cyber-crime.

 
17. Can a director's liability be restricted or limited? Is it possible for the company to indemnify a director against liabilities?

The director and a company can enter into an agreement for the discharge of liability for the director in specific matters. Such an agreement must be approved by the general meeting and does not limit the director's liability for losses caused by intent or gross negligence, nor does it reduce liability to third parties.

 
18. Can a director obtain insurance against personal liability? If so, can the company pay the insurance premium?

A company can provide for directors' insurance in order to cover potential directors' liability. Such insurance would cover the liability of a director on certain terms.

It is quite common for Norwegian companies to obtain directors' insurance and for the company to pay the insurance premium.

 
19. Can a third party (such as a parent company or controlling shareholder) be liable as a de facto director (even though such person has not been formally appointed as a director)?

The general rule under Norwegian law is that every limited company is a separate legal entity only liable for its own liabilities and obligations. Therefore, a parent company or a controlling shareholder cannot generally be held liable as de facto director for any of the subsidiary's liabilities or obligations. However, a parent company or a controlling shareholder may be held independently liable for its subsidiary's liability if it has contributed to a wrongful act through a controlling interest in the company.

 

Transactions with directors and conflicts

20. Are there general rules relating to conflicts of interest between a director and the company?

The directors are fiduciaries of the company and the directors must act in the best interest of the company. Section 6-28 of the Private Limited Liability Companies Act of 1997 and the Public Limited Liability Companies Act of 1997 (Acts) state that a board of directors must not perform any actions that could give certain shareholders or others an unreasonable benefit at the cost of the company or other shareholders.

The directors also have a duty not to participate in resolutions where the director himself or a related party of the director must be considered to have a special personal or financial interest in the matter. Similarly, a director has a duty to refrain from participating in resolutions to grant loans or other credit to himself, and from issuing securities for his own debt.

The Norwegian Code of Corporate Governance (Code) has more comprehensive requirements for public limited liability companies (LLCs) than the statutory law requirements with regard to conflicts of interest for members of the board. The Code stipulates that guidelines should be established to ensure that the board is notified of a situation where a director or a member of the executive personnel has a material interest in a transaction or other matter entered into by the company or binding on the company.

 
21. Are there restrictions on particular transactions between a company and its directors?

Transactions between a director and the company are considered to be related party transactions under Norwegian law. To be valid, such transactions must be approved by the general meeting of the company provided that the consideration from the company has a real value exceeding 10% (private companies) and 5% (public companies) of the share capital of the company. Further formal requirements apply to the approval process of such agreements.

Some agreements are exempted from these requirements, typically agreements entered into as part of the company's normal business at market price and other terms that are customary for such agreements.

In addition, there are further restrictions on the director's ability to receive loan or credit from the company. The main rule is that the company can only grant credit to, or provide security for the benefit of, a director or the director's related parties within the range of the funds that the company can use for the distribution of dividends.

 
22. Are there restrictions on the purchase or sale by a director of the shares and other securities of the company he is a director of?

A director of an unlisted company is not restricted by law from dealing in shares or other securities of the company. Restrictions can however be imposed in the articles of association or in shareholders' agreements. There are also certain restrictions on the company's ability to grant the director credit to acquire the shares (see Question 21).

For directors who own shares in companies that are listed on a Norwegian regulated market, the Securities Trading Act imposes certain restrictions to prevent insider trading. According to section 3-3, directors possessing inside information must not, directly or indirectly, for their own or a third party's account, subscribe, purchase, sell or exchange financial instruments or incite others to conduct such transactions. The Securities Trading Act also contains provisions that ensure the transparency of major shareholdings.

 

Disclosure of information

23. Do directors have to disclose information about the company to shareholders, the public or regulatory bodies?

There are many circumstances in which the directors must disclose information about the company to shareholders and public authorities.

The Private Limited Liability Companies Act of 1997 and the Public Limited Liability Companies Act of 1997 (Acts) do not contain any provisions that impose on directors a duty to give information to the shareholders on their own account. However, directors do have a statutory duty to give further information at the request of a shareholder on:

  • The annual accounts.

  • The director's report.

  • Specific matters to be dealt with in a general meeting.

  • The company's financial position.

The board also has a comprehensive duty of disclosure towards the shareholders in the director's report and in relation to certain specific matters such as mergers or demergers and share issues.

The company must also notify the Norwegian Register of Business Enterprises regarding any changes in the company, such as:

  • Changes to the share capital.

  • Changes to the board of directors.

  • Change of general manager.

