corporate acquisitions and mergers editor-in-chief: … · corporate acquisitions and mergers...

Corporate Acquisitions and Mergers

Editor-in-Chief: Peter F.C. Begg

Supplement 3 of 2013

Corporate Acquisitions and Mergers represents the largest database of M&Aknow-how available anywhere in the world. Top firms from the largest 50economies in the world have provided a concise legal analysis of the cultural,legal, regulatory, tax and accounting regimes affecting transactions in their homejurisdictions.

Please find enclosed the following completely updated chapters:

• BrazilGuilherme Leite & Fábio ContentePinheiro Neto Advogados, São Paulo, Brazil

• IsraelEhud SolHerzog Fox & Neeman

• NigeriaLadi Taiwo & Alayo OgunbiyiAbdulai, Taiwo & Co.

• NorwayArne Didrik Kjørnæs, Susanne Munch Thore & Anders MyklebustWikborg Rein & Co.

• SpainFernando de las Cuevas & Álvaro MateoGómez-Acebo & Pombo Abogados, S.L.P

• SwitzerlandHans-Jakob Diem & Jacques IfflandLenz & Staehelin

• United KingdomNilufer von BismarckSlaughter and May

9888002863

Corporate Acquisitionsand

Mergers

Volume 2

Editor-in-Chief:Peter F.C. Begg

Supp 3/2013

Published by Kluwer Law InternationalP.O. Box 3162400 AH Alphen aan den RijnThe Netherlands

Sold and distributed in North, Central and South America byAspen Publishers, Inc.7201 McKinney CircleFrederick MD 21704USA

In all other countries, sold and distributed byKluwer Law International c/oTurpin Distribution Services Ltd.Stratton Business ParkPegasus DriveBiggleswadeBedfordshire SG18 8TQUnited Kingdom

DISCLAIMER: The material in this volume is in the nature of general comment only. It isnot offered as advice on any particular matter and should not be taken as such. The editorand the contributing authors expressly disclaim all liability to any person with regard to any-thing done or omitted to be done, and with respect to the consequences of anything done oromitted to be done wholly or partly in reliance upon the whole or any part of the contents ofthis volume. No reader should act or refrain from acting on the basis of any matter con-tained in this volume without first obtaining professional advice regarding the particularfacts and circumstances at issue. Any and all opinions expressed herein are those of the par-ticular author and are not necessarily those of the editor or publisher of this volume.

© Kluwer Law InternationalFirst published 1986

Basic Work ISBN 978-1-8533-3832-8British Library Cataloguing in Publication Data

Begg, P.F.C.Corporate acquisitions and mergers1. Consolidation and merger of corporationsI. Title344.206-6626 KD 2127

Volume 2

All rights reserved. No part of this publication may be reproduced, stored in a retrieval sys-tem, or transmitted in any form or by any means, electronic, mechanical, photocopying,recording or otherwise, without the prior permission of the publisher.

Permission to use this content must be obtained from the copyright owner. Please apply to:Permissions Department, Wolters Kluwer Legal, 76 Ninth Avenue, Seventh Floor, New York,NY 10011, United States of America. E-mail: [email protected]. Website: www.k-luwerlaw.com

Printed in the Netherlands

CORPORATE ACQUISITIONS AND MERGERS

Supp 3/2013

General Table of Contents

Volume 1

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii-xii

Filing Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-ii

Checklist of Pages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-iv

Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-58

Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-34

Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-32

Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-136

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-22

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-90

Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-16

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-38

Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-124

Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-34

European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-156

Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-50

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-104

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-140

Greece . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-40

Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-32

Volume 2

Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-84

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-32

Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-38

Iran . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-34

Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-32

Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-46

Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-28

General Contents–vSupp 3/2013

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-158

Lithuania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-38

Luxembourg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-38

Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-22

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-24

The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-46

New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-48

Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-64

Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-40

Pakistan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-32

Peru . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-36

Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-28

Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-64

Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-20

Romania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-50

Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-28

Volume 3

Republic of Serbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-80

Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-28

Slovak Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-108

South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-52

Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-24

Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-138

Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-124

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-78

Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-28

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-26

Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-22

United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-176

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-186

Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i-78


vi–General Contents Supp 3/2013

Norway

Arne Didrik KjørnæsSusanne Munch Thore

Anders Myklebust

Wikborg Rein & Co.

Updated to October 2012

Norway–iSupp 3/2013

Corporate Acquisitions and Mergers: Norway

© Kluwer Law International


ii–Norway Supp 3/2013

Wikborg Rein & Co.

Wikborg Rein is one of Norway’s leading law firms with about 250 lawyers in Oslo,Bergen, London, Singapore, Kobe, and Shanghai. The firm’s long-standingpresence overseas distinguishes Wikborg Rein as the Norwegian law firm withmost international experience and expertise.

Wikborg Rein operates within the business and industry sectors banking andfinance, shipping and offshore, natural resources, trade, industry and publicsector, technology, media, and telecom, real estate, corporate finance, andlitigation/dispute resolution. The combination of professional knowledge,industry experience, and a keen commercial understanding makes us uniquelyqualified to develop new business possibilities and overcome challenges for ourclients.

Authors

Arne Didrik Kjørnæs is a partner based in the firm’s Oslo office. For a number ofyears, Kjørnæs has advised Norwegian and non-Norwegian finance institutions,securities trading firms, banks and other companies on stock exchangeintroductions, share issues, mergers, acquisitions and sale in Norway as well asabroad. Kjørnæs has been a member of a number of committees on corporate,accounting, stock exchange and securities law and was retained by the Ministry ofJustice in connection with the travaux préparatoires of the Companies Acts, and bythe Ministry of Finance concerning amendments of insider trading rules. Kjørnæsis recommended by Chambers and Partners as ‘Leaders in their field’ in thecategories Capital Markets/Corporate/M&A. Kjørnæs is admitted to theNorwegian Supreme Court. He is engaged as legal adviser to the NorwegianCorporate Governance panel. He has served as chairman of the board of WikborgRein as well as head of the corporate group.

Susanne Munch Thore is Managing Partner in Wikborg Rein and based in thefirm’s Oslo office. She is part of Wikborg Rein’s corporate group. Munch Thorehas assisted both foreign and Norwegian entities in connection with mergers andacquisitions (M&A), capital market transactions including stock exchange listings,as well as transactions pertaining to company law and securities law. MunchThore assists Private Equity and Venture Capital firms, with portfolio-, public-to-private-, and exit transactions. Before Munch Thore joined Wikborg Rein, sheworked as a lawyer at the Oslo Stock Exchange (1992–1993). Munch Thore isrecommended by Chambers and Partners and Legal 500 as ‘Leaders in their field’in the category Corporate M&A and Capital Markets.

Anders Myklebust is a partner based in Wikborg Rein’s Oslo office. He mainlyworks with issues related to tax laws and company laws. He has previously beenemployed in the Central Tax Office for large-sized companies(Sentralskattekontoret for storbedrifter) and has published a book and severalarticles in connection with tax law. Myklebust is head of the firm’s tax departmentand is a partner in the corporate department. In addition to corporate taxationMyklebust also has wide experience related to the special tax regimes for shipping


Norway–iiiSupp 3/2013

companies (tonnage tax), as well as experience from the tax regimes related tohydroelectric power plants and petroleum activities. Myklebust also works withordinary personal taxation, including taxation of earn out related to employedshareholders’ sale of companies. Myklebust is recommended by Chambers andPartners as ‘Leaders in their field’ in the category Tax.

Wikborg Rein & Co.Kronprinsesse Marthas plass 1, 0160 OsloPostboks 1513 Vika, 0117 OsloNorway

Tel.: +47 2282 7500Fax: 2282 7501E-mail: [email protected] or [email protected]


iv–Norway Supp 3/2013

Table of Contents

Culture and Business Climate .............................................................. 1Political System ............................................................................. 1Legal System ................................................................................ 1Norway’s Economy ....................................................................... 2EFTA, EU and the EEA Agreement ............................................... 2Other Cultural Factors .................................................................. 3

Climate for Foreign Investment ........................................................... 3Financing Support/Investment Incentives ....................................... 3Exchange Controls ........................................................................ 3Restrictions on Ownership, the Need for Governmental

Concessions and Acquisition Control .......................................... 4Public Sources of Information on Legal Entities and Real Property . 4

Forms of Business Enterprise............................................................... 5Limited Liability Companies ......................................................... 5Partnerships.................................................................................. 7

Accounting and Auditing Requirements ............................................... 7Accounting Requirements .............................................................. 7Accounting Treatment of Acquisitions and Mergers ........................ 8Statutory Audit............................................................................ 10

Acquisitions and Mergers................................................................... 10Forms of Acquisitions .................................................................. 10Relevant to Acquisition of Entities ................................................ 11Effects of the Concession Laws ..................................................... 11Registration of Shares.................................................................. 12Market Places for Shares in Norway ............................................. 13Recent Legislative Development................................................... 13Inside Information – Dealing Restrictions and Disclosure

Obligations .............................................................................. 14Inside Information ...................................................................... 14Territorial Scope of the Norwegian Insider Dealing Legislation .... 15Inside Information in Relation to Criminal Insider Dealing .......... 15Inside Information in Relation to Listed Issuers’ Disclosure

Obligations .............................................................................. 16Disclosure of Acquisitions of Large Shareholdings and Rights to

Shares ..................................................................................... 17Notification Requirement for Primary Insiders ............................. 17Mandatory Takeover Bids ............................................................ 17Voluntary Takeover Bids .............................................................. 18Defences against Public Takeovers ................................................ 19

Norway–vSupp 3/2013

Agreements between the Company and the Offeror ...................... 19Squeeze-Out and Sell-Out............................................................ 20Own Shares ................................................................................. 20Mergers ...................................................................................... 21

Antitrust/Competition Issues .............................................................. 23Transactions that Require Notification in Norway ......................... 23Filing of Notifications: Time Limits.............................................. 24Conditions for the NCA to Intervene ........................................... 25

Tax System........................................................................................ 25Introduction................................................................................ 25Corporate Taxes .......................................................................... 26Dividends ................................................................................... 26Capital Gains on Shares............................................................... 29CFC Legislation .......................................................................... 31Taxation of Interest ..................................................................... 31Group Relief ............................................................................... 32Losses ......................................................................................... 32Depreciation ............................................................................... 32Land, Apartment Houses and Dwellings Cannot Be Depreciated... 33Capital Gains Assets other than Shares ......................................... 33Transactions and ‘Substance over Form’ ....................................... 33

Considerations ...................................................................... 33Acquisitions........................................................................... 34Reorganizations..................................................................... 34

Mergers, De-mergers and Liquidation .......................................... 34Mergers ................................................................................ 34De-mergers ........................................................................... 34Liquidation ........................................................................... 35

Intragroup Transfer of Assets ....................................................... 35Value Added Tax ......................................................................... 35Other Indirect Taxes ................................................................... 35Petroleum Tax ............................................................................. 36

Employee Matters ............................................................................. 36Standard of Workforce ................................................................. 36Labour Costs............................................................................... 37Employer/Employee Relations...................................................... 37Termination of Employment ........................................................ 37Other Labour Protection ............................................................. 39Social Security ............................................................................. 39Immigration and Work Permits .................................................... 39


vi–Norway Supp 3/2013

CULTURE AND BUSINESS CLIMATE

Political System

[01] Norway is a constitutional monarchy based on the constitution of 1814. How-ever, it has developed into a parliamentary democracy in which authority rests witha cabinet responsible to the Parliament (No: Stortinget). Statutes enacted by Parlia-ment are, in turn, subject to judicial review by the Supreme Court, which has thepower to strike down legislation deemed inconsistent with the constitution. TheParliament consists of 169 members elected on the basis of proportional represen-tation. Norway’s political life functions through a multiparty system. The politicalparties nominate their candidates for election to Parliament in each of Norway’scounties, and each county elects, according to the size of its population, a givennumber of representatives. The party representation is allotted on the basis of thevotes received.

[02] The Norwegian Labour Party, advocating a moderate form of socialism, wasthe dominant party from before World War II until the mid-1960s. During thisperiod, the country was transformed into a modern welfare state. After 1965 nosingle party has had a majority in the legislature, but the various coalition andminority cabinets have accepted and endorsed the concept of the ‘welfare state’. Asa result of coalition rule, the political issues and decisions tend to reflect compro-mises, and a loyal and well-educated bureaucracy contributes strongly to the main-tenance of a stable political environment.

