corporate governance

The Corporate Governance Review

Law firm Steenstrup Stordrange has contributed to the Corporate Governance Review 2013 by supplying the Norwegian chapter. The Review is published by Law Business Research Ltd and contains information about regulations and recommendations for corporate governance in 31 jurisdictions. The Norwegian chapter was authored by partners Terje Gulbrandsen and Odd Moe.

The article is reproduced here with permission from Law Business Research Ltd.


Companies listed on Norwegian regulated markets must be public limited liability companies (‘ASA’) or foreign equivalents. Corporate governance issues for an ASA are primarily regulated by the Norwegian Public Limited Liability Companies Act of 13 June 1997 No. 45 (‘the Companies Act’), Chapters 5 and 6. In addition, the Norwegian Securities Trading Act of 29 June 2007 No. 75 (‘the STA’) contains several provisions of practical importance.

Companies listed on the Oslo Stock Exchange or the Oslo Axess are, in addition, required to comply with the continuing obligations (‘CO’) of stock exchange-listed companies. Section 7 of the CO requires listed companies to provide a report on the company’s corporate governance compliance in their annual report. The report must cover every section of the Norwegian Code of Practice for Corporate Governance (‘the Governance Code’). If the company does not comply fully with the Governance Code, the company must explain the deviation and what solution it has selected. Listed foreign companies and companies with a secondary listing may prepare a report in accordance with similar reporting requirements in the state where the company is registered or in which the company maintains its primary listing.

The Governance Code is published by the Norwegian Corporate Governance Board (‘NUES’). NUES is the result of cooperation between nine different institutions and representative bodies, including the Oslo Stock Exchange.

The listed company corporate governance regime is enforced by different parties. Rights established by the Companies Act may generally be enforced by individual shareholders, or by shareholders or groups of shareholders owning shares above certain thresholds. Rights established by the STA are typically enforced by the Financial Supervisory Authority of Norway. Compliance with the Governance Code is generally enforced by the Oslo Stock Exchange through the CO, although it should be stressed that these rules are based on the ‘comply or explain’ principle and are therefore generally not heavily enforced as long as companies report and explain their behaviour.

Over the past two decades, we have seen a definitive move in the Norwegian market towards stricter disclosure requirements, a clearer policy on conflicts of interest and above all a much greater focus on the independence of board members in relation to both shareholders and executive personnel. In general, corporate governance has gained a much more prominent position. A development over the last few years has been that the market, now to a much greater extent, expects actual practices to comply with both the word and the spirit of the governance rules in the Companies Act and also the Governance Code. Where non-compliant practices could previously sometimes be explained away with an efficiency argument, this is generally no longer as accepted, and non-compliant companies will have to expect closer market scrutiny.

In general, Norwegian corporate governance policies comply with and follow the general trends from the EU and EEA. However, levels of employee representation and involvement may seem foreign to many jurisdictions but cause very little friction in real life.

i.    Governance structure, mandatory and voluntary corporate bodies
An ASA must have a board of directors of at least three members and a managing director.

If the company has more than 200 employees, it must also establish a corporate assembly. The duties of the corporate assembly are defined in the Companies Act and include electing the chairperson and members of the board of directors, and approving investments that are substantial in relation to the company’s resources and such efficiency measures or changes to the operations of the company’s business that will entail a major change or reallocation of the labour force. The corporate assembly shall also supervise the board of directors’ and managing director’s administration of the company. According to the Companies Act, the number of members of the corporate assembly must be 12 or a higher number that is divisible by three. Two-thirds of the members of the corporate assembly are appointed by the shareholders and one-third are appointed by and among the employees. This corporate body must be considered in the context of the strong  tradition of employee representation in Norwegian corporate governance. It is generally engineered to allow for representation in the corporate bodies of large companies of representatives not only from the largest labour unions, as will often be the case in a board of directors that has fewer members, but also from smaller unions that can therefore be given an indirect representation and a voice in relation to major labour force changes. On certain terms, the company and the employees, or their representatives, may agree that no corporate assembly is established in return for further board representation or observers. This has become fairly common, as many of the larger companies outside the traditional industries and their employees view the corporate assembly as something of an anachronism.