  • Mergers or demergers.

The company must submit its annual accounts and the tax return to the Register of Company Accounts.

The Securities Trading Act imposes continuing reporting obligations on listed companies regarding, among other things:

  • Inside information.

  • Interim financial information.

  • Changes in the share capital, share rights, loans and the company's articles of association.

 

Company meetings

24. Does a company have to hold an annual shareholders' meeting? If so, when? What issues must be discussed and approved?

A company must hold an annual general meeting within six months of the end of each financial year. The annual general meeting must deal with the following matters (Private Limited Liability Companies Act of 1997 and Public Limited Liability Companies Act of 1997):

  • Adoption of the annual accounts and the directors' report, including the distribution of dividends.

  • Any other matters that should be considered at the general meeting under the law or the articles of association.

Public limited liability companies (LLCs) must also deal with the board of directors' declaration concerning the determination of salaries and other remuneration of senior employees. The general meeting must also hold an advisory vote following the board of directors' guidelines for determination of remuneration of senior employees.

 
25. What are the notice, quorum and voting requirements for holding meetings and passing resolutions?

The notice period for:

  • Private limited liability companies (LLCs) is one week.

  • Public LLCs is two weeks.

The articles of association can impose stricter notice period requirements.

There is no requirement that a specific number of shareholders must be present at the general meeting to form a quorum. The main rule is that a resolution of the general meeting requires a majority of the votes present at the meeting (Private Limited Liability Companies Act of 1997 and Public Limited Liability Companies Act of 1997).

 
26. Are specific voting majorities required by statute for certain corporate actions?

Certain resolutions require a qualified majority of the votes present in the meeting to be legally resolved. The most important example is a resolution that involves an amendment of the articles of association (such as changes in share capital, the purpose of the company and registered address). These resolutions require the support of at least two-thirds of the votes and the share capital represented at the general meeting.

Other resolutions require the supporting votes of shares making up more than 90% of the share capital represented at the general meeting. These resolutions typically involve a detriment to the rights of the shareholders, for example, resolutions:

  • Proposing a reduction in shareholders' rights to dividends or the company's capital.

  • Imposing limitations on the right of shareholders to dispose of shares in the company, where there had previously not been such limitations (such as imposing board consent or a right of first refusal).

Certain resolutions require the consent not only of all shares represented at the general meeting but from the entire issued share capital of the company. These resolutions typically involve:

  • An increase in the obligations of the shareholders towards the company.

  • Subjecting the shares to compulsory redemption.

  • Altering the legal relationship between formerly equivalent shares.

If the resolution affects only some of the shareholders, the resolution requires the support of all affected shareholders and a majority on a similar basis as amendments to the articles of association.

 
27. Can shareholders call a meeting or propose a specific resolution for a meeting? If so, what level of shareholding is required to do this?

The board of directors is responsible for giving notice of a general meeting. In private limited liability companies (LLCs), the board of directors must call an extraordinary general meeting whenever a shareholder representing at least 10% of the share capital of the company demands in writing that a specific matter is dealt with. If all the shareholders approve that an extraordinary general meeting must be held, a meeting may be held without a resolution from the board of directors.

In public LLCs, the board of directors must call an extraordinary general meeting whenever a shareholder representing at least 5% of the share capital demands in writing that a specific matter be dealt with.

The board of directors must ensure that the general meeting is held within one month of the demand being submitted.

 

Minority shareholder action

28. What action, if any, can a minority shareholder take if it believes the company is being mismanaged and what level of shareholding is required to do this?

A shareholder can bring a legal action to void a resolution of a general meeting on the grounds that it was unlawfully adopted or is otherwise in conflict with statute or the articles of association of the company.

A shareholder can further propose that the incorporation of the company, its administration or other specified matters relating to the administration or the accounts be investigated. The proposal may be submitted at an ordinary general meeting or at a general meeting whose agenda sets out the proposal for an investigation. If the proposal is supported by shareholders owning at least 10% of the share capital present at the general meeting, any shareholder may within one month from the date of the general meeting require the District Court to pronounce by decree a decision for investigation.

 

Internal controls, accounts and audit

29. Are there any formal requirements or guidelines relating to the internal control of business risks?

As Norway has a codified legal system, the directors' responsibility for the company's business is quite extensively regulated in the Private Limited Liability Companies Act of 1997 and the Public Limited Liability Companies Act of 1997 (Acts). The board of directors are responsible for the management of the company and the supervision of the day-to-day management of the company. The board of directors must ensure that the company has sound internal controls and systems for risk management that are appropriate in relation to the extent and nature of the company's activities (see Question 6).

