On 20 June 2023 the Norwegian government made a proposal to amend Norwegian law by introducing regulation on gender balance for the board of directors in large and mid‑sized private limited liability companies (Nw. aksjeselskaper), as well as certain partnerships, cooperatives and foundations. Previously, such requirements only applied to public limited liability companies, and the purpose of the proposal is, inter alia, to increase the proportion of women in Norwegian board rooms. The proposal was adopted by the Norwegian Parliament, and the regulation entered into force on 1 January 2024 with a gradual introduction over the coming years depending on the revenue and/or number of full-time employees of the company in question.
The Gender Balance Regulation
The regulation sets out a requirement that there should be at least 40% of each gender in the board of directors of Norwegian private limited liability companies, and certain other types of entities, covered by the regulation. For private limited liability companies, the new requirement applies to companies that either has combined operating and financial revenue higher than NOK 50 million or more than 30 employees, and a minimum of three board members, including any deputy board members, that are elected by the shareholders at the company’s general meeting.
The total number of board members that can have the same gender pursuant to the gender balance regulation, is as follows:
Separate Requirements for Employee-elected Board Members
In companies that have a minimum of three board members that are elected by and amongst the employees, the employee-elected board members cannot have the same gender. However, this does not apply to companies where more than 80% of the employees have the same gender.
For larger companies, with more than 200 employees, the gender balance requirement that apply to board members elected by the shareholders at a company’s general meeting also apply to the employee-elected board members of such companies. For these companies the gender balance requirement will apply from the next ordinary election of such representatives, including when such ordinary election is scheduled for the following year.
Gradual Introduction of the Regulation
Even though the regulation on gender balance entered in to force on 1 January 2024, the regulation will be introduced gradually, in five steps, up until 1 July 2028, based on the size and revenue of a company:
Companies that are not required to fulfill the gender balance requirement during the gradual introductory period, due to the size of the company, but later either reach an operating and financial revenue higher than NOK 50 million or exceed more than 30 employees, must meet the gender balance requirement within one month after the first subsequent annual general meeting of the company.
Consequences of the Regulation
The new regulation may entail that companies need to change the composition of the board of directors by recruiting new board members. The majority of new board members that needs to be recruited for companies to comply with the gender balance regulation, will be women. On this basis, companies must be prepared to allocate resources to recruit board members that has the necessary competence and meets the gender balance requirement.
Further, the gender balance requirement may affect the content of both current and future shareholder agreements, with regard to clauses regulating the shareholders’ right to appoint members of the board of directors of a company. Such clauses must be amended or adjusted to take into consideration the gender balance requirement. Similarly, the articles of association of a company that contains provisions on the election of board members, may also be affected by the gender balance requirement.
In conclusion, companies must take the gender balance regulation into consideration when handling matters regarding the election of board members, as well as the election of the board members itself. Companies should already now take action so that they can be compliant with the gender balance requirements, in line with the gradual introduction of the regulation.