Legal System

[03] The Norwegian legal system is characterized by an active legislator, most legalareas being subject to codifications and enactments, partly as a result of a certainlegislative cooperation with the other Scandinavian countries. There is also a leg-islative tradition for passing statutes with a certain degree of vagueness andambiguous language, leaving discretionary powers to the Government and itsadministration. An important interpretative source is the purpose for which thelegislation was enacted, and its preparatory works. The Norwegian legal system isalso characterized by the doctrine of the binding force of precedents, however gen-erally only applying to decisions by the Supreme Court. Moreover, the SupremeCourt itself is not bound by stare decisis in the strictest sense, and can more easilythan in common law countries overturn its former decisions. Since the early 1990s,implementation of European Union (EU) legislation based on the European Eco-nomic Area (EEA) Agreement has influenced legal development, see paragraphs[06], [07] and [110] below.

[04] The court system is divided into sixty-six courts of first instance, six appellatecourts and the Supreme Court. All courts deal with all legal disputes – civil, penal


Norway–1Supp 3/2013

and administrative cases and the like. There is only one specialized court, namelythe Labour Court which task is to take under consideration disputes about validity,interpretation, existence and breaches of collective agreements, breach of thepeace obligation and claims thereof. Ordinarily, civil cases must be submitted to aconciliation council before they can be taken to court, unless both parties are rep-resented by lawyers and it is deemed unnecessary to appear before the conciliationcouncil.

Norway’s Economy

[05] Norway is Europe’s fifth largest country, covering an area of 385 852 squarekilometres including the islands of Svalbard and Jan Mayen. The Norwegian coast-line exceeds 83 000 kilometres. The population is in excess of 5.0 m, giving a popu-lation density of only 15 inhabitants per square kilometre. In 2011, the GNP percapita was approximately Norwegian Krone NOK549 000. Norway has WesternEurope’s largest offshore petroleum and natural gas fields and has been one of theworld’s most important exporters of petroleum and natural gas. Other core indus-tries include maritime, sea food and energy-intensive industries (metals, pulp andpaper). Approximately 80% of Norway’s exports are to EU Member States. Since1996, the State’s net cash flow from the petroleum sector has been transferred tothe Government Pension Fund Global, which combined with the Government Pen-sion Fund Norway is one of the largest pension funds in the world. By the end ofthe fourth quarter of 2011 its value was approx NOK3312 bn.

EFTA, EU and the EEA Agreement

[06] Norway is a member of the European Free Trade Association (EFTA), havingturned down European Union memberships twice in 1972 and 1994. In 1992, EUand EFTA signed the Agreement on the European Economic Area (the EEA Agree-ment), admitting the EFTA countries to the EU Internal Market. The EEA Agree-ment came into force on 1 January 1994.

[07] Under the EEA Agreement, Norway is bound by EU legislation relating to thefree exchange of goods, the movement of services, capital and persons, and a broadrange of other areas such as anti-trust rules. Under the EEA Agreement, EFTA hasestablished the European Surveillance Authority (ESA) and the EFTA Court for thepurpose of monitoring, advising and resolving EEA relevant issues, their functionsbeing similar to those of the European Commission and the Court of Justice of theEuropean Union.


2–Norway Supp 3/2013

Other Cultural Factors

[08] It has been an agreed policy in Norway to endeavour to maintain fair livingconditions throughout the country, including areas with very low population den-sity. The population has enjoyed a high standard of living in the last few decades.One result of the moderate political and social course endorsed by the majority ofthe political parties is a well-educated population with a comparatively flat socialstructure.

CLIMATE FOR FOREIGN INVESTMENT

Financing Support/Investment Incentives

[09] Innovation Norway is the Norwegian government’s most important financialtool in Norwegian business development. When established in 2004 it replaced theNorwegian Trade Council and the Norwegian Industrial and Regional Develop-ment Fund, amongst others. Since the beginning of 2010, Innovation Norway hasbeen jointly owned by the Norwegian government and the nineteen differentcounty authorities of Norway, securing local influence on the development of localbusinesses. Its primary objective is to promote innovation, business developmentand turnaround operations in Norway. Its financial tools are equity capital, low riskloans, venture capital loans, grants and guarantees. Most of these are aimed atprojects in Norwegian enterprises that meet certain specific criteria like start-up,fishery, rural development, business networks, etc.

[10] A number of governmental programmes have been established to support thedevelopment of small and medium-sized enterprises. Some programmes target atspecific industries or industrial sectors, whilst others target specific geographicareas. For further information on Innovation Norway, governmental programmes,Nordic cooperation, etc., see www.innovasjonnorge.no and www.bedin.no.

Exchange Controls

[11] Under the Norwegian foreign exchange controls currently in effect, transfersof capital to and from Norway are not subject to prior government approval. How-ever, all payments to and from Norway shall be registered with the Norwegian Cur-rency Register. Registration is made by the entity performing the transaction.Physical transfers of payments in currency exceeding NOK25 000 shall be notifiedto the Norwegian customs. Such transfer will also be registered with the NorwegianCurrency Register. Please note that money transfers are subject to the NorwegianMoney Laundering Act.



Restrictions on Ownership, the Need for GovernmentalConcessions and Acquisition Control

[12] Both Norwegian citizens and foreigners must apply for permission beforeacquiring certain types of real property, such as agricultural land. There are noconcession requirements in relation to acquiring private real estate for living orbusiness activities. The Norwegian Concession legislation requires that a govern-ment permit must be obtained in order to hold title to or enjoy rights in respect ofwaterfalls (hydroelectric power plants).

[13] There are no general restrictions on acquiring Norwegian businesses. How-ever, in certain sectors, for example financing, banking and insurance activities,governmental authorization is required. Ownership in such companies is alsorestricted. No one may hold more that 10% of the shares of a company providingfinancing, banking or insurance services, without prior governmental permission.For companies providing such services, further permissions must be obtainedbefore increasing the ownership beyond respectively 20%, 30% and 50%. For insur-ance companies, permission to own more than 10% of the shares will normally notbe given.

Public Sources of Information on Legal Entities andReal Property

[14] The Brønnøysund Register Centre is Norway’s central register authority andsource of information, and consists of several different national computerized reg-isters. For more information, see www.brreg.no/english/registers/.

[15] One of these registers is the Register of Business Enterprises, which is respon-sible for registering all Norwegian and foreign business enterprises in Norway. Theregister shall ensure the protection of business names against third parties and pro-vide an overview of the financial structure of a business enterprise. The register isan important source of information for anyone in need of correct informationabout participants in Norwegian business and industry. All enterprises operatingbusiness activities – both with unlimited as well as limited responsibilities – areobliged to register with the Register of Business Enterprises. This also applies tosole proprietorships operating a trade with purchased goods or which employmore than five persons in primary positions. Other sole proprietorships may reg-ister on a voluntary basis.

[16] Another important public registry is the Register of Company Accounts. Pur-suant to accounting law requirements, all private and public limited companies,partnerships with certain exceptions, savings banks, mutual insurance companiesand petroleum enterprises are obliged to submit their annual accounts, annualreport and auditor’s report, to the Register of Company Accounts within a speci-fied time period after the annual account for last year has been approved. All



accounts received by the Register of Company Accounts are available to the generalpublic.

[17] The Register of Mortgaged Moveable Property registers entitlements andmortgages/security interests on moveable property. A registration means that theentitlement or mortgage/security interest will be registered as an encumbrance onthe person or business enterprise the secured claim concerns. The registrationgives perfection to creditors.

[18] Real property is registered in the Register of Real Property (No: Grunnboken).The register includes information about the properties, including purchase, sale,hire and mortgages. All documents relating to establishing, changing, relinquish-ing, accepting or cancelling a privilege in real property can be registered. The reg-istration gives perfection to creditors. For more information see www.tinglysing.no.

[19] For information on ownership of private and public limited liability compa-nies, see paragraphs [56] to [59] below regarding the Norwegian Central SecuritiesDepository (VPS).

FORMS OF BUSINESS ENTERPRISE

Limited Liability Companies

[20] The limited liability company is the favoured legal entity for business activi-ties in Norway. The shareholders of a limited liability company are only liable fortheir contribution to the share capital, and not the debts of the company. Limitedliability companies are divided into public limited liability companies (No: allmen-naksjeselskap or ASA) and private limited liability companies (No: aksjeselskap orAS). The main difference is that a public limited liability company may offer itsshares to the public, whereas a private limited liability company may only offer itsshares to invited investors. There are also certain differences in the statutory com-pany legislation reflecting this basic division. The statutory company legislationpertaining to a private limited liability company is somewhat simplified comparedto the public limited liability company. In order to apply for listing on a regulatedmarket, the company needs to be a public limited liability company (ASA).

[21] The minimum share capital to be contributed by the founders of a limitedliability company is NOK30 000 in the case of a private company and MNOK1 inthe case of a public company. The contribution shall be made either in cash and/orin kind prior to registration of the company in the Register of Business Enterprises.Only upon such registration is the company legally incorporated and may com-mence business with limited liability for its shareholders.

[22] There is no requirement under Norwegian law for a limited liability companyto have more than one shareholder. A single-person board of directors is possiblefor private limited liability companies that have a share capital of less thanMNOK3. The general meeting shall also appoint at least one deputy directorwhere the board has less than three members.



[23] In a private company with a share capital of MNOK3 or more, and in all pub-lic companies, the board shall consist of a minimum of three members. Such com-panies shall also have a managing director. The managing director may be a boardmember, but may not hold the position of chairman of the board. In private limitedliability companies with a share capital of less than MNOK3, the same person mayserve as both chairman of the board and managing director. In public limitedliability companies, both genders must be represented on the board in ratiosdepending on the number of board members.

[24] Statutory law provides for extensive employee representation at board level.In summary, in companies which have more than thirty employees and no corpo-rate assembly, employees are entitled to nominate representatives to serve on theboard of directors. Such employee representatives are nominated through an elec-tion procedure by and among the employees which is held separately from theelection of directors by the shareholders.

[25] If the company has more than fifty employees and no corporate assembly, theemployees are entitled to elect up to one-third of the total number of directors andminimum two directors, shall be elected among the employees. Such employeerepresentatives shall also have alternates who are elected by and among them-selves.

[26] Statutory law also provides for a corporate assembly to be established in com-panies with more than 200 employees unless the company and the employeesagree to establish extended employee representation instead of a corporate assem-bly. The corporate assembly shall consist of at least twelve members, two-thirds ofwhich are elected by shareholders and one-third by and among the employees.However, under statutory law it may be agreed between the company and a major-ity of the employees, or trade unions representing two-thirds of the employees, thatthe company shall not have a corporate assembly.

[27] The intended purpose of the corporate assembly has traditionally been toprovide a forum through which employee representatives together with sharehold-ers’ representatives are given access to information of importance regarding thecompany’s business, and also to create a vehicle through which they may expresstheir views on such matters before final resolutions are passed by the board of direc-tors.

[28] The corporate assembly shall appoint the board of directors and the chair-man, supervise the board’s and the managing director’s administration of thecompany, opine on the annual accounts, adopt resolutions on matters that concerninvestments that are substantial compared to the company’s resources and effi-ciency measures or changes to the business which will lead to major changes orreallocation of the labour force. In its supervision of the board and the managingdirector, the corporate assembly may only adopt recommendations, except forstated above.



Partnerships

[29] A partnership is defined as an entity which engages in economic activities forthe account and risk of two or more participants, provided either that at least oneof the participants, who may be a private person, a corporate body or another part-nership, has unlimited personal liability for the aggregate liabilities of the entity, orthat two or more participants have unlimited liability for their proportionate partof the entity’s liabilities, provided their aggregate liabilities correspond to the totalobligations of the entity.

[30] The choice between setting up an entity in the form of a partnership or a lim-ited liability company is one that should be carefully considered in each separatecase in light of the particular features of the individual project. Cash flow and taxconsiderations are important elements in this respect. The partnership structure(instead of the limited liability company) has frequently been chosen for single pur-pose, capital intensive projects with a limited number of investors. Typicalexamples are the use of partnerships as a vehicle for investment in and ownershipof ships, aircraft and real estate.