According to the Companies Act, listed companies must establish an auditing committee if the company during the last accounting year met two of the following three criteria: an average of 250 employees or more, a balance sum of 300 million kroner or more at the end of the accounting year and a net turnover of 350 million kroner or more. The auditing committee is appointed by and between the members of the board of directors, but executive directors are not eligible. The audit committee shall prepare the follow-up of the financial reporting process, monitor internal control and risk management, have contact with the appointed external auditor and review and monitor the independence of the appointed external auditor.

Listed companies within certain business areas, typically within the financial services industry, are often required by law to establish other corporate bodies in addition to these.

The Governance Code also requires listed companies to establish a nomination committee. The general meeting should elect the chairperson and members of the nomination committee and should determine the committee’s remuneration as well as provide guidelines for the committee. The majority of the committee should be independent of the board of directors and the executive personnel. At least one member of the nomination committee should not be a member of the corporate assembly, committee of representatives or the board. No more than one member of the nomination committee should be a member of the board of directors, and any such member should not offer himself or herself for re-election to  the board. The nomination committee should not include the company’s CEO or any other executive personnel. The nomination committee’s duties are to propose candidates for election to the corporate assembly and the board of directors and to propose the fees to be paid to members of these bodies. Finally, the Governance Code suggests that the board of directors should also consider appointing a remuneration committee in order to help ensure thorough and independent preparation of matters relating to compensation paid to the executive personnel. Membership of such a committee should be restricted to members of the board who are independent of the company’s executive personnel.

ii.   Board structure and practices
The Companies Act establishes a one-tier board structure as the main rule for Norwegian companies. Apart from this, the structure of corporate bodies of Norwegian listed companies depends on how many employees the company or group of companies has.

As mentioned above, companies with more than 200 employees are required to establish a corporate assembly unless an agreement is made between the company and the employees or their representatives not to establish one.

Further, corporate bodies may also be introduced by the company’s articles of association, but this is not widespread.

The requirements for the composition of the board of directors of a Norwegian listed company can be fairly complicated, as the Companies Act establishes requirements both with regards to employee representation and gender representation. On top of this, the Governance Code contains restrictions on the appointment of executive personnel as directors, a recommendation that the majority of the shareholder-appointed directors should be independent of executive personnel and material business contacts, and that at least two of the board members should be independent of the company’s main shareholder or shareholders.

The Companies Act requires the general manager and at least half of the members of the board of directors to be resident in Norway, but this requirement does not apply to nationals of states that are parties to the EEA Agreement when they are residents in such a state.

Only physical persons may be board members, although exceptions apply for public limited liability shipping companies, and only persons of age may serve as board members.

The composition of the board of directors should ensure that the board can attend to the common interests of all shareholders and meet the company’s need for expertise, capacity and diversity. Attention should be paid to ensuring that the board can function effectively as a collegiate body.

If the board does include executive personnel, the company should provide an explanation for this and implement consequential adjustments to the organisation of the work of the board, including the use of board committees to help ensure more independent preparation of matters for discussion by the board.

The level of employee representation depends on the number of employees in the company. Special regulations control the calculation of the thresholds, employees eligible for election, nomination and election procedures, etc. The following are the main thresholds that apply:

  • When a company with more than 30 employees does not have a corporate assembly, a majority of the employees may require the election by and among the employees of one member of the board of directors and one observer, with deputies.
  • When a company with more than 50 employees does not have a corporate assembly, a majority of the employees may require the election by and among the employees of up to one-third of the directors and at least two of the members of the board of directors, with deputy directors.
  • When a company has more than 200 employees and it has been agreed that it should not have a corporate assembly, the employees shall elect one member of the board of directors and two observers, with deputies, in addition to what follows from the preceding paragraph.

In groups of companies, each group company may fulfil a different requirement of those mentioned above. As a main rule, the employees may then also require representation at group level, even though the holding company does not have any employees, if the actual business decisions concerning the group are taken at that level. This may include both board representation and the introduction of a requirement for a corporate assembly. Where representation is agreed on a higher level in the group, the representation in other group companies is usually limited or removed.

