The MO for M&A in Norway

By Tormod Ludvik Nilsen; Arne Didrik Kjørnæs and Geir Sviggum, Wikborg Rein
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We will in a series of articles focus on mergers and acquisitions in Norway. The Norwegian legal system supports a free and open business environment, and acquisitions are no exception. Norway is sixth out of 183 economies in the World Bank’s ease of doing business ranking. This article concentrates on forms of acquisitions, registration of shares and marketplaces in Norway. Following articles will focus on inside information and disclosure obligations, mandatory bid and squeeze-out regulations. We’ll also look at merger regulations, and finally concentrate on competition law, employment laws and other areas of interest.

Forms of acquisitions

Company or business acquisitions can take numerous forms depending on the requirements of the acquirer, the corporate structure of the target company and the nature of its business. When structuring an acquisition, you should consider whether it will take form as an acquisition of the entire corporate entity or certain subsidiaries, of certain assets or as a merger. In determining the structure, which liabilities will be assumed from the target company and tax aspects are important. An acquisition of a listed company incurs stricter statutory requirements than an acquisition of a privately held company. For the latter, shareholders’ agreements and the articles of association are normally of greater importance.

Acquisition of entities

Shareholders of a private or a public limited liability company have a statutory pre-emption right in connection with share capital increases. Shareholders frequently rely on the company’s articles of association and shareholders’ agreement to raise the barrier for acquisitions of such companies. The provisions in the articles of association and shareholders’ agreement may impose restrictions or qualifications in respect of prospective partners or shareholders in order to avoid competitors buying into the business, or provide for rights to ensure the current shareholders receive part of any premium to be paid for the shares.

Tormod Ludvik Nilsen Senior Associate Wikborg Rein Shanghai
Tormod Ludvik Nilsen
Senior Associate
Wikborg Rein
Shanghai

Transfer of shares in a private limited liability company requires the approval of the board of directors, unless otherwise provided for in the articles of association. Consent must be given as soon as possible after the transfer has been reported to the company and cannot be unreasonably withheld. If the board does not consent, the acquirer is entitled to either reverse his or her agreement (subject to contract terms or transferors’ approval), to dispose of the shares, to commence legal action or, in certain cases, to claim redemption of the shares by the company.

Transfer of shares in a private limited liability company is also subject to existing shareholders’ pre-emptive right, unless the company’s articles of association provide otherwise. Generally, the pre-emptive right is redeemed when the transfer is effected.

In respect of public limited liability companies, the main rule is the opposite; unless the articles of association specifically provide otherwise, no board approval is required and the other shareholders do not have pre-emptive rights. Normally, listed companies will not have such provisions in their articles of association. If such provisions exist, the market will closely monitor its use of such provisions in order not to violate the free trade of shares.

Registration of shares

Ownership of shares in private limited liability companies is evidenced by entry in the company’s shareholder register, which is maintained by the company. The acquirer of shares in such companies must notify the company, and the company must without delay enter the acquirer into the company’s share register as title holder. The concept of bearer shares of a corporation is not known under Norwegian law.

Arne Didrik Kjørnæs Senior Partner Wikborg Rein Oslo
Arne Didrik Kjørnæs
Senior Partner
Wikborg Rein
Oslo

In public limited liability companies, the transferor must ensure that the Norwegian Central Securities Depository (VPS) is notified immediately of transfers of ownership. The VPS is an electronic centralised securities registry in which the ownership of and all transactions relating to shares in all public limited liability companies are to be recorded. For public limited liability companies VPS registration replaces the shareholder register. Private limited liability companies may also choose to register shares in the VPS.

The VPS system confirms each entry by sending a transcript to the registered shareholder, which must then establish a securities account with a Norwegian account agent. Norwegian banks, the Bank of Norway, authorised securities brokers in Norway and Norwegian branches of international credit institutions are allowed to act as agents. The entry of a transaction in the shareholder register or in the VPS prima facie evidences the legal rights of the party entered as holder of the shares against the company or a third party claiming interest in the security.

Nominee registration is only available for foreign shareholders, defined as persons domiciled outside Norway and legal entities not registered in Norway, holding shares in a company with shares listed on a regulated market in Norway. A nominee may only receive dividends and other distributions, including allocation of new shares in a share capital increase, and may not vote at general meetings on behalf of the beneficial owner. In order to exercise voting rights, the beneficial owner must register the ownership in its own name in the VPS or otherwise provide sufficient proof of ownership. A nominee is under the duty to provide information on the identity of beneficial owners to the company and Norwegian authorities if so requested.

Marketplaces for shares in Norway

Norway currently has two regulated markets for shares: the Oslo Børs (Oslo Stock Exchange) and Oslo Axess. The distinction between the two primarily rests on the listing requirements, particularly requirements relating to the number of shareholders and the number of years the company has operated. A company listed on Oslo Axess is subject to the same obligations to the marketplace and investors as companies listed on the Oslo Børs, including market surveillance carried out by the marketplace itself. For more information, see www.oslobors.no and www.osloaxess.no.

In addition, the Norwegian Securities Dealers Association administers an information system for unlisted shares (the NOTC system). Associated members can register their buying and selling interests and report purchases. Information on prices and companies is distributed throughout the trading day, closing price information is updated daily on the association’s website, and after 4.30pm market statistics are published. For more information, see www.nfmf.no.

Tormod Ludvik Nilsen is a senior associate at Wikborg Rein in Shanghai and Arne Didrik Kjørnæs is a senior partner at Wikborg Rein in Oslo. Geir Sviggum, a partner at Wikborg Rein in Shanghai, also contributed to this article

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