[31] There are numerous variations in structuring a partnership, with varying pos-sible degrees of liability and influence for the individual partners. The most com-mon forms, however, are the general partnership (No: ansvarlig selskap or ANS)where all partners have unlimited liability, and the limited liability partnership(No: kommandittselskap or KS) whereby one partner (which may be a limited liabilitycompany) shall have unlimited liability and the other partners’ liability is limited.Other partnerships forms include partnerships where the partners’ unlimitedliability for the obligations of the partnership is proportionate to their respectiveshare of the partnership (No: delt ansvar or DA).

[32] There are several mandatory provisions under statutory law relating to part-nerships, and particularly in respect of those with limited liability. One example isthe statutory requirement that at least 40% of the subscribed capital (limited liabil-ity capital) of a limited liability partnership has to be paid-up capital, thus estab-lishing a reasonable capital base for the partnership.

[33] A partnership must in the same way as a limited liability company be duly reg-istered in the Register of Norwegian Business Enterprises. Partnerships are obligedto maintain and file accounts with the Register of Company Accounts in the sameway as limited liability companies.

ACCOUNTING AND AUDITING REQUIREMENTS

Accounting Requirements

[34] Both private and public limited liability companies and partnerships are sub-ject to statutory accounting requirements. Exemptions apply to certain minor part-nerships. Companies subject to the accounting requirement shall, for each



financial year, prepare annual accounts and a directors’ report, which shall beadopted no later than six months after the expiry of the financial year, which as thegeneral rule follows the calendar year.

[35] Companies with shares listed on Oslo Børs or Oslo Axess, see paragraph [60]below, shall in addition to the annual accounts prepare quarterly and half-yearlyinterim reports. The interim reports shall be adopted and published within twomonths following the expiry of the relevant interim period. Such companies shallalso adopt and publish the annual accounts within four months after the expiry ofthe financial year.

[36] The annual accounts shall contain an income statement, balance sheet, cashflow statement and notes. Small enterprises (as defined in the Norwegian Account-ing Act) need not prepare a cash flow statement. For parent companies, the annualaccounts shall consist of the company accounts and consolidated accounts. The lat-ter shall include the parent company and all subsidiaries presented as one entity.Group internal transactions shall not be recognized in the consolidated accounts.Listed companies are subject to certain additional accounting requirements.

[37] A Norwegian parent company which itself is a subsidiary of a company domi-ciled in an EEA state which prepares consolidated accounts comprising the Norwe-gian company and its subsidiaries is not required to prepare consolidated accountsfor the Norwegian corporate structure. However, the consolidated accounts pre-pared by the EEA company shall be either in Norwegian, Swedish, Danish orEnglish.

[38] The annual accounts shall be prepared in compliance with statutory require-ments and either Norwegian Generally Accepted Accounting Practise (NGAAP) orInternal Accounting Standards/International Financial Reporting Standards (IAS/IFRS). Public limited liability companies which have their shares listed on a regu-lated market shall prepare the consolidated accounts in accordance with IAS/IFRS.

[39] As noted in paragraph [16] above, all companies subject to statutoryaccounting requirements shall submit their annual accounts, including theauditor’s report, to the Register of Company Accounts. All accounts received will beannounced after registration and all subsequent information will be made availableto the general public. In addition, companies listed on a Norwegian regulatedmarket is obligated to publish their annual and interim reports within thetimeframes as mentioned in paragraph [35] above, and to at the same time submittheir annual and interim reports with the Norwegian Financial SupervisoryAuthority for review.

Accounting Treatment of Acquisitions and Mergers

[40] In general, acquisitions and mergers of businesses must be accounted for byacquisition accounting under Norwegian GAAP. This means that the assets andliabilities of the target business must be included in the acquiring company’s bal-ance sheet at their fair value as at the date of the acquisition. Any difference



between the acquisition costs and the fair values of the net identifiable assets is rec-ognized in the balance sheet of the acquiring company as positive or negativegoodwill. By way of exception to the general rule, merger accounting should beapplied in the event of mergers as described in paragraphs [100]–[109] belowwhere such mergers take place between: (i) a parent company and its subsidiary; (ii)subsidiaries controlled by the same parent company holding more than 90% of theoutstanding and voting shares in the subsidiaries; or (iii) companies with identicalshareholders structures. In merger accounting, the assets and liabilities of the tar-get business are included in the balance sheet of the acquiring company at bookvalue.

[41] The fair value of the net identifiable assets of the acquired business is calcu-lated on the basis of their estimated sales value and is not affected by the acquirer’sfuture plans. No provisions may be recognized due to expected reorganization orintegration costs. Acquisition costs include the net consideration paid for the targetbusiness and any direct transaction costs. Therefore, expenses related to transac-tion advisors, valuation, etc. will in most cases be capitalized together with the con-sideration amount paid for the shares. Deferred payments/contingentconsideration must be included in the acquisition cost at its fair value on the effec-tive date. The fair value of such consideration must reflect the probability of it actu-ally being paid, and the value of such consideration must be discounted.

[42] The intangible assets of the target business are recognized in the balancesheet of the acquiring company at fair value to the extent that they: (i) are con-trolled by the target business; (ii) are identifiable; and (iii) represent future eco-nomic profit to the acquiring company. Such intangible assets are subject toamortization over their expected life time as further defined by Norwegian GAAP.Intangible assets classified as indefinite are subject to annual impairment testing.Costs related to own research and development may be expensed under Norwe-gian GAAP.

[43] Positive goodwill is amortized in accordance with a reasonable amortizationplan (mainly corresponding to the underlying assets’ economical lifetime). Specialrequirements apply for amortization plans longer than five years. Recognizednegative goodwill that is deemed to be related to expected future reorganization/integration costs may be brought to the income statement as the relevant costs areincurred. Other negative goodwill is systematically brought to the income state-ment as reduction of costs over a period of five years.

[44] The effective date of the acquisition will, pursuant to Norwegian GAAP, corre-spond to the date on which control and risks are transferred from the seller to theacquiring company. If an acquisition or a merger is conditional upon governmentalapprovals or if a creditor notice period applies, the effective date will not occurbefore these conditions have been satisfied.



Statutory Audit

[45] Companies subject to statutory accounting requirements are also subject tostatutory auditing requirements by a registered public accountant or state-authorized public accountant, subject to certain exemptions. Such accountantsshall be approved by the Norwegian Financial Supervisory Authority.

[46] The auditor shall prepare an audit report containing an introduction whichshall, at a minimum, disclose which annual accounts have been audited and whichrules for financial reporting have been applied in the preparation of the annualaccounts. In the audit report the auditor shall confirm that the audit has been con-ducted in accordance with the law, regulations and good auditing practice.

[47] The audit report shall further contain a description of the scope of the auditand shall, at a minimum, disclose which auditing standards have been applied inthe conduct of the audit. In the audit report, the auditor shall express an opinionregarding whether the annual accounts in the auditor’s judgment give a fair pre-sentation conforming with the requirements for financial reporting that have beenapplied, whether the annual accounts have been prepared and approved in accor-dance with the law and regulations, whether the management of the entity subjectto the statutory audit obligation has fulfilled its duty to produce a proper andclearly set out record and documentation of accounting information, and whetherthe information in the annual report concerning the financial statements, thegoing concern assumption and the proposal for the application of profit or cover-age of loss is in accordance with law and regulations, and whether the informationis consistent with the financial statements.

[48] If the accounts fail to provide information about an undertaking’s results andfinancial position that should have been provided, the auditor shall make an auditreservation and in the event provide necessary supplementary information in hisreport. Should the auditor deem that the accounts should not be approved as pre-sented by the board, this shall be indicated separately.

[49] An auditor who audits the annual accounts of a parent company shall presenta joint audit report for the parent company and the group.

ACQUISITIONS AND MERGERS

Forms of Acquisitions

[50] The acquisition of a company or business may take numerous forms, depend-ing both on the requirements of the acquirer, the corporate structure of the targetcompany and the nature of its business. When structuring an acquisition, it is natu-ral to consider whether the acquisition shall take form as an acquisition of theentire corporate entity or certain subsidiaries, of certain assets or as a merger. Indetermining the structure, you should consider which assets and/or liabilities thatshall be assumed from the target company, and tax aspects. An acquisition of a



listed company is subject to stricter statutory requirements than the acquisition of aprivately held company. For the latter, shareholder’s agreements and the articles ofassociation are normally of greater importance.

Relevant to Acquisition of Entities

[51] Shareholders of a private or a public limited liability company normally havestatutory pre-emption rights in connection with share capital increases. Sharehold-ers frequently rely on the company’s articles of association and shareholder agree-ments to raise the barrier for acquisitions of such companies. The provisions in thearticles of association and shareholder agreement may, for instance, impose restric-tions or qualifications in respect of prospective partners or shareholders in order toavoid competitors buying into the business, or provide for rights to ensure that thecurrent shareholders receive part of any premium to be paid for the shares. In thisrespect, it is not uncommon that articles of association and shareholder agree-ments contain tag-along and drag-along provisions as well as mandatory offerregulations.

[52] Transfers of shares in private limited liability companies established after 1January 1999 require the approval of the board of directors, unless otherwise pro-vided for in the articles of association. Such consent shall be made as soon as pos-sible after the transfer has been reported to the company and cannot beunreasonably withheld. If the board does not consent, the acquirer is entitled toeither reverse his or her agreement (subject to contract terms or transferor’sapproval), to dispose of the shares, to commence legal action or, in certain cases, toclaim redemption of the shares by the company.

[53] Transfer of shares in a private liability company is also subject to the existingshareholders’ pre-emptive right, unless the company’s articles of association pro-vide otherwise. As the main rule, the pre-emptive right is redeemed when thetransfer is effected, and not before.

[54] In respect of public limited liability companies the main rule is the opposite;unless the articles of association specifically provide otherwise, no board approvalis required and the other shareholders do not have pre-emptive rights. The sameapplies for transfer of shares in a private limited liability company established priorto 1 January 1999. Normally listed companies will not have such provisions in theirarticles of association. If such provisions exist, the market will closely monitor itsway of practicing such provisions in order not to violate the free trade of shares,being a fundamental listing requirement.

Effects of the Concession Laws

[55] Transactions, which are subject to a concession as discussed in paragraphs[12] and [13] above, require board approval for the transfer of the shares irrespec-tive of whether or not such approval is otherwise required under the company’s



articles of association or under Norwegian company law. The lack of such boardapproval will have the effect, inter alia, that the purchaser will not be entitled toexercise his voting rights until such board approval has been given.

Registration of Shares

[56] The concept of bearer shares of a corporation is not recognized under Norwe-gian law. Ownership of shares in private limited liability companies is evidenced byentry in the company’s shareholder register, which as a main rule is maintained bythe company. The acquirer of shares in such companies shall notify the company,and the company shall without delay enter the acquirer into the company’s shareregister as title holder.

[57] In respect of public limited liability companies, the transferor shall ensurethat the Norwegian Central Securities Depository (VPS) is notified immediately oftransfers of ownership. The VPS is an electronic centralized securities registry witha computerized bookkeeping system in which the ownership of, and all transac-tions relating to shares in all public limited liability companies shall be recorded.For public limited liability companies VPS registration replaces the shareholderregister. Private limited liability companies may also choose to register the shares inthe VPS instead of maintaining the register itself.

[58] The VPS system confirms each entry by sending a transcript to the registeredshareholder irrespective of any beneficial ownership. To effect such entries, theindividual shareholder must establish a securities account with a Norwegianaccount agent. Norwegian banks, the Bank of Norway, authorized securities bro-kers in Norway and Norwegian branches of international credit institutions areallowed to act as such agents. The entry of a transaction in the shareholder registeror in the VPS prima facie evidences the legal rights of the party entered as holderof the shares against the company or a third party claiming interest in the security.