The Companies Act contains some unique requirements with regards to gender representation in the board of directors in an ASA. The rules are as follows:

  • if the board of directors has two or three members, both sexes must be represented;
  • if the board of directors has four or five members, each sex shall be represented by at least two;
  • if the board of directors has six to eight members, each sex shall be represented by at least three;
  • if the board of directors has nine members, each sex shall be represented by at least four; and
  • if the board of directors has more than nine members, each sex shall be represented by at least 40 per cent.

The rules apply correspondingly to elections of deputy members. Special rules regarding gender representation also apply to employee representatives.

In companies with employee representatives on the board, the board of directors must provide instructions detailing the board’s activities and procedures.

Power to represent the company at the outset rests with the joint board and the joint board signs for the company. It may be determined in the articles of the company that directors, the managing director or named employees are authorised to represent and sign for the company. To do this is very common for practical reasons. Typically such powers are given to the chairperson and one or two directors jointly, to two or three directors jointly, to the chairperson and the managing director jointly, or to the managing director and one or two directors jointly. The board may also authorise directors, the managing director or named employees to sign for the company. These provisions need to be tailored to fit in companies with employee representatives on the board of directors. Shareholders will normally want to avoid a provision allowing two directors to sign on behalf of the company in companies with two or more employee representatives on the board, although exceptions are fairly frequent.

A director, or more commonly a combination of directors or the managing director, or both, authorised in accordance with the provisions described above, may represent the company without a board decision. All decisions deemed to be of major importance to the company must be decided upon by the board. This may provide for a limitation in the right to represent the company if the counterparty ought to understand that a decision was not approved by the board. A company will therefore document major decisions by a board decision reflected in the board minutes. The principal limit to the board’s powers to represent the company in relation to third parties is the articles’ description of the company’s purpose.  However, article provisions setting out the company’s purpose and business are generally quite vague and open in Norwegian corporate practice, and therefore these usually do not pose strict restrictions on the board’s authority.

The board of directors must keep itself informed of the company’s financial position, and is obliged to ensure that its activities, accounts and management are subject to adequate control. The board must conduct the inspections and reviews they consider necessary to perform their functions. The board of directors must supervise the day-to-day management of the management and the company’s business in general. It may issue instructions for the managing director. The board must ensure that the company is properly organised, and that the company’s business is kept within its purpose according to the articles and any requirements set by law.

The board determines the annual accounts of the company, subject to approval by the company’s shareholders’ meeting, and must in this context also prepare a declaration on the fixing of salaries and other forms of remuneration for leading personnel.

The chairperson of the board is obliged to be present at any shareholders’ meetings and other board members have the right to attend and speak at the meetings. It is very rare that this is not complied with in listed companies, but we do on rare occasions see that a chairperson of the board is not present at the shareholders’ meeting and delegates his or her responsibility to another board member. There are no real sanctions against this other than replacing the chairperson, and  in most cases no action will be taken as long as the chairperson is viewed to have had a valid reason for his or her absence.

It is also the board’s obligation to prepare and file any petition for debt or bankruptcy proceedings.

The legal principle is that the chairperson presides over the board meetings, and that he or she has the casting vote in matters not concerning elections unless the articles determine otherwise. However, the chairperson does not from a legal perspective have any special right or position to represent the company in relation to third parties unless this authority has been granted in the articles or by a decision by the board. Frequently, due to historical reasons, we see that board chairpersons are both viewed as having greater authority than this and also consider their own powers to be wider. Over the past year, for instance, we have seen examples where the chairperson has fired the managing director and then notified the board, although this is clearly a board matter and not a matter for the chairperson alone.

Traditionally, boards of directors in listed Norwegian companies have worked as a group rather than divide work into subcommittees. However, both the Companies Act and the Governance Code have introduced a recommendation of establishing several subcommittees after the Anglo-American model, and companies seem to be adapting to these new requirements at varying rates.