For listed companies, the Norwegian Code of Corporate Governance (Code) imposes additional responsibilities on the board of directors. The company's internal control system must, at a minimum, address the organisation and execution of the company's financial reporting.

The Code also indicates that the board should carry out an annual review of the company's most important areas of exposure to risk and its internal control arrangements.

 
30. What are the responsibilities and potential liabilities of directors in relation to the company's accounts?

The board of directors is responsible for ensuring that the annual accounts are prepared in accordance with statute, regulations and generally accepted accounting principles. If the company has a general manager, the general manager must ensure that the company's accounts are prepared. However, the board of directors has ultimate responsibility for the annual accounts and, together with the general manager, must sign and be the addresser of the annual accounts. The board must therefore ensure that the annual accounts are prepared in accordance with relevant regulations and is responsible for the information given in the annual accounts. The board can be held liable in accordance with the general provisions of directors' liability if the information given is misleading or incorrect (see Question 16).

The board of directors must deal with the annual accounts and the director's report in a board meeting. The annual accounts and the director's report must be signed by all the directors. It is the board's responsibility to ensure the annual accounts are presented and approved by the general meeting within six months of the end of the financial year.

 
31. Do a company's accounts have to be audited?

The company's annual accounts must be audited. For private limited liability companies (LLCs) there is an exemption from the obligation to audit the annual accounts if the:

  • Annual operating revenues of the total business do not exceed NOK5 million.

  • Balance sheet amount does not exceed NOK20 million.

  • Average number of employees does not exceed ten full-time or equivalent.

If the conditions for exemption are fulfilled, the general meeting can (with the majority required for amendments of the articles of association) issue an authorisation giving the board of directors authorisation to adopt a resolution to the effect that the company's annual accounts are not to be audited.

 
32. How are the company's auditors appointed? Is there a limit on the length of their appointment?

The general meeting has the authority to elect the company's auditor. An auditor serves until another auditor has been elected.

 
33. Are there restrictions on who can be the company's auditors?

Only auditors registered with the Financial Supervisory Authority of Norway can act as auditors. Authorisation is only granted to auditors who meet the requirements laid down in the Auditor Act (for example, education, practical training and good standing).

The Auditor Act also imposes general requirements regarding independence, objectivity and ethics to serve as an auditor.

 
34. Are there restrictions on non-audit work that auditors can do for the company that they audit accounts for?

An auditor who audits the annual accounts of a company that is subject to the statutory audit obligation must not provide consulting or other non-audit services to the company if the services may influence or compromise the auditor's independence and objectivity (Auditor Act).

The auditor must not provide services which fall under the management and control tasks of the audited company and the auditor must not act as attorney-in-fact for the company.

 
35. What is the potential liability of auditors to the company, its shareholders and third parties if the audited accounts are inaccurate? Can their liability be limited or excluded?

The auditor must perform his duties in accordance with good auditing practice and applicable professional standards. The auditor is liable for any damage caused intentionally or negligently during the performance of his duties as auditor (Auditor Act).

The company bears the main responsibility for the business and for the presentation of correct information. If the company has contributed to a loss, the liability of the auditor may be reduced (section 5-1, Compensatory Damages Act). However, the auditor can be liable to a third party if he has not acted in accordance with good auditing practice and applicable professional standards, and the third party would have acted differently if the information had been correct.

Severe or repeated breaches of good auditing practice may be punished by fines or imprisonment of up to one year.

The auditor firm is jointly and severally liable with the auditor who has performed the assignment on behalf of the auditor firm.

 

Corporate social responsibility

36. Is it common for companies to report on social, environmental and ethical issues? Please highlight, where relevant, any legal requirements or non-binding guidance/best practice on corporate social responsibility.

All limited liability companies (LLCs) must, in the director's report, provide information on social matters such as:

  • The working environment.

  • Measures implemented to improve or promote gender equality and discrimination.

  • The impact the company may have on the external environment.

Large companies (typically public limited liability companies (LLCs)) must also prepare a statement explaining in more detail how the company, in its business strategies, both in daily operations and in relation to its shareholders, promotes, among other things:

  • Human rights.

  • Labour rights and social conditions.

  • The environment.

  • Anti-corruption efforts.

 

Company secretary

37. What is the role of the company secretary in corporate governance?

In Norway there are no legal requirements to appoint a company secretary. The Norwegian Register of Business Enterprises does however fulfil many of the functions of a company secretary in other jurisdictions.