[59] Nominee registration is only available for foreign shareholders defined aspersons domiciled outside Norway and legal entities not registered in Norway,holding shares in a company with shares listed on a regulated market in Norway. Anominee may only receive dividends and other distribution, including allocation ofnew shares in a share capital increase, but may not vote at general meetings onbehalf of the beneficial owner. In order to exercise voting rights, the beneficialowner must register the ownership in its own name in the VPS or otherwise providesufficient proof of ownership. A nominee is under the duty to provide informationon the identity of beneficial owners to the company and Norwegian Authorities, ifso requested. A nominee must be approved by the Norwegian Financial Supervi-sory Authority (NO: Finanstilsynet) and it must be reflected in the VPS that theaccount is a nominee account.



Market Places for Shares in Norway

[60] Norway currently has two regulated markets for shares; Oslo Børs (Oslo StockExchange) and Oslo Axess. Oslo Børs is currently the only regulated market inNorway also holding a license as a stock exchange. The distinction between the twomarkets does however primarily rest on the listing requirements, and particularlythe requirements relating to market capitalization, number of shareholders andnumber of years the company has been in operation. A company listed on OsloAxess is in principle subject to the same continuing obligations as companies listedon Oslo Børs, including the market surveillance carried out by the market placeitself. For more information, see www.oslobors.no and www.osloaxess.no.

[61] In addition to Oslo Børs and Oslo Axess, the Norwegian Securities DealersAssociation administers an information system for unlisted shares (the NOTC sys-tem), which is owned by the Norwegian Stockbrokers Information Services. Associ-ated member firms can register their buying and selling interests and reportpurchases in the system. Information on prices and companies is distributedthroughout the trading day with updates every two minutes. Closing price informa-tion is updated daily on the association’s website, and after 4.30 pm market statis-tics are published. Companies which are registered on the NOTC list are subject tocertain disclosure requirements; however, not to the same extent as companieslisted on a regulated market. For more information, see www.nfmf.no.

Recent Legislative Development

[62] In recent years, Norway has experienced significant legislative activity in rela-tion to the capital markets, primarily due to implementation of EU legislationrelated to the Financial Services Action Plan, including, inter alia, the Market AbuseDirective 2003/6/EC, the Prospectus Directive 2003/71/EC as amended by Directive2010/73/EU, the Takeover Directive 2004/25/EC, the Transparency Directive 2004/109/EC and the Short-Selling Regulation (EU) No. 236/2012. Acquisitions of listedcompanies is thus subject to statutory requirements which makes the acquisitionprocess not only more formalized, but the acquirer needs to observe several sets ofrules which may make it more time consuming, and which also may have strategicimplications and consequences for the ability to carry out the planned acquisition.These include, inter alia, the prohibition to trade or induce trading on the basis ofinside information, certain notification and disclosure requirements when acquir-ing shares, the mandatory offer obligations, counter measures by the target com-pany and squeeze-out rules. Both the Market Abuse Directive and theTransparency Directive are currently undergoing revision, and proposals foramendments of both directives were published in October 2011. A revised proposalfor amendment of the Market Abuse Directive was published in July 2012 as aresult of the London Interbank Offered Rate (LIBOR)/Euro Interbank OfferedRate (EURIBOR) investigations relating to suspected manipulation of benchmarksin connection with interbank lending in the European market. Amendments were



proposed to ensure that manipulation of benchmark was captured by the regula-tion as a criminal offence.

[63] Regarding regulations concerning the financial market, the Norwegian Cor-porate Governance Board (NUES) has developed the Norwegian Code of Practicefor Corporate Governance with the latest update as of 23 October 2012. The pur-pose of the Code of Practice is to clarify the respective roles of shareholders, boardof directors, other corporate bodies and executive officers beyond the require-ments of the legislation. The continuing obligations for stock exchange listed com-panies stipulate that companies listed on Oslo Børs and Oslo Axess must annuallypublish a statement on the company’s principles for corporate governance inaccordance with the Code of Practice – or the equivalent code for companies with aprimary listing on a foreign stock exchange. The Code of Practice is based on a‘comply or explain’ principle. This means that a company must either follow eachof the recommendations that make up the Code of Practice, or explain how andwhy the company has chosen another solution.

Inside Information – Dealing Restrictions andDisclosure Obligations

[64] The Norwegian insider legislation regime was revised in line with the MarketAbuse Directive in 2005. The occurrence of ‘inside information’ triggers a widerange of duties and prohibitions, including not only a prohibition on insider deal-ing, but also a duty on listed companies to immediately disclose inside informationto the market. A listed company may, on certain conditions, delay disclosure of theinside information, provided always that the information be kept confidential, andthat information on the delay and the reasons for delay is given to Oslo Børs assoon as the disclosure obligation arises. Recent precedents confirm that ‘insideinformation’ may occur at a very early stage of a takeover process.

Inside Information

[65] Inside information is defined as precise information relating to financialinstruments, the issuer of such instruments or other circumstances which maynoticeably influence the price of such financial instruments, or related financialinstruments, and which is not publicly available or generally known in the market.

[66] Two essential criteria must be met in order for non-public information to fallwithin the scope of the definition: (i) the information must be of a precise natureand (ii) the information must be likely to influence the price of the instrumentsnoticeably.

[67] The requirement that non-public information must be likely to noticeablyinfluence the price of the relevant instruments refers to the so-called reasonableinvestor test; non-public information which a reasonable investor would be



expected to take into account in making his investment decisions should beregarded as ‘inside information’.

[68] The precise nature-requirement is meant to exclude rumours and speculations,but may include a broad variety of circumstances which may already have occurred,or which may reasonably be likely to occur, and which are sufficiently specific in orderto draw a conclusion about the possible effect on the price. The information does,however, not need to be complete, clear, final or unconditional in order to fall withinthe scope of the definition and be regarded as inside information.

[69] Information about both planned and ongoing takeover processes, as well asinformation relating to ongoing merger negotiations may constitute inside infor-mation. It is however, particularly difficult to provide guidance on the specific stageat which information relating to continuously evolving processes shall be regardedas constituting inside information and trigger dealing restrictions and disclosureobligations.

Territorial Scope of the Norwegian Insider DealingLegislation

[70] The territorial scope of the Norwegian insider legislation covers behaviouroccurring anywhere in the world relating to financial instruments that are listed, orare pending listing, on a regulated market in Norway or financial instrumentsbeing traded on a Norwegian Multilateral Trading Facility (MTF). The prohibitionon insider dealing applies both to on- and off-exchange trading in such instru-ments. The prohibition also covers insider dealing occurring in Norway althoughrelating to instruments listed on regulated markets within another EEA-MemberState, irrespective of the state of incorporation of the relevant listed company.Although the insider legislation does not directly apply to trading in shares on theNOTC list, it is assumed that misuse of inside information in the ‘grey market’ willbe subject to the general prohibition on application of unreasonable businessmethods which, in addition to listed instruments, applies to financial instrumentswhich are not listed on a regulated market.

Inside Information in Relation to Criminal InsiderDealing

[71] Prosecutions pursuant to the legislation on insider dealing have over the lastyears resulted in convictions of individuals that have engaged in insider dealingprior to, or during the course of, takeovers. Case law suggests that insider dealing isbecoming more heavily sanctioned than before. Inside information relating toplanned takeovers is, according to case law, deemed to exist at an early stage ofsuch processes, which in turn triggers early dealing restrictions.

[72] A conviction for insider dealing illustrates that even plans to present atakeover bid which have not yet been adopted by the offeror may be regarded as



sufficiently specific and precise information and constitute inside information ifsuch plans are being supported by a director, or member of the management, withinfluence within the company.

Inside Information in Relation to Listed Issuers’Disclosure Obligations

[73] The board of directors of Oslo Børs announced on 24 May 2007 a decisionrelating to the handling of inside information with respect to the Hydro/ Statoilmerger process (both listed offshore operating companies). Hydro and Statoil hadon the morning of Monday 18 December 2006 disclosed to the market that theboard of directors of the two companies had agreed to recommend to their share-holders a merger of Hydro’s oil and gas activities with Statoil.

[74] The companies were criticized by Oslo Børs for not having informed the stockexchange of their delayed disclosure of inside information relating to the ongoingmerger process. The two companies claimed that information relating to the pro-cess did not constitute inside information before Saturday/Sunday 16/17 December2006, and that no breach of the companies’ duty to disclose inside information tothe market, or to inform the stock exchange of their decision to delay disclosure ofsuch information with reference to their legitimate interests, had occurred.

[75] Oslo Børs disagreed and emphasized the fact that the two companies hadbeen in contact and explored the possibilities of a merger over a long period oftime. Since October 2006, the companies had been discussing possible transactionmodels and assets and liabilities to be included in a possible merger. Meetings hadtaken place between the management of both companies, and the chairmen of theboard of directors of both companies had been informed about the discussions.

[76] Inside information was therefore deemed by Oslo Børs to have existed nolater than 14 December 2006. At this stage both boards of directors had approvedentering into merger negotiations. It is worth noting that no negotiations had yet,at this stage, taken place relating to the composition of the board and the manage-ment, the geographic location of the merged company’s head office or theexchange ratio in a possible merger. The Norwegian state, the main shareholder ofboth companies, had not even been informed of the process.

[77] Oslo Børs nevertheless stated that information relating to the process at thisstage was sufficiently specific in order to draw a conclusion on the potential effectof a possible merger on the price of the shares of both involved companies and con-stituted ‘inside information’. Oslo Børs further argued that previous unsuccessfulmerger talks between the same companies in 2004, and market speculations ofmerger talks being reinitiated, indicated that specific information about contactbetween the companies was likely to be highly price sensitive.

[78] Hydro and Statoil were therefore criticized for not immediately having dis-closed inside information to the market, or informing the stock exchange of theirdecision to delay public disclosure with reference to their legitimate interests,



hence depriving the stock exchange of the possibility of intensifying the monitor-ing of the trading in the companies’ shares and preventing market abuse.

[79] Following the Hydro and Statoil case several listed companies have been finedfor neglecting to disclose inside information in a timely manner and/or to informOslo Børs confidentially about the delay. In any larger transaction involving a com-pany listed on Oslo Børs or Oslo Axess, Oslo Børs will routinely investigate whetherinformation has been disbursed properly, and whether there has been irregularityin trading indicating the existence of insider information in the market.

Disclosure of Acquisitions of Large Shareholdings andRights to Shares

[80] If a person, legal entity or group acting in concert agrees to acquire or disposeof shares or rights to shares (including voting rights and lending of shares) of alisted public company with Norway as its home Member State, and such acquisitionor disposal results in its aggregated ownership exceeding or falling below 5%, 10%,15%, 20%, 25%, 1/3,50%, 2/3 or 90% of the voting rights and/or total number ofshares outstanding in the company, the regulated market and the issues shall benotified immediately. The same applies when the shareholder becomes aware ofother circumstances which result in passing any of the above- mentioned thresh-olds.

Notification Requirement for Primary Insiders

[81] Members, deputy members and observers to the board, senior employees,members of the control committee, the company secretary and the company’sauditor shall notify the regulated market immediately of any purchase, sale,exchange or subscription by them, or by any of their connected persons, of sharesor certain other financial instruments in the company or in its group, to which theyare related. This also applies to the listed company’s trade in its own shares andshares of group companies, as well as to senior employees and members of theboard in group companies that normally have access to inside information relatedto the listed company. Companies which, because of their ownership of shares in alisted company, are represented on the board of that company are also subject tothe notification requirements.

Mandatory Takeover Bids

[82] Any person or consolidated group that acquires more than one-third of thevoting rights of a Norwegian company listed on a regulated market is required tomake an unconditional general offer to acquire all issued shares of the company



within four weeks. The mandatory offer requirement is also triggered when ashareholder, through acquisitions, control 40% or 50% or more of the voting rightsin the company, provided that the shares are not acquired under the initial manda-tory offer. Instead of presenting a mandatory offer, the acquirer may choose toreduce his shareholding below the thresholds within four weeks.

[83] The acquirer shall notify the supervisory authority, viz. the regulated market,and the company immediately upon entering into the purchase agreement thatwill trigger the mandatory offer requirement. The notification shall state whetherthe acquirer will tender an offer or reduce his shareholding. The acquirer may notexercise other rights for the shares exceeding one-third of the shares in the com-pany other than the right to receive dividends and pre-emption rights in connec-tion with share capital increases until the mandatory offer has been tendered. If theacquirer breaches the mandatory offer requirement, that is, exceeds the four weeksperiod, the limitations in voting and other shareholder’s rights will apply to theentire shareholding. In such case the supervisory authority may also undertake aforced sale of the shares.