The CEO may not be appointed the chairperson of a Norwegian listed company, and the roles of each are therefore relatively clearly distinguishable. The chairperson will generally be a link between the managing director and the board in the performance of the board’s obligations with regards to control and supervision. The chairperson will also to some extent be a point of contact for shareholders, although fairly strict rules on inside information and disclosure in the STA set  clear restrictions as to what a chairperson can and cannot say to shareholders outside of official corporate information in connection with general market notifications, intermediary accounts publications, etc. Most third parties considering an offer for the company will, for instance, make the chairperson their initial point of contact before the board as a group is involved.

In relative terms, the remuneration of both directors and senior management is lower even in large listed companies in Norway than that found in many other jurisdictions.

The remuneration of the board of directors should reflect the board’s responsibility, expertise, time commitment and the complexity of the company’s activities. The remuneration of the board of directors should not be linked to the company’s performance. The Governance Code states that the company should not grant share options to members of the board, but it is not uncommon for companies not to comply with this rule.

Members of the board of directors and companies with which they are associated should not take on specific assignments for the company in addition to their appointment as a member of the board. If they do nonetheless take on such assignments, this should be disclosed to the full board. The remuneration for such additional duties should be approved by the board. Any remuneration in addition to normal directors’ fees should be specifically identified in the annual report.

The board of directors is required by law to prepare guidelines for the remuneration of the executive personnel that are communicated to the annual general meeting. These guidelines should set out the main principles applied in determining the salary and other remuneration of the executive personnel, and should help to ensure convergence of the financial interests of the executive personnel and the shareholders. Performance-related remuneration of the executive personnel in the form of share options, bonus programmes or the like should be linked to value creation for shareholders or the company’s earnings performance over time. Such arrangements, including share option arrangements, should incentivise performance and be based on quantifiable factors over which the employee in question can have influence. Performance-related remuneration should be subject to an absolute limit.

Apart from the required or recommended committees set out above, boards will sometimes form a transaction subcommittee if a transaction is pending regarding the company and one or more of the board members are considered disqualified from participating in any discussions or decisions due to a conflict of interest.

Norwegian law sets strict restrictions on the board’s practice in takeovers.

When an offer is made under the STA offer rules, the board must prepare and publish a statement with the board’s opinion of the bid and the basis for this opinion, including its views on the effects of the implementation of the bid on the company’s interests, and on the offeror’s strategic plans for the company and their likely repercussions on employment and locations of the company’s places of business. The board’s statement on the offer should make it clear whether the views expressed are unanimous, and if this is not the case it should explain the basis on which specific members of the board have excluded or reserved themselves from the board’s statement. The board should arrange a valuation from an independent expert. According to the Governance Code, the valuation should include an explanation, and should be made public no later than at the time of the public disclosure of the board’s statement. The Governance Code states that the board of directors should establish guiding principles for how it will act in the event of a takeover bid, and that in a bid situation, the company’s board of directors and management have an independent responsibility to help ensure that shareholders are treated equally and that the company’s business activities are not disrupted unnecessarily. The board has a particular responsibility to ensure that shareholders are given sufficient information and time to form a view of the offer, and any agreement entered into between the company and a bidder that is material to the market’s evaluation of the bid should be disclosed no later than at the same time as the announcement that the bid will be made. The board of directors should not seek to hinder or obstruct takeover bids for the company’s activities or shares. Any agreement with a bidder that limits the company’s ability to solicit or arrange other bids for the company’s shares, as well as any agreement on the payment of financial compensation to the bidder if the bid does not proceed, should only be entered where it is evident that it is in the common interest of the company and its shareholders. The financial compensation agreed should be limited to the costs the bidder incurs when making the bid.

The Governance Code also states that, in the event of a takeover bid for the company’s shares, the company’s board of directors should not exercise mandates or pass any resolutions with the intention of obstructing the takeover bid unless this is approved by the general meeting following announcement of the bid. This corresponds with a prohibition in the STA against the board taking certain actions after a bid is announced. According to this provision, in the period from the time after the company is informed a bid will be made until the period of the bid has expired and the result is clear, the board may not:

  • issue shares or other financial instruments by the company or a subsidiary;
  • resolve to merge the company or a subsidiary;
  • sell or purchase significant areas of operation of the company or a subsidiary, or make other dispositions of material importance to the nature or scope of its operations; or
  • purchase or sell the company’s own shares.

