The Norwegian legal system is characterised by an active legislator, most legal areas being subject to codifications and enactments, partly as a result of a certain legislative co-operation with the other Scandinavian countries. There is also a legislative tradition for passing statutes with a certain degree of vagueness and ambiguous language, leaving discretionary powers to the government and its administration. An important interpretative source is the purpose for which the legislation was enacted and its preparatory works.
The Norwegian legal system is also characterised by the doctrine of the binding force of precedents, however only applying to decisions by the Supreme Court. Since the early 1990s, implementation of EU legislation based on the European Economic Area (EEA) Agreement has influenced legal development.
Norway is a member of the European Free Trade Association (EFTA). The EU and EFTA signed the EEA Agreement, admitting the EFTA countries to the EU internal market from 1 January 1994.
Under the EEA Agreement, Norway is bound by EU legislation relating to the free exchange of goods, the movement of services, capital and persons, and certain other areas such as anti-trust rules. The EFTA has established the European Surveillance Authority (ESA) and the EFTA Court for the purpose of monitoring, advising and resolving EEA-relevant issues, similar to the European Commission and the EU Court.
Under the Norwegian foreign exchange controls currently in effect, transfers of capital to and from Norway are not subject to prior government approval. However, all payments to and from Norway should be registered with the Norwegian Currency Register. Registration is made by the entity performing the transaction. For physical transfers of payments in currency exceeding NOK25,000 (US$4,300) the Norwegian Customs Service shall be notified. They will also be registered with the Norwegian Currency Register. Money transfers may be subject to the Norwegian Money Laundering Act.
Restrictions and permission
There are no general restrictions on acquiring Norwegian businesses. However, in certain sectors such as financing, banking and insurance activities, government authorisation is required. Ownership in such companies is also restricted. No one may hold more that 10% of the shares of a company providing financing, banking or insurance services without government permission. Further permission must be obtained before increasing the ownership beyond 20%, 30% and 50%. For insurance companies, permission to own more than 10% of the shares will normally not be given.
The Norwegian concession legislation requires that a government permit be obtained in order to hold title to, or enjoy rights in respect of, certain types of real property and “waterfalls” (hydroelectric power plants). There are no concession requirements in relation to acquiring private real estate for living or business activities.
The Register of Business Enterprises is responsible for registering all Norwegian and foreign business enterprises in Norway. The Register of Company Accounts receives information from all private and public limited companies and most partnerships, savings banks, mutual insurance companies and petroleum enterprises. They are obliged to submit their annual accounts, annual report and auditor’s report, which are then available to the general public.
The Register of Mortgaged Moveable Property registers entitlements and mortgages/security interests on moveable property. The registration gives perfection to creditors. The Register of Real Property includes information about properties including owners, purchase, sale, hire and mortgages. The registration also gives perfection to creditors.
Limited liability companies
The limited liability company is the favoured legal entity for business activities in Norway. The shareholders of a limited liability company are only liable for their contribution to the share capital, and not the debts of the company. Limited liability companies are divided into public limited liability companies (ASA) with a minimum share capital of NOK1 million and private limited liability companies (AS) with a minimum share capital of NOK30,000. A public limited liability company may offer its shares to the public, whereas the private limited liability company may only offer its shares to invited investors. In order to apply for listing on a regulated market, the company needs to be an ASA.
A limited liability company may have one shareholder. In a private company with a share capital of NOK3 million or more, and in all public companies, the board shall consist of a minimum of three members, and such companies shall have a managing director. In private limited liability companies with a share capital of less than NOK3 million, the board may consist of one or two board members.
Statutory law provides for employee representation at board level. In summary companies that have more than 30 employees and no corporate assembly, employees are entitled to nominate representatives to serve on the board of directors. There are special rules for companies having more than 50 and 200 employees respectively.
A partnership is an entity that engages in economic activities for the account and risk of two or more participants, provided either that at least one of the participants – who may be a private person, a corporate body or another partnership – has unlimited personal liability for the aggregate liabilities of the entity, or that two or more participants have unlimited liability for their proportionate part of the entity’s liabilities, provided their aggregate liabilities correspond to the total obligations of the entity.
The choice between setting up an entity in the form of a partnership or a limited liability company is one that should be considered in each separate case in light of the particular features of the individual project. Tax considerations are important elements in this respect. The partnership structure, instead of the limited liability company, has frequently been chosen for single-purpose, capital-intensive projects with a limited number of investors. Typical examples are the use of partnerships as a vehicle for investment in and ownership of ships, aircraft and real estate.
Arne Didrik Kjørnæs is a senior partner at Wikborg Rein in Oslo, and Geir Sviggum is a partner at Wikborg Rein in Shanghai.
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