[84] The offer price shall be equivalent to the highest price the acquirer has paidor agreed to pay in the six months period prior to the requirement to make a man-datory offer. If the market price is higher when the offer requirement is triggered,then the offer price shall be equivalent to the market price. Due to a ruling by theEFTA Court stating non-compliance with the Takeover Directive in 2010, the appli-cation of this provision is under review by the authorities. Settlement under theoffer shall be in cash, but the offeror may also give the offerees a right to chooseother forms of settlement. The settlement shall be guaranteed by an authorizedfinancial institution in Norway in the form of a guarantee that fulfils the require-ment of Oslo Børs and shall take place at the latest within two weeks of the expiry ofthe offer period, which shall not be shorter than four weeks or longer than sixweeks. Within the expiry of the offer period, the offeror may choose to tender anew offer.

[85] The offer document shall be approved by the supervisory authority prior topublication. The board of directors of the target company shall issue a statementon the offer at least one week prior to the expiry of the offer period, disclosing itsopinion on the effects of the offer.

Voluntary Takeover Bids

[86] Certain of the provisions relating to mandatory takeover bids apply to volun-tary takeover bids in case where the threshold for mandatory offers is exceeded ifaccepted by the offerees under the voluntary bid. The main difference between amandatory bid and a voluntary bid is that under a voluntary bid the offeror maymake the bid conditional and for other consideration than cash.

[87] Under a voluntary bid the offeror shall also prepare an offer document whichshall be approved by the supervisory authority prior to publication. The board of



directors of the target company shall issue a statement on the offer at least oneweek prior to the expiry of the offer period, disclosing its opinion on the effects ofthe offer. The offeror is also under a strict obligation of equal treatment of theshareholders of the target company.

Defences against Public Takeovers

[88] From the time a company is informed that a mandatory offer or a voluntaryoffer will be made, and until the expiry of the offer period and the result is clear,the board of directors or managing director may not make decisions regarding: (i)issue of shares or other financial instruments by the company or by a subsidiary, (ii)merger of the company or subsidiary, (iii) sale or purchase of substantial areas ofoperation of the company or its subsidiaries, or other disposals of material signifi-cance for the nature or scope of its operations, or (iv) purchase or sale of the com-pany’s shares. This does not apply to disposals which are part of the company’snormal ongoing business operations, or cases where the general meeting hasauthorized the board of directors or the managing director to resolve such actionsin case of a takeover situation. For companies listed on a regulated market, theNorwegian Code of Practice on Corporate Governance recommends an evenstricter regime on the actions of the Board of Directors in connection with a take-over. The recommendation is that the Board of Directors should not make use ofauthorizations unless the general meeting has approved the use of the authoriza-tion after the offer has been announced. The Norwegian Code of Practice on Cor-porate Governance further applies an absolute recommendation that the companyshould not hinder or obstruct takeover bids for the company’s activities or shares.

[89] The general meeting of the company may also resolve to amend the articles ofassociation to provide for such rules as follows from the Takeover Directive Article9(2) and (3) regarding prior authorization by the general meeting of board actionsthat may result in the frustration of a bid. In particular, prior authorization is nec-essary before issuing any shares which may result in a lasting impediment to theofferor’s ability to acquire control of the target company. The same applies for thebreakthrough rules pursuant to the Takeover Directive Article 11.

Agreements between the Company and the Offeror

[90] In connection with voluntary offers, it is not uncommon for the offeror andthe target company to enter into a transaction agreement regulating, inter alia,exclusivity, the board of directors recommendation of the offer to the shareholders,how the business of the target company shall be conducted throughout the offerprocess and in certain situations the parties will agree on a break-fee for the trans-action.

[91] The Norwegian Code of Practice on Corporate Governance recommends thattransaction agreements limiting the company’s possibility to obtain a competing



offer can only be entered into when it is clear that such agreement is in the jointinterest of the company and its shareholders.

[92] The same recommendation applies to agreements on break-fee, which shouldfurther be limited to actual costs the offeror has incurred in making the offer. Therecommendation further states that agreements entered into between the companyand the offeror that are material to the market’s evaluation of the bid should bepublicly disclosed no later than at the same time as the announcement that the bidwill be made is published.

Squeeze-Out and Sell-Out

[93] An offeror acquiring 90% or more of the share capital and an equivalent shareof the voting rights in a Norwegian private or public limited liability company maysqueeze-out the remaining shareholders. Upon the decision of the offeror tosqueeze-out the other shareholders, the remaining minority shareholders will havetheir status changed from a shareholder of the target company to being creditors ofthe offeror. The offeror shall at the same time pay the total redemption priceoffered to the minority shareholders into a separate account with a bank autho-rized to carry out banking activities in Norway.

[94] If the redemption is carried out within three months of the expiry of the man-datory offer period, the redemption price shall be equal to the offer price, unlessthere are specific reasons to the contrary. Outside this period, each shareholder hasthe right to object to or reject the redemption price. In such case, the redemptionprice shall be fixed by an appraisement by a Norwegian court.

[95] In the event the offeror becomes the owner of 90% or more of the share capi-tal and an equivalent share of the voting rights under a voluntary bid, the offerormay redeem the remaining shareholders no later than four weeks from the expiryof the offer period to avoid the duty to tender a mandatory bid. The redemptionprice shall, in such case, be equal to lowest offer price applying under the rules ofthe mandatory offer.

[96] The minority shareholders have a corresponding right to require the offerorto acquire their shares.

Own Shares

[97] A limited liability company may acquire, but not subscribe for, its own shares.Such a company may not hold own shares exceeding 10% of its total nominal sharecapital. Additionally, any acquisition of own shares must not cause the total nomi-nal share capital of the limited liability company to fall below the minimum



required nominal share capital1 when subtracting the nominal value of shares heldby the company itself from the total nominal share capital. Further, it is a require-ment that the company’s distributable equity exceeds the consideration to be paidfor the shares acquired. The company may also, within the same limits, hold mort-gage rights in its own shares. In order to purchase own shares or mortgage rights,the board of directors of the company needs to be authorized by the general meet-ing. The authorization may be valid for up to eighteen months.

[98] A limited liability company may acquire its own shares in excess of the 10%limit as a consequence of a merger where the surrendering company holds sharesin the surviving company. In such case, the shares in excess of the 10% limit shall besold as soon as possible and at the latest two years after the merger. Failing toundertake such divestiture or as an alternative thereto, the company must reduceits share capital relating to the excess number of shares within the expiry of the twoyears period. Similar restrictions apply to a subsidiary’s right to hold shares in itsparent.

[99] A company is generally not allowed to lend money to or to guarantee loans toa third party or otherwise make funds available in connection with the acquisitionof or right to acquire the shares in the company (or any other company within thesame group of companies). These restrictions will apply prior to as well as after theacquisition.

Mergers

[100] A merger of limited liability companies is defined as the transfer by one orseveral companies of all assets, rights and obligations as a whole, with the share-holders of the surrendering company being compensated by way of shares in thesurviving company. Alternatively, the compensation may consist of a combinationof shares and cash, provided the amount of cash does not exceed 20% of the aggre-gate compensation. In the event that the surviving company belongs to a group,and if one or more of the group companies hold more than nine-tenths of theshares and the votes at the general meeting of the surrendering company, the com-pensation to shareholders of the surrendering company may also consist of sharesin the parent company of the surviving company, or in another member of the sur-viving company’s group. In any event, once the merger has been consummated bythe surviving company the surrendering company is liquidated.

[101] A merger may also be effected pursuant to the rules set out above by combin-ing two or more companies into a new company established for the purpose, andthereby liquidating the surrendering companies.

[102] In the event of a merger between a parent company as the surviving com-pany and its wholly owned subsidiary, the merger process is somewhat simplified

1 NOK30 000 for a private limited liability company and MNOK1 m for a public limited liability com-pany.



insofar as all resolutions may be passed by the board of directors of the two compa-nies, thus avoiding (inter alia) the necessity for resolutions by the general meeting.Simplified procedure also applies in connection with a merger between a parentcompany as the surviving company and its subsidiary, where the subsidiary is notwholly owned, but the parent company has at least 90% or more of the shares and acorresponding amount of the votes. In such cases, the merger can be carried out byway of resolution by the board of directors in the two companies, thus avoiding thenecessity for a resolution by the general meeting. However, all the required docu-ments must still be produced and made available to the shareholders, thusenabling the remaining shareholders of the subsidiary to decide whether to acceptbeing issued shares in the surviving entity or to require the parent company toacquire all the remaining shares prior to the merger.

[103] As a general rule (except for mergers of wholly owned or 90% owned subsid-iaries into the parent company) the merger, including a specific plan for themerger, shall be approved by a qualified majority of two-thirds of the votes and theshares represented at the general meeting in each of the merging companies. Ageneral meeting is not required in the surviving company if its shareholders havepreviously granted to the board of directors an authority to issue new shares in con-nection with a merger. However, if the company has a corporate assembly, themerger may not be adopted by the board of directors without the merger plan hav-ing been approved by the corporate assembly. In addition, in public limited liabil-ity companies, shareholders representing at least 5% of the share capital mayalways require that a general meeting is called to decide on the merger.

[104] The board of directors of the participating companies shall agree on amerger plan prior to distributing the plan to the shareholders. The plan shall con-tain detailed information relevant to the merger, such as the merging companies’business name, the accounting date of the merger, the consideration to be paid tothe shareholders in the surrendering company, specific rights and obligations, par-ticular benefits favouring the directors, the general manager or others involved inthe merger, and a draft opening balance for the surviving company prepared by acertified auditor. Certain corporate documents shall be enclosed to the plan.

[105] In addition to the plan, the board of directors of the participating companiesshall prepare a report on the merger describing, inter alia, the reason for themerger and the effect thereof on the companies and their employees. Further theboard of directors in private limited companies shall prepare a statement on, interalia, the merger regarding the determination of the consideration. The board ofdirectors may resolve not to prepare such a statement if all the shareholdersapprove. The board of directors will, however, still be required to produce a docu-ment stating the effect of the merger on employees. For a public limited liabilitycompany, the statement shall be prepared by an expert, normally a certifiedaccountant or an auditor.

[106] Information on the planned merger shall be given to the employee repre-sentatives who shall be entitled to discuss the merger with management. Themerger plan and all other relevant documentation shall be presented to the



employees. If the company has a corporate assembly, the complete merger docu-mentation shall be reviewed by the corporate assembly who shall prepare a state-ment on the merger.

[107] In a merger involving at least one public limited liability company, the com-plete merger documentation must be made available to all shareholders at the lat-est one month prior to the general meeting, and the merger plan must beregistered and published with the Register of Business Enterprises within the sametime limit. A merger of private limited liability companies only is subject to a noticeperiod of two weeks. There is no requirement to file documentation with the Reg-ister of Business Enterprises.

[108] Not later than one month after the merger plan has been approved by thegeneral meeting (or if applicable by the board of directors only), the approval ofthe merger shall be registered with the Register of Business Enterprises which willmake it public. Upon publication a two-month creditor notice period commences,whereby creditors may object to the merger. Objections may be avoided by payingthe claims, in full, except where the claim is contested or has not yet fallen due forpayment. In the latter case the creditor may request that satisfactory collateral begiven for the debt unless this is already adequately secured. The merger becomeseffective at the expiry of the creditor notice period upon notification to the Regis-ter of Business Enterprises by both the surrendering and the surviving company.

[109] In the case of a merger between one or more limited liability companies andone or more foreign companies with limited liability, the Norwegian legislation isbased on the provisions in the EC Council Directive 2005/56/EF, but accommo-dated to the Norwegian public limited companies act. Such merger is subject to theforeign company having a registered office or head office in another EEA state andbeing governed by the laws of an EEA state other than Norway.