Certain qualifications apply, particularly if specific defence mechanisms are built into the company’s articles.

Any transaction that is in effect a disposal of the company’s activities should be decided by a general meeting, except in cases where such decisions are required by law to be decided by the corporate assembly.

iii.  Directors
As mentioned above, the Governance Code recommends that members of the executive management are not appointed as directors. Some Norwegian listed companies have historically had a larger representation of executive management than others, but the definitive trend over the last two decades has been in the direction of companies reducing the number of executive managers on the board.

Board members closely associated with major shareholders are, on the other hand, very common, and shareholders will often ‘expect’ board representation once they reach a certain level of ownership in the company. This raises several issues. One is the potential disqualification of directors associated with a shareholder when matters are to be discussed or resolved that affects the position of that shareholder. Another is that Norwegian insider trading provisions in the STA are very strict, and appointing a board member closely associated with a shareholder may result in that shareholder being regarded to be in possession of any inside information that the board member possesses and therefore restrict, inter alia, the  shareholder’s freedom with regards to sales or purchases of shares and other securities.

Under Norwegian law, all board members are considered to have a duty of care in relation to the company, and not to any specific shareholder or group of shareholders. All directors may therefore receive early information about any matter concerning the company, and will in most cases expect to be consulted about or informed in all matters of a certain level of importance. Although the daily communication in this respect will often be between the chairperson and the managing director, where the chairperson decides what should be dealt with by the board, it should be noted that the duty to inform and involve the board includes all board members – including the employee representatives. Many foreign investors are sceptical of this practice, but leaks or improper use of information in this respect from employee representatives is virtually unheard of.

The board may conduct site visits and hold talks with the managing director, lower management and other employees, but this is expected to take place within a frame discussed and agreed with the managing director. The board may conduct visits and talks outside of this frame, but this would usually be regarded as an expression of distrust towards the managing director.

One particular issue that often arises with regards to the board’s point of contact is internal auditing. By far the most usual approach is to establish internal auditing under the leadership of the managing director, so that the managing director uses the internal auditing in his or her work to comply with any requirements made by the board. In some companies, however, there is a debate between internal auditing and the managing director about whether internal auditing may and  should report directly to the board. In some cases this may be appropriate, but the overall trend is that this is not done unless internal auditing has first addressed the issue with the managing director, and he or she has disregarded any recommendations made.

Directors may be held liable for any losses suffered by the company or the shareholders from their actions as board members. Disputes and claims for compensation from board members were uncommon until the beginning of the 1990s, after  which a few Supreme Court cases defined the standards to a greater extent than before. A slight paradox is that the introduction of insurance arrangements for board members has probably also increased the likelihood of claims against board members for negligence. Such arrangements mean that significantly more funds are available for actual collection than used to be the case.

The board is appointed by the shareholders’ meeting, or by the corporate assembly if the company has one. The articles of the company may also specify that board members are appointed by others (typically a specific shareholder), but this is very uncommon. More than half of the board members must be appointed by the shareholders’ meeting or the corporate assembly.

For continuity reasons, board members are often appointed for different time periods so that only half of the board is up for ordinary election on each ordinary shareholders’ meeting.

Members of the board of directors are appointed for two years if no other decision is made by the shareholders’ meeting or corporate assembly, but service periods can be shorter or longer. Service is limited to four years by the Companies Act, and Section 8 of the Governance Code states that the term of office for members of the board of directors should not be longer than two years at a time, although this is relatively frequently not complied with.

The chairperson of the board of directors should be elected by the general meeting so long as the Companies Act does not require that the chairperson must be appointed either by the corporate assembly or by the board of directors as a consequence of an agreement that the company shall not have a corporate assembly.

Election of employee representatives follows a separate election process.