 

Institutional investors and shareholder groups

38. How influential are institutional investors and other shareholder groups in monitoring and enforcing good corporate governance? Please list any such groups with significant influence in this area.

Institutional investors and other shareholder groups can have an indirect influence on the monitoring and enforcing of good corporate governance through indirect membership of the Norwegian Corporate Governance Board (NUES). NUES is the body that prepares, revises and issues the Norwegian Code of Practice for Corporate Governance. Institutional investors and other shareholder groups are represented in NUES through, for example, the Institutional Investor Forum, the Confederation of Norwegian Enterprises and Oslo Børs, which are all members of NUES.

Institutional and financial investors can also have influence over the monitoring and enforcing of good corporate governance through their ownership interests in Oslo Børs.

Large shareholder groups can also have influence on specific companies' corporate governance through their ownership in the company. Most companies will do their best to comply with the recommendations of such shareholders as they are important to the business and the financial position of the company. However, such shareholders have limited legal tools to enforce good corporate governance and their influence will be confined to the specific company.

 

Reform

39. Please summarise any proposals for reform and state whether they are likely to come into force and, if so, when.

As a part of a long process of simplifying Norwegian company law, certain amendments to the Private Limited Liability Companies Act of 1997 and the Public Limited Liability Companies Act of 1997 (Acts) entered into force on 1 July 2013. These amendments have been taken into consideration throughout this overview.

It is not anticipated that any substantial changes to the law will be implemented in the near future.

 

Online resources

Lovdata

W www.lovdata.no

Description. Lovdata is a foundation established by the Department of Justice and the Faculty of Law at the University of Oslo, which offers up-to-date information and sources of Norwegian law in Norwegian.

Rettsdata

W www.rettsdata.no

Description. There are no official websites that provide English translations of Norwegian laws. Rettsdata is a trusted unofficial website. The website requires log in information.

Faculty of Law

W www.ub.uio.no/ujur/ulov/

Description. English translations of certain Norwegian laws can be obtained from the Faculty of Law's website. The translations on this webpage may not be up to date.

NUES

W www.nues.no

Description. NUES publishes the Norwegian Code of Practice for Corporate Governance annually, both in Norwegian and English.

Oslo Børs

W www.oslobors.no

Description. Oslo Børs publishes up-to-date listing rules and continuing obligations for listed companies, in both Norwegian and English. The website also contains an English translation of the Securities Trading Act. The website may not be up to date.



Corporate governance authorities and bodies

Norwegian Register of Business Enterprises (Brønnøysundsregistrene)

W www.brreg.no

Description. The Norwegian Register of Business Enterprises is a government body that forms part of the Norwegian Ministry of Trade and Industry and consists of several different national registers for company information.

Financial Supervisory Authority of Norway (NFSA)

W www.finanstilsynet.no

Description. The NFSA is an independent government agency under the Ministry of Finance which has responsibility for the supervision of the financial market. The NFSA is responsible for the supervision of banks, finance companies, mortgage companies, insurance companies, pension funds, investment firms, securities fund management and market conduct in the securities market, stock exchanges and authorised market places, settlement centres and securities registers, estate agencies, debt collection agencies, external accountants and auditors.

Oslo Børs ASA

W www.oslobors.no

Description. Oslo Børs ASA offers the only regulated markets for securities trading in Norway. Oslo Børs is responsible for investor protection and market surveillance.

Norwegian Corporate Governance Board (NUES)

W www.nues.no/en/

Description. The Norwegian Corporate Governance Board publishes the Norwegian Code of Practice for Corporate Governance.



Contributor profiles

Lars-Kaspar Andersen, Partner

Advokatfirma DLA Piper Norway DA

T +47 24 13 15 76
F +47 24 13 15 01
E lars-kaspar.andersen@dlapiper.com
W www.dlapiper.com

Professional qualifications. Norway

Areas of practice. Corporate.

Kristina Sandanger, Lawyer

Advokatfirma DLA Piper Norway DA

T +47 24 13 15 39
F +47 24 13 15 01
E kristina.sandanger@dlapiper.com
W www.dlapiper.com

Professional qualifications. Norway

Areas of practice. Corporate.

Ole Christian Muggerud, Junior Lawyer

Advokatfirma DLA Piper Norway DA

T +47 24 13 15 38
F +47 24 13 15 01
E ole.muggerud@dlapiper.com
W www.dlapiper.com

Professional qualifications. Norway

Areas of practice. Corporate.


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