ANTITRUST/COMPETITION ISSUES

Transactions that Require Notification in Norway

[110] The EU Merger Regulation (Council Regulation (EC) No. 139/2004 (the‘ECMR’)) applies to transactions (mergers, acquisitions, certain joint ventures)where the turnover of the parties meets the thresholds set out in the ECMR. Trans-actions in which those thresholds are not met may be subject to notification to theNorwegian Competition Authority (the ‘NCA’) under the Norwegian CompetitionAct of 2004 if the transaction is considered as a ‘concentration’ under the act andthe parties’ turnover in Norway (broadly equivalent to sales to customers in Nor-way) exceeds certain thresholds.

[111] The definition of ‘concentrations’ under Norwegian law mirrors the ECMRdefinition. Mergers and acquisitions are typical examples of concentrations, butthe establishment of joint ventures is also covered under specific circumstances.Also, even an acquisition of a minority interest (less than 50% of the shares) may be



deemed a concentration, for instance if the shareholding will likely result in amajority of votes at future shareholders’ meetings considering the attendance atprevious shareholders’ meetings. It may be added that even acquisitions of minor-ity shareholdings that do not confer control of the target fall within the scope of theNorwegian Competition Act and may be reviewed by the NCA, but such acquisi-tions are not subject to the notification requirement.

[112] All concentrations in which the group turnover of each of the parties (e.g.,the acquirer and the target company) exceeds MNOK20 in Norway are subject tonotification to the NCA, provided that the combined group turnover of the partiesexceeds MNOK50 in Norway. There is no deadline for submitting the notificationto the NCA. However, there is an automatic suspension obligation applying to alltransactions that have to be notified to the NCA, implying that the parties cannotimplement the transaction until expiry of the fifteen working days period (seebelow). A number of changes to Norwegian merger control rules have been pro-posed, including significantly higher turnover thresholds. The changes, if enacted,are not expected to enter into force until 1 July 2013.

Filing of Notifications – Time Limits

[113] Following the initial, so-called standardized, notification, the NCA has fif-teen working days to decide on whether to order the parties to file a so-called com-plete notification (which requires more detailed information on the affectedmarkets, etc.). About 95% of the standardized notifications do not proceed to arequest for a ‘complete notification’ and are cleared as a result of the expiry of thefifteen working days’ deadline. Upon receiving a complete notification, the NCAwill have twenty-five working days to advise the parties on whether an in-depthinvestigation will be opened. The parties may file a complete notification rightaway instead of first filing a simplified notification in order to avoid the delay of asimplified notification, but this is only advisable in exceptional cases.

[114] If the NCA decides to press ahead with an investigation, it must present adraft decision within seventy working days of its receipt of the complete notifica-tion. The parties will then have fifteen working days to present their arguments.The NCA must make a decision within fifteen working days of receiving the argu-ments from the parties. If the parties propose remedies, the NCA may extend thatdeadline by an additional twenty-five working days. Accordingly, from the date ofsubmission of a complete notification, the review period until a final decision mayadd up to 125 working days.

[115] Following receipt of the final decision by the NCA, the parties may file anadministrative complaint to the Ministry of Government Administration, Reform,and Church Affairs within fifteen working days of receiving that decision. The Min-istry must decide on the complaint within sixty working days. The proposedchanges to the merger control rules include changes to the review timetable.



Conditions for the NCA to Intervene

[116] In order for the NCA to intervene against a transaction, the concentrationmust be deemed to create or strengthen a significant restriction of competition.The substantive merger analysis is generally comparable to that of the EuropeanCommission under the EU Merger Regulation.

[117] Assuming an initial finding of ‘significant restriction of competition’, theNCA will assess whether the economic losses due to restricted competition aregreater than the potential efficiency gains resulting from the concentration such assynergies, economics of scale, etc.

[118] The NCA may move against horizontal as well as vertical concentrations andconglomerates, and strike down on unilateral as well as collective dominance(harmful oligopolies). If there is a basis for intervention, the NCA may either pro-hibit the transaction or clear it subject to divestitures and/or other conditions.

TAX SYSTEM

Introduction

[119] After implementation of the 2006 tax reform, the principal Norwegian taxesare: (a) general tax; (b) personal tax; (c) payroll tax; (d) wealth tax; and (e) petro-leum special tax.

[120] General tax is applicable at a flat rate of 28% to both companies and indi-viduals. This tax is a combination of municipal, county and national tax, but is lev-ied as one tax based on net income.

[121] Personal tax is levied upon individuals on the basis of the gross earnedincome. It consists of a progressive national tax (top tax) and an individual contri-bution to the social security system. The national tax is levied at a rate of 9% onincome exceeding approximately NOK490 000, and at 12% on income exceedingapproximately NOK796 400 (fiscal year 2012). The individual contribution to thesocial security system is levied at 7.8% (11% for self employed persons). This resultsin a marginal tax rate for individual tax payers of 47.8%.

[122] Payroll tax at 14.1% (less in certain rural areas) is levied upon employers,based on gross payroll. It is also referred to as employers’ contribution to thenational social security system. The tax is deductible for general income tax pur-poses.

[123] Wealth tax at 1.1% is levied upon individuals on the basis of their net wealth.Municipal tax is 0.7% and national tax is 0.4%. Certain limits and exemptionsapply.

[124] Value added tax (VAT) applies at a uniform rate of 25%, which will be dis-cussed in paragraph [174] below.



[125] Petroleum special tax at 50% is levied on companies producing hydrocar-bons on the Norwegian continental shelf. It is a national tax and the single mostimportant income tax paid to the government. The tax is levied under the Petro-leum Tax Act as discussed further in paragraphs [178]–[181] below.

[126] In addition there are several excise taxes, which are important to the Norwe-gian economy. The government take in respect of various taxes applicable to motorcars exceeds the government take in respect of income taxes. There is a municipaltax on the gross value of real estate in some cities and certain other municipalities.The rate is variable, but cannot exceed 0.7%. There is a growing tendency towards‘environmental taxes’, special taxes aimed at those damaging the environment,such as a special tax on emissions of CO2 and the use of hydrocarbons.

[127] The Norwegian tax reform of 1992 was in line with recent tax reforms in theUS and Europe; lower tax on a broader base. As far as possible, amendments havebeen made to accord with relevant EU directives.

[128] In 2004, the 1992 reform was substantially amended. For corporations (AS,ASA and similar limited liability companies) a participation exemption method wasintroduced, with effect from 26 March 2004. See paragraph [134] below.

[129] With effect from 2006, dividends received by physical persons are subject toordinary tax at 28%. A similar model is applicable for partnerships. A tax exemptyield shall be based on the cost of the share. See from paragraph [132] below.

[130] For sole proprietors the profit on the business shall be subject to tax, irre-spective of funds being ‘distributed’ from the business or not.

Corporate Taxes

[131] The corporate tax is the general tax of 28% referred to above. The tax is lev-ied on net income, after exclusion of dividend income received from other corpo-rations or partnerships, and exclusion of capital gains (or losses) resulting from thedisposal of shares in other corporations within the EEA, see below.

Dividends

[132] Dividends distributed to Norwegian personal shareholders are taxable ascapital income at a rate of 28% to the extent the dividends exceed a calculated taxfree allowance. The allowance is calculated on a share-by-share basis, and is equalto the cost price of the share (including RISK-adjustments per 1 January 2006;RISK is the Norwegian abbreviation for the previous regulation regarding varia-tion of the company’s retained earnings after tax during the ownership of theshareholder) multiplied with a determined risk free interest rate based on theeffective rate after tax of interest on treasury bills with three months maturity. Anypart of the calculated allowance one year exceeding the dividend distributed on theshare the same year (unused allowance) is added to the cost price of the share and



included in the basis for calculating the allowance the following year, and may alsobe carried forward and set off against future dividends received on the same share.

[133] If certain requirements are met, Norwegian personal shareholders areentitled to a tax credit for any withholding tax imposed on dividends distributedfrom foreign companies in the jurisdiction where the foreign company is residentfor tax purposes.

[134] Norwegian corporate shareholders (i.e., limited liability companies andsimilar entities) are exempt from tax on dividends received on shares in Norwegianlimited liability companies and similar entities (the Norwegian participationexemption). However, after recent changes in the tax law, 3% of such dividends willbe included in the tax base and taxable at the 28% rate, implying a 0.84% effectivetax rate on the dividends. From 2012, the 3% rule has been removed for distribu-tion of dividends between companies forming a group under the NorwegianIncome Tax Act.

[135] The same rules apply to dividends received on shares in companies residentfor tax purposes within the EEA. However, if the company distributing the divi-dend is resident in a low tax jurisdiction within the EEA it is a requirement thatsuch company is genuinely established in order for the participation exemption toapply, see paragraph [141] below.

[136] Dividends received by corporate shareholders on shares in companies resi-dent for tax purposes outside the EEA are taxable as general income at a flat rate of28% if the jurisdiction is considered a low tax jurisdiction for Norwegian tax pur-poses. Norway may consider a jurisdiction as a low tax jurisdiction if the generaltaxation of the company’s profits is less than two-thirds of the tax the companywould have been subject to had it been a tax resident of Norway. If the jurisdictionis not considered a low tax jurisdiction, dividends distributed to Norwegian corpo-rate shareholders are tax free (except for 3%) in Norway if the Norwegian share-holder owns at least 10% of the share capital and controls at least 10% of the votingrights at shareholders meetings of the company for a consecutive period of twoyears.

[137] Partnerships are as a general rule transparent for Norwegian tax purposes.Taxation occurs at partner level, and each partner is taxed on a current basis for itsproportional share of the net income generated by the partnership at a rate of 28%,regardless of whether such income is distributed to the partners or not. However,dividends received by the partnership are not taxed on a current basis (except forthe tax on 3% of the dividend). For partners who are Norwegian personal share-holders taxation occurs when the distributions are made from the partnership tosuch partners. Such distributions will be taxed as general income at a rate of 28%.The Norwegian personal shareholders will be entitled to deduct a calculated allow-ance when calculating their taxable income related to the distribution, see thedescription of tax issues related to personal shareholders above. From 2012, the 3%rule also applies to distributions from partnerships to corporate shareholders.Norwegian corporate shareholders holding shares in a partnership will thus be



subject to pay tax on 3% of their proportional part of the distribution from thepartnership.

[138] Dividends distributed by limited liability companies to foreign individualshareholders are, as a general rule, subject to Norwegian withholding tax at a rateof 25%. The withholding tax rate of 25% is normally reduced through tax treatiesbetween Norway and the country in which the shareholder is resident. The with-holding obligation lies with the company distributing the dividends.

[139] Foreign personal shareholders resident within the EEA are liable to the samewithholding tax, but entitled to apply for a partial refund of the withholding tax.The refund equals the calculated allowance granted to Norwegian personal share-holders.

[140] If a foreign shareholder is carrying on business activities in Norway and therelevant shares are effectively connected with such activities, the shareholder will besubject to the same taxation as a Norwegian shareholder, as described above. From2012, the 3% rule on distributions from partnerships also applies to distributionsto foreign corporate shareholders.

[141] Dividends distributed to shareholders who are limited liability companiesnot resident in Norway for tax purposes are, as a general rule, subject to withhold-ing tax at a rate of 25%. The withholding tax rate of 25% is normally reducedthrough tax treaties between Norway and the country in which the shareholder isresident. Dividends distributed to foreign corporate shareholders resident withinthe EEA for tax purposes are exempt from Norwegian withholding tax. In order forthe exemption to apply, the company resident within the EEA must in addition begenuinely established and perform genuine economic activity within the EEA. Thissubstance requirement was introduced in 2008, and the interpretation of it hasbeen uncertain. The aim of the requirement is to prevent companies from estab-lishing artificial organizations with the sole purpose of avoiding tax. A comprehen-sive assessment must be made in each case. In order for an investment to qualifywithin the Norwegian participation exemption, the company will have to be orga-nized and run in accordance with what is considered custom in both Norway andthe country in question.

[142] Foreign shareholders who have suffered a higher withholding tax than setout in an applicable tax treaty may apply to the Norwegian tax authorities for arefund of the excess withholding tax deducted.

[143] Nominee registered shares will be subject to withholding tax at a rate of 25%unless the nominee has obtained approval from the Norwegian Central Office forForeign Tax Affairs for the dividend to be subject to a lower withholding tax rate.To obtain such approval, the nominee is required to file a summary to the taxauthority including all beneficial owners that are subject to withholding tax at areduced rate.