Names of proposed board members are generally disclosed by the nomination committee in the summons of the shareholders’ meeting or corporate assembly meeting. Board members are appointed by a majority decision by the shareholders’ meeting or according to the special provisions that apply for companies with a corporate assembly.

Other than the requirements with regards to gender representation set out above and the requirements for independent directors set out by the Governance Code and in the CO, there are no formal requirements with regards to knowledge or qualifications.

The Companies Act states that directors may not participate in the discussion of or resolutions regarding any matter that is of such particular importance to him or her or any related party that he or she must be deemed to have a special and prominent personal or financial interest in the matter. Nor may any director or the general manager participate in any decision to grant a loan or other credit to himself or herself or to issue security for his or her debt.

A practical issue that often arises is whether the fact that a director is employed by a shareholder that has a definitive interest in the outcome of the matter is automatically disqualified in accordance with the above. The short answer is no – the employee’s situation will need to be examined specifically in order to determine whether the conditions for legal disqualification are met. In reality, senior employees of substantial shareholders directly affected by a matter to be resolved by the board will normally abstain from participating in dealing with any such matters and will likely face criticism if they do not.

Listed companies must prepare group accounts in accordance with International Financial Reporting Standards. According to the STA, listed companies must make their annual accounts public at the latest four months after the end of each financial year, and must ensure that they remain publicly available for at least five years.

The CO also require a listed company to publish quarterly accounts. These must be published as soon as possible after the relevant period, but no later  than two months  thereafter.

Any inside information that the company possesses must be disclosed immediately unless conditions for delayed publication are fulfilled.  The external auditor must be completely independent of the company. The auditor should submit the main features of the plan for the audit of the company to the audit committee annually.

The auditor should participate in those meetings of the board of directors that deal with the annual accounts. At these meetings the auditor should review any material changes in the company’s accounting principles, comment on any material estimated accounting figures and report all material matters on which there has been disagreement between the auditor and the executive management of the company. At least once a year the auditor should present a review of the company’s internal control procedures to the audit committee, including identified weaknesses and proposals for improvement. The board of directors should hold a meeting with the auditor at least once a year at which neither the CEO nor any other member of the executive management is present.

The board of directors should establish guidelines in respect of the use of the auditor by the company’s executive management for services other than the audit.

The board of directors must report the remuneration paid to the auditor at the annual general meeting, including details of the fee paid for audit work and any fees paid for other specific assignments.

One-on-one meetings of directors with shareholders are not common, and a company may only to a very limited extent hold meetings with individual shareholders and provide information not generally disclosed to the market.

When it comes to risk management, including financial, currency, liquidity, compliance, litigation and reputational risks, this is normally principally handled by the management of the company and reported on to the board of directors,   either directly by executive management in cooperation with the managing director or directly by the managing director. Few Norwegian listed companies seem to operate with a special risk committee or a board-appointed risk manager, but exceptions apply, especially within the financial services sector.

In general, the responsibility therefore rests primarily with the managing director, but subsequently also with the board as a corporate body in terms of control and supervision. In cases where the managing director has failed to establish  appropriate rules and routines in order to monitor or alleviate risk, the board will usually also be subjected to criticism for failing to spot and correct the shortcomings. Setting the standard from the top is highly emphasised in Norwegian listed companies. Apart from companies that are controlled by one person, company or a group despite being listed, neither management nor directors can expect to last long in their position unless they maintain a reputation and history of  taking corporate and social responsibility seriously.

One particular difficulty in this respect has been the establishment of compliance policies and ‘whistle-blowing’. Norway has seen some fairly high-profile whistle-blower cases over the past 10 years. Some are quite obviously very real, and the whistle-blower has first tried to correct matters from within and then taken the matter public when he or she has not been heard. In other matters, employers argue that no notice had been given internally before the matter was taken public,  or even that the whistle-blowing is a result of an internal disagreement or dispute and is therefore not a reasonable reaction to the issue at hand or a fair disclosure of internal matters. What most whistle-blowers seem to agree on, however, is  that, whether a matter is real or disputed, the person making the disclosure of internal matters will always have a very challenging time following the whistle-blowing. The debate has therefore been how real whistle-blowers can be offered better protection. The current conclusion seems to be that there is no perfect solution, but the employment protection is likely to be strengthened even further.