[144] Dividends distributed to foreign partnerships are, as a general rule, subjectto withholding tax at a rate of 25%. The partners in the partnership may beentitled to a reduced withholding tax rate based on applicable tax treaties or an



exemption from the withholding tax as residents in the EEA. However, thisdepends on each partner’s specific situation.

Capital Gains on Shares

[145] Sale or other disposal of shares is considered as a realization for Norwegiantax purposes. A capital gain or loss generated by a Norwegian personal share-holder through a realization of shares is taxable or tax deductible in Norway. Suchcapital gain or loss is included in or deducted from the shareholder’s capitalincome in the year of disposal. The tax rate for capital income is currently 28%.The gain is subject to tax and the loss is tax deductible irrespective of the durationof the ownership and the number of shares realized.

[146] The taxable gain/deductible loss on the realization of shares is calculated pershare as the difference between the consideration received and the cost price of theshare, including any RISK-adjustments up to 1 January 2006 and costs incurred inrelation to the acquisition or realization of the share. Any unused allowance on ashare may be set off against capital gains related to the realization of the sameshare, but this may not lead to or increase a deductible loss, that is, any unusedallowance exceeding the capital gain upon the realization of a share will beannulled. If the shareholder owns shares acquired at different points in time, theshares that were acquired first will be regarded as the first to be disposed of, on afirst-in first-out basis.

[147] Norwegian corporate shareholders are not taxed in Norway on capital gainsrelated to realization of shares, and losses related to such realization are not taxdeductible. The same applies to capital gains on shares in companies resident fortax purposes within the EEA. However, if the capital gain is related to shares in acompany resident in a low tax jurisdiction within the EEA, it is a requirement thatsuch a company is genuinely established in order for the participation exemptionto apply. Before the amendment to the Norwegian Income Tax Act in 2012, 3% ofthe capital gain was included in the tax base and taxable at the 28% rate. An evalu-ation of the exemption method concluded that the 3% rule may prevent sensiblerestructuring of companies. Moreover, it has made it necessary for the tax authori-ties to calculate gains and losses on transactions again. As a result, the rule wasremoved for capital gains related to realization of shares.

[148] Capital gains related to shares in companies resident for tax purposes out-side the EEA area are taxable as general income at a flat rate of 28% if the jurisdic-tion is considered a low tax jurisdiction for Norwegian tax purposes. The gain issubject to tax and the loss is tax deductible irrespective of the duration of the own-ership and the number of shares disposed of. The taxable gain/deductible loss iscalculated per share as the difference between the consideration received and thecost price of the share. If the jurisdiction is not considered a low tax jurisdiction, again realized on the shares is tax free in Norway if the Norwegian shareholder hasowned at least 10% of the capital and has had at least 10% of the voting rights atshareholders meetings of the company for a consecutive period of two years prior



to the realization of such gain. Losses are only deductible if the 10% threshold isnot exceeded at any time for the preceding two years before the disposal.

[149] Shareholders resident in Norway for tax purposes, owning shares through apartnership, are not taxed on a current basis for their proportional share of capitalgains generated by the partnership. For partners who are Norwegian personalshareholders, taxation occurs when the capital gains received are distributed fromthe partnership to such partners. Such distributions will be taxed as generalincome at a rate of 28%. The Norwegian personal shareholders will be entitled todeduct a calculated tax free allowance when calculating their taxable income. A dis-tribution from the partnership to partners who are Norwegian corporate share-holders does not give rise to any taxation of such partners.

[150] Gains from the sale or other disposal of shares by a foreign shareholder willnot be subject to taxation in Norway unless the foreign shareholder is an individualand: (i) the shares are held in connection with the conduct of a trade or business inNorway or (ii) has been a tax resident of Norway within the five calendar years pre-ceding the year of the sale or disposal (and whose gains are not exempt pursuant tothe provisions of an applicable income tax treaty). If the gain is taxable or the lossis deductible in Norway for shareholders resident abroad, the rules that apply forcalculating gains, etc. will be the same as for shareholders who are Norwegian taxresidents, see above.

[151] Capital gains derived by the sale or other realization of shares by foreign cor-porate shareholders are not subject to taxation in Norway unless the shares areheld in connection with a permanent establishment in Norway.

[152] As of 2007, a Norwegian personal shareholder who moves abroad and ceasesto be tax resident in Norway as a result of this, will be deemed taxable in Norwayfor any potential gain on the shares held at the time the tax residency ceased, as ifthe shares were realized at this time. Gains of NOK500 000 or less are not taxablefor personal shareholders. A deferral of the payment of the taxes may be granted,provided that satisfactory guarantee is given. If the personal shareholder moves toa jurisdiction within the EEA, a deferral of the payment of the taxes will be grantedwithout such a guarantee, provided that Norway pursuant to a treaty can requestinformation from the other jurisdiction regarding the person’s income and wealth,and assistance in relation to the collection of taxes. If the shares are not realizedwithin five years after the shareholder ceased to be resident in Norway for tax pur-poses, the tax liability calculated under these provisions will not apply. Any taxtreaty in force between Norway and the state to which the shareholder has movedmay influence the application of these rules.

[153] Similarly, it has been considered as a taxable event if a limited liability com-pany ceases to be tax resident. This will trigger taxation of the company as if all theassets are realized. The shareholders will also be taxed as if the shares in the com-pany have been realized. In a letter dated 2 March 2011, ESA concluded that theprovisions regarding exit-tax conflict with Norway’s obligations under the EEAAgreement.



[154] On 25 March 2011, the Ministry of Finance proposed that the provisionsregarding exit-tax should be changed with immediate effect for migration withinthe EEA. As a result, tax on owner level was abolished and corporate level whencompanies relocate to countries within the EEA that are not considered low-taxcountries, and to low tax countries within the EEA provided that the company isgenuinely established and perform genuine economic activity within the EEA.

[155] Taxation of exit from the Norwegian tax jurisdiction according to generalprinciples will continue to apply. According to these rules, a settlement of tax posi-tions shall be carried out related to assets and liabilities which prior to the exit wereconnected to the Norwegian tax jurisdiction, but which will lose this connectionwhen moving abroad. A deferral of tax payment may be available.

CFC Legislation

[156] Norwegian CFC-legislation (NOKUS) may on certain conditions be appli-cable to companies resident in a deemed low tax jurisdiction, subject to direct orindirect control by Norwegian resident shareholders. In this context Norwegiancontrol means that Norwegian resident shareholders have direct or indirect owner-ship of shares totalling to 50% or more, or otherwise is in a position where theyhave effective control of a company’s share capital. If the NOKUS-rules are appli-cable, Norwegian resident shareholders are subject to annual taxation in Norwayfor their proportionate part of the taxable net income of the foreign company.

[157] In the event that Norwegian resident shareholders are subject to annualCFC-taxation in Norway, the applicable tax rate will be 28% of their proportionatepart of the taxable net income of the company. Dividends distributed from thecompany to a Norwegian corporate shareholder will be exempt from further taxa-tion, if the dividends do not exceed the proportionate part of the taxable netincome. A Norwegian individual shareholder will be taxed on 72% of distributeddividends, at a rate of 28%, as well as tax based on CFC-legislation.

Taxation of Interest

[158] Interest received is taxable at a rate of 28% for both individual and corporatetaxpayers. Interest payments are normally fully deductible, and there is no with-holding tax on interest paid abroad from Norwegian sources. There is no debt toequity ratios stated in the tax legislation. However, the concept of thin capitaliza-tion is applied in Norway and has been developed in relation to the oil industry,where inter-company financing at very high gearing ratios has been prevalent. Theoffshore case law combined with a general arm’s-length requirement is in principleapplicable to onshore activities as well. Whether or not a specific ratio is acceptablemust be considered separately from industry to industry, or even on a case-by-casebasis.



Group Relief

[159] Companies forming a group under the Limited Liability Companies Actsmay utilize the rules of group relief provided that the top holding company (whichneed not be Norwegian) owns more than 90% of its underlying subsidiaries. Therelief may be given as a direct contribution from subsidiary to subsidiary andbetween parent and subsidiary at any level as long as the ‘more than 90% owner-ship’ test is met, and both the contributing company and the receiving companyare Norwegian. A Norwegian branch of a foreign company resident within the EEAwill be considered a Norwegian company if the following requirements are ful-filled. The foreign company must correspond to a qualifying Norwegian company,the foreign company must be taxable in Norway due to either a permanent estab-lishment here or according to provisions in the Petroleum Tax Act, and finally theNorwegian branch has to be taxable in Norway for the received contribution.

[160] The contributing company must observe the requirement for sound equity.The relief is deductible to the extent it does not exceed taxable income before thecontribution.

Losses

[161] A loss not covered by other income (or group relief) in the fiscal year may becarried forward. Reduction of loss in the financial statements through utilization ofthe legal reserve, etc., does not reduce the loss carried forward for tax purposes. Ifthere is a change of ownership in the company having the loss, the loss may still becarried forward unless the transaction is considered tax-motivated.

Depreciation

[162] An asset must be capitalized if it has a purchase value exceeding NOK15 000and if it is considered to have an economic life exceeding three years. Capitalizedassets are then depreciated on a declining balance basis. When the balance is belowNOK15 000, the remainder may be expensed immediately.

[163] The maximum annual depreciation rates applicable to balances at year endare:

(a) office equipment (not fixed): 30%;(b) acquired goodwill: 20%;(c) trucks, lorries, buses, vans, taxis and transports for the disabled: 20%;(d) personal cars, tractors, other rolling stock, machinery, office furniture,

etc.: 20%;(e) vessels, drilling rigs, etc.: 14%;(f) aircraft including helicopters: 12%;



(g) installations for transmission of hydroelectric power and certain equip-ment in hydroelectric power stations: 5%;

(h) plants, warehouses, hotels, etc.: 4(8)%;(i) commercial buildings: 2%;(j) permanent technical installations in buildings: 10%.

Land, Apartment Houses and Dwellings Cannot BeDepreciated

[164] Intangible assets, and assets that are not included in the list above, but whichare nevertheless depreciable due to obvious wear and tear, must be depreciated ona straight-line basis over their expected useful life. Tailor-made software normallyfalls within this category.

Capital Gains Assets other than Shares

[165] The recognition of capital gains is closely related to the depreciation rules.Gains on non-depreciable assets (e.g., shares and other securities) are taxed as ordi-nary income in the year of sale. Gains on assets listed in groups (a) to (d) and (j)above in paragraph [163] may be taken to income or charged against immediatelosses but the sale proceeds may also be charged against the balance to which theybelong. Gains on assets listed in groups (e)–(i) are entered into a gains/loss account.Twenty per cent of this account is taken to ordinary income annually. Losses on thesame type of assets are charged against it. If the account is negative a maximum of20% thereof may be deducted against ordinary income each year. The gain/lossaccount is a significant tax deferral device.

Transactions and ‘Substance over Form’

Considerations

[166] Transactions between related parties are subject to an ‘arm’s-length’ test.Related party is not a defined term, and may include any party that has a common-ality of interest with another party in the transaction. When such transactions aremade cross-border, the onus of proof is reversed, so that the Norwegian taxpayerhas the burden of proving that the transaction is made on normal commercialterms.

[167] This provision is closely related to the unwritten law of ‘substance over form’or ‘tax-motivated transactions’. This is a concept developed through case law,where the courts have allowed the tax authorities to reclassify or disallow transac-tions or arrangements which in reality are different from their form or appearance,or where the transaction makes little or no sense if it were not for the tax implica-tions.



Acquisitions

[168] In a share acquisition, the purchase price cannot be depreciated, it createsno step-up of the tax base of the assets of the enterprise, and no part of it may beallocated to depreciable goodwill. In an asset purchase, the purchase price must beallocated among the assets acquired. Allocation must be made on the basis of mar-ket value, independent of what the book value of the seller was. Any payment inexcess of the market value of the tangible assets may be classified as acquired good-will and depreciated at a rate of 20%. The tax authorities are entitled to reallocatethe purchase price between assets, if they deem the allocation made by the partiesto be in conflict with the real market values.