Corporate social responsibility (‘CSR’) is often on the agenda in the legal debate concerning Norwegian corporate governance. Traditionally, the view has been that the board, management and shareholders should only take into consideration the company’s best interest, and the interest of any other stakeholders and other matters concerning integrity and ethical behaviour was primarily explained from a marketing perspective. Partially based on recent EEA and EU initiatives, we expect this position to shift over time towards a more formal requirement to take such matters into consideration.


i.   Shareholder rights and powers
The Companies Act determines that all shares are equal and carry one vote each; however, Norwegian law permits the creation of different classes of shares with different voting rights and other shareholder rights. Shares with no voting rights  are also permitted by corporate law.

As for listed shares, the Governance Code states that the company should only have one class of shares. Some companies do have more than one class of shares, but this arrangement has become less and less popular over the past few decades.

Individual shareholders have no direct right to influence the board, but shareholders representing shares that make up 5 per cent or more of the share capital have certain minority rights established by the Companies Act.

A large number of corporate decisions require shareholder approval under Norwegian law. This includes issue of shares and other securities, reduction of share capital or share premium reserves, mergers and demergers, approval of dividends  and group contributions, and authorisation of the board to resolve share issues and mergers.

Minutes from shareholders’ meetings must contain a description of how many votes were cast in favour of, against and abstained from voting in each particular matter. Other than this, dissenting shareholders have no special rights as long as there are no material or procedural errors attached to the shareholders’ meeting’s preparation or decision in the matter.

If the dissenting shareholder believes that the decision made by the shareholders’ meeting either is materially wrong (typically that a decision has been made contrary to rules in the Companies Act, contrary to principles on equal treatment of  shareholders, etc.) or that it is subject to procedural errors that may have affected the outcome of the matter, then the shareholder may legally dispute any such matters.

There are no special facilities for long-term shareholders, such as extra votes or extra dividend. As mentioned above, having more than one class of shares in a Norwegian listed company is discouraged.

ii. Shareholders’ duties and responsibilities
As a principal rule, there are no special controlling shareholder duties and liabilities or code of best practice aside from general provisions that apply to all shareholders. Following a couple of high-profile hostile takeovers over the last decade,  however, a debate has begun about what steps a majority shareholder may take to force other shareholders to accept its proposals. A specific example has been a shareholder with negative control stating that, unless other shareholders accept  its offer for a takeover, it will vote against an alternative rescue share issue for the company and thus force the company into liquidation rather than saving it. The main rule is clearly that each shareholder may vote as he or she sees fit, but it  has been argued that this form of use of voting rights may constitute an action that may result in a liability for damages in relation to other shareholders. This has not been tested in a court of law, and the argument is contested in authority.

iii.  Shareholder activism
The shareholders’ meeting must approve the annual remuneration of the board of directors, although such remuneration is usually understood or agreed to be at a certain level at the time of election.

The board of directors must prepare a declaration on the fixing of salaries and other forms of remuneration of the managing director and other leading personnel. The declaration shall include salaries and also:

  • payment in kind;
  • bonuses;
  • allocation of shares, subscription rights, options and other forms of remuneration linked to shares or the development of the official share price of the company or
  • other companies within the same group;
  • pension schemes;
  • severance pay arrangements; and
  • any form of variable element in the remuneration or special compensation addition to the basic salary.

As the report is made available to the shareholders as part of the summons for the annual shareholders’ meeting, shareholders will have an opportunity to take action should the remuneration be, in their view, inappropriate.

Limitations apply on the management’s right to receive remuneration or other forms of payment related to their services for the company from sources other than their employer.

If the company’s general meeting has adopted a resolution of no liability or rejected a proposal to hold liable any member of the board, the managing director, the corporate assembly or shareholders owning at least 10 per cent of the share  capital (or, if the company has 100 or more shareholders, shareholders constituting at least 10 per cent of the total number of shareholders) may bring a claim on behalf of the company and in its name.