Reorganizations

[169] Restructuring of a business into a limited liability company will normally notresult in taxable gains. Current regulations provide that the difference betweenmarket value and book value of the assets transferred shall be recognized, andpotential deferred tax on the difference be shown, and collateral for the deferredtax may be requested. Establishing a new holding company over an existing com-pany by contributing assets from the latter is a taxable event, and gains must be rec-ognized. If a reorganization is taxable, it is possible in some cases to apply to theMinistry of Finance for tax relief, subject to conditions set by the Ministry.

Mergers, De-mergers and Liquidation

Mergers

[170] Under current law, most mergers between limited liability companies may becarried out tax free at both company and shareholder level if the book value of theassets in the companies involved in the process remains as before. A loss carry-forward is not automatically lost in a merger, except where utilization of a losscarry-forward for tax purposes is in fact the dominant reason for the merger. Irre-spective of which accounting method is applied for accounting purposes, continu-ity must be used in the tax accounts. A merger cannot give any right to theappreciation of assets for tax purposes.

De-mergers

[171] A demerger of limited liability companies may be carried out tax free at bothcompany and shareholder level. The normal procedure is to establish a company toacquire the business assets that are to be demerged, and then reducing the sharecapital in the original company by an amount equal to the share capital in the newcompany. The shareholders suffering a reduction in their shareholding in theoriginal company are then compensated with shares in the new company. The pro-cess may only take place between shareholders in the original company. The sharesreceived are not considered as a dividend, nor is the process seen as any kind of liq-uidation. It is however not a requirement under the law to de-merge into a newcompany, an existing company may be used.



Liquidation

[172] The liquidation of a company follows the capital gains rules. Any gain/loss iscomputed as the difference between the sales proceeds and the adjusted cost price.The exception to this rule is when the liquidation is part of a merger or demerger,as the liquidated company is considered to continue in the merged company.

Intragroup Transfer of Assets

[173] Companies within a tax group being defined as a joint ownership of 90% ormore may transfer assets between them without triggering tax. The transfer mustbe made at market value, but the tax on the potential gain is deferred. The taxauthorities may require collateral for the deferred taxes. The Ministry of Financemay also require a clawback of the deferral if for any reason (e.g., merger, sale andissue of new shares) the company which has acquired the assets no longer is a mem-ber of the tax group.

Value Added Tax

[174] Norway has a VAT system which in many ways corresponds with Europeannorms. Together with the petroleum revenue taxes it represents the most impor-tant source of income to the Norwegian government. The system has three rate lev-els: 25%, 15% and 8%. The common rate is 25% and applies to all goods and mostservices. Food is taxed at 15%, and, inter alia, transportation of persons and hotelaccommodation is taxed at 8%.

[175] An enterprise will pay VAT on goods and services purchased, and deduct theVAT paid from the VAT charged on goods and services sold.

[176] VAT is charged on most goods, but normally not on rental of real property,unless the tenants are VAT subjects and the property meets certain requirements.Goods and services may be exempt from VAT if sold for export, to internationalshipping or the offshore oil industry. Services are generally subject to VAT; how-ever, certain important services such as health, education and financial services areexempt. Imported goods are subject to VAT upon entry, irrespective of the VATtreatment in the exporting country.

Other Indirect Taxes

[177] As mentioned in paragraph [126] above, there are several, and economicallyimportant, excise taxes and other indirect taxes. Stamp duty has been abolished oneverything but the transfer of real property where it is charged at the rate of 2.5%.The various excise taxes are too numerous to be discussed in detail. In particular



the excise taxes on cars, gasoline, alcohol and tobacco are important sources ofgovernment revenue.

Petroleum Tax

[178] Any enterprise active on the Norwegian continental shelf is subject toNorwegian tax, unless exempted by treaty. In this context, it should be noted thatNorway in general will reserve its right to tax such enterprises under its treaties, asa presence on the shelf for more than thirty days in any twelve month period willconstitute a ‘deemed permanent establishment’.

[179] If such legal entity is engaged in the exploitation of hydrocarbons and/orpipeline transport of same, it is also subject to a special petroleum tax. The rate iscurrently 50%, in addition to the 28% general tax. For such companies special rulesapply, particularly with regard to depreciation, but also in computing income. Forthe latter, a norm-price is determined by a government body and this norm-price isindependent of the actual price achieved. Special tax incentives also apply toexploration activities.

[180] Oil-producing installations are depreciated over six years on a straight-linebasis. In addition, uplift to the depreciation is given before computing the specialtax.

[181] The tax regime applicable to oil companies must also be seen in context withroyalty charges and the duty to carry government interests in the explorationphase, etc. The rules are very complicated. It should, however, be noted that thesale or acquisition of oil companies, or licenses or assets connected thereto, are sub-ject to a special ruling system, the purpose of which is to achieve ‘neutrality’. TheMinistry of Finance may deviate from any rule or regulation in any tax law and willissue a tax ruling pertinent to the transaction. However, most of the acquisitions arenow subject to a regulation given by the Ministry of Finance whereby a specific rul-ing no longer is necessary. The idea is that the Norwegian government take shouldnot be reduced or increased by any transfer of ownership. The rulings are normallynegotiated in advance with the Ministry, the companies suggesting a method ofachieving neutrality suiting their needs.

EMPLOYEE MATTERS

Standard of Workforce

[182] The level of education of the Norwegian workforce is high. Pursuant to sta-tistics prepared by Statistics Norway (SSB) included in the statistical yearbook,2 asof 2007, 69% of the Norwegian workforce has completed secondary education or

2 www.ssb.no/aarbok/.



higher, whereof 19.9% has completed up to four years of tertiary education(university and college studies, etc.) and 6% tertiary education for more than fouryears.

Labour Costs

[183] Pursuant to SSB, full time employees with primary or secondary educationhad average monthly earnings of NOK28 251 in 2008. Average monthly earningsnormally increase with education level. For employees who have finished uppersecondary education an additional NOK5000 is added to their monthly earningscompared to those with only primary or secondary education. Employees with ter-tiary education, four years or less, had monthly earnings of NOK39 622. In com-parison employees with tertiary educational, more than four years, had monthlyearnings of NOK49 482.

Employer/Employee Relations

[184] Traditionally, the government has not interfered directly in bargainingbetween employee unions and employers’ organizations. However, laws relating tosocial security, etc. constitute an important framework for employer/employee rela-tions.

[185] Norwegian trade unions must be regarded as fairly strong, especially withinthe heavy industries and in the oil industry. Employee representation is discussedin paragraphs [25]–[28] above.

[186] The current Working Environment Act entered into force 1 January 2006.The Act imposes a duty on the employer to inform and consult the employees inany matter which is of importance to the employees if there are more than fiftyemployees in the company. Tariff agreements may also impose extended obliga-tions to inform and consult the employees.

[187] Due to Norway’s membership in the EEA, EU rules regarding transfer ofundertakings apply. These rules are since 1994 incorporated in the Working Envi-ronment Act. If the sale constitutes a transfer of undertakings which falls within EUDirective 2001/23/EF, various obligations must be respected by both the seller andthe buyer. A sale is considered a transfer of undertakings if it implies transfer of anautonomous unit that retains its identity after the transfer. If these criteria are com-plied with, planned measures towards employees must be discussed with theemployees’ representatives with the aim of reaching an agreement. Further, allrights and obligations of the former employer in force on the date of transfer shallin principle be transferred to the new employer. Also, the transfer in itself does notconstitute a sufficient reason for termination of employment agreements (see para-graph [192] below).



Termination of Employment

[188] Protection against unfair termination represents an important part of Nor-wegian labour law. The statutory law in itself is rather brief, but there is a vast baseof case law. The basic requirement of the law is that a termination must be based onobjective grounds of fact and fairness.

[189] A rationalization or closure of the business will normally constitute sufficientgrounds for termination. This is not the case, however, if the employer is in a posi-tion to offer the employee another suitable post within the business. In practice,the selection of whom to dismiss appears to present the most important problem toemployers. Qualifications are normally considered a relevant and sufficient factorin themselves. In areas covered by tariff, agreements seniority will in practice bedecisive even if it is not generally supposed to overrule qualifications from a formalpoint of view. Based on tariff agreements, and also non-statutory law, the employermay also make employees temporary redundant if there is a temporary need for areduction of the work force. The procedures in such cases will mainly follow thesame principles as an ordinary redundancy.

[190] An important aspect is the employer’s procedural approach in relation tothe planning of a large-scale termination of employees, so-called mass redundan-cies, which is defined as the dismissal of ten or more employees. Such redundanciesshall be discussed with representatives of the employees as early as possible with theaim of reaching an agreement. Redundancies shall be reported to the publicemployment service and they will not come into effect until thirty days after theemployment service’s receipt of such notice.

[191] Each individual termination must always be made in writing and theemployee must be informed of his or her right to have the termination tried by acourt. A person who is dismissed may normally remain in his position until the caseis finally decided by the courts.

[192] As mentioned above, a sale of a business, whether by way of a sale of shares orby sale of assets, does not in itself constitute a sufficient reason for termination ofemployment contracts. A termination in connection with a transfer of a business isfrequently supported by other arguments, normally related to a subsequent ratio-nalization or closure of the business. Terminations in this connection may meetwith problems, particularly when bearing in mind the potential conflict of interestbetween employees of the purchaser and the vendor. Procedural problems mayarise from the exercise of the protection rules against both the purchaser and thevendor.

[193] Termination based upon an individual employee’s failure to perform andnot upon the business in general is rarer, and will in general be scrutinized moreclosely by the courts.



Other Labour Protection

[194] The rules on termination are supplemented by two other important sets ofprotection rules, the first being the law’s regulation on working hours, which iselaborated on in further detail in tariff regulations. The normal weekly workinghours are 37.5 hours. Second, there are rules on the physical and psycho socialenvironment at the place of work, which are substantially complemented by a widerange of detailed regulations.

Social Security

[195] The Norwegian social security system is founded on high ambitions. Themost important provisions of the benefit system are:

– payment of salary during sickness absence; the social security payment is sub-ject to certain limitations, and comes into effect after sixteen calendar days ofsick leave. In the first sixteen calender days, the employer must maintain sal-ary payments;

– payment, within certain limitations, of 100% of salary for forty-seven weeksor 80% of salary for fifty-seven weeks during maternity leave. Of these, thefather of the child must take at least twelve weeks paternity leave;

– disability benefit to persons becoming disabled before their pension age;– unemployment benefit in limited periods.

[196] Furthermore, all members of the National Insurance are entitled to age apension from the state pension scheme. After a reform in 2011, the members mayreceive age pension from 62 years of age, and it is also possible to wholly or partlycontinue to work and receive salary (which in turn will lead to continuous earningof pension rights). Special retirement rules apply to certain types of professions.Where the employer is a party to a general tariff agreement between the employ-ers’ and employee organizations, a voluntary additional pension scheme (AFP)may come into effect and provide additional payments from 62 to 67 years of age.

[197] The state pension is in most cases well below the level of the previous salary.The Mandatory Occupational Pension Act entered into force 1 January 2006, andobliges all employers (with only a few exceptions) to establish a collective pensionscheme which complies with certain minimum requirements. Collective pensionschemes in accordance with the act are subject to tax relief for the employer and theemployee.

Immigration and Work Permits

[198] In order to work in Norway, most foreign citizens need a residence permit.The permit must be granted before entry, as the general rules do not allow theapplicant to enter into Norway before the permission is granted. Separate rules



apply to applicants from the EEA, whereby citizens of certain Member States of theEU may enter into Norway and work for three months without registration. ForEEA/EU employees who wish to stay in Norway for more than three months, theymust register with the Norwegian government. In order to register, the employeesmust have a place of residence, a valid identity card or passport and enclose theemployment contract. The employees may register online (see link: https://selfservice. udi.no/), but will subsequently have to meet in person at a police stationor at a Service Centre for Foreign Workers (see link: http://sua.no/eng.html). Thereis a Service Centre in Oslo, as well as in Stavanger and Kirkenes. When theemployee has registered, the employee will receive a registration certificate whichis free of charge and valid indefinitely.



corporate acquisitions and mergers editor-in-chief: … · corporate acquisitions and mergers...

Documents