Proxy battles take place from time to time in Norwegian companies. The Governance Code requires the company to promote the ability for all shareholders to take part in shareholders’ meetings, etc., by preparing proxies and informing  shareholders about their rights.

In takeover or merger scenarios in particular, we have seen regular proxy battles where shareholders have tried to promote or block the proposed decisions. One issue that arises in this respect is what level of cooperation is permitted before  any such cooperating shareholders are considered to be operating in concert in terms of the STA, which in turn raises questions both with regards to disclosure and mandatory offer rules.

iv.  Contact with shareholders
In addition to the financial reporting described above, the company must disclose all inside information to the market.

The company may only to a very limited extent hold meetings with individual shareholders and provide information not  generally disclosed to the market. The company has a duty to hold such inside information not disclosed to the general market confidential, and may only divulge such information to individual shareholders if there are strong business reasons for the company to do so. Any shareholders receiving such information will become insiders and thus will not be  permitted to trade in the company’s securities.

Each listed company is required to have internal guidelines for the proper and secure treatment of inside information.

If any third party does receive inside information, the company is required to document that the third party has been informed about the obligation to hold the inside information confidential and that it is not permitted to trade in the  company’s securities while in possession of inside information.

Summons for shareholders’ meetings in listed companies must as a rule be sent 21 days before the shareholders’ meeting, and information related to that shareholders’ meeting must be provided together with the summons. Companies may  regulate in their articles that information is not sent in hard copy but instead provided in electronic form on the company’s website.

It is very common to see the company provide template proxies as part of the summons for a shareholders’ meeting, with a proxy being given to the chairperson of the board as a default option unless another person is appointed. However, it  is generally not common for the company to actively solicit proxies in favour of a particular result, but instead state that the chairperson will only accept bound proxies filled out with a statement from the shareholder of what his or her vote  shall be in each matter on the agenda.

It is uncommon for shareholders to give or be asked their opinion on general matters before the shareholders’ meeting, but in the case of special resolutions (such as share issues, mergers, etc.), the board will often make an effort to ensure it  has addressed any concerns these shareholders have in advance of the shareholders’ meeting so as to increase the possibility of a positive result.

Large shareholders will need to consider both mandatory notification requirements and mandatory offer rules. Within certain business areas, typically the financial services sector, there will also be maximum ownership thresholds taking into  consideration blocks of shareholders being regarded as acting in concert.

Corporate governance developments appear to move like a pendulum, with efficiency and deregulation on the one side, and stricter rules, regulations, control and accountability on the other. Our impression is that the pendulum has swung  quite clearly towards the latter position in recent years, and developments within the EU and EEA seem to indicate that there is still some way to go. The action plan on European company law and corporate governance published by the  commission on 12 December 2012 is an example of this. Exactly how this will influence Norwegian corporate governance remains to be seen. We expect to see not only stricter rules and requirements over the years to come, but in particular  more detailed requirements that need to be complied with by boards and board members. Another trend is that board members are held liable for shortcomings to a greater extent than was previously common.

This article was first published in The Corporate Governance Review, 3rd edition (published in April 2013 – editor Willem J L Calkoen). Reproduced with permission from Law Business Research Ltd.


Terje Gulbrandsen, tel: 480 16 588, mail:

Odd Moe, tel: 480 16 570, mail:

The Author

Terje Gulbrandsen
Terje Gulbrandsen Terje Gulbrandsen is a partner at Steenstrup Stordrange’s office in Oslo, and is a senior member of the M&A and Corporate Practice. He mainly works with transactions, securities law, corporate law and financing. As well as being an Attorney at Law, he holds a Master of Business and Economics. Gulbrandsen is recommended within Corporate and M&A in Legal 500 in 2014, and in M&A as well as Banking and Finance in IFLR 1000 in 2014. Gulbrandsen has also been selected by his peers to be included in Best Lawyers Norway (in the category “Banking law”) 2013 and 2014.

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