Proposal to simplify the Norwegian Private Limited Liability Companies Act

| Insight

The expert committee appointed by the Ministry of Trade and Fisheries in early 2016, has recently presented its suggestions for simplification of the Norwegian Private Limited Liability Companies Act (the Companies Act).

The new proposal comes on top of certain simplifications adopted in 2013, and the purpose is to ease everyday life for small and medium sized companies. The proposal will now be submitted for public consultation, and the Government’s plan is to present the matter to the Stortinget in the spring session in 2017. Here are some of the more important proposals:

Minimum required share capital reduced to 1 NOK

  • The minimum required share capital in a private limited liability company (LLC) is proposed to be reduced from NOK 30,000 to NOK 1. The reason is that the existing minimum requirement has no significance to the company’s creditors or to prevent white-collar crime. Under the proposal, the minimum capital requirement going forward will be based on the requirement for an adequate equity and liquidity.
  • For public limited liability companies (PLCs), the share capital requirement remains (NOK 1 mill.).

Agreements between the company and shareholders, representatives and close associates

  • A proposal to replace the procedural rules in the Companies Act section 3‑8 for agreements between the company and shareholders, representatives and close associates, with an obligation to notify all shareholders of such agreements. The notification may be sent by e-mail and must include information about the transaction, the relevant parties and the amount.
  • Intra-group agreements are on certain conditions proposed to be exempted from the notification requirement.
  • Breach of the rules will not lead to the agreement being null and void, but may be used as basis for claims under the regular rules on liability for the involved parties.
  • The similar procedural requirements for PLCs are also proposed to be softened, but not to the same extent as for LLCs.

Reduced documentation related to incorporation, merger, demerger and transformation

  • A proposal to repeal the requirement of an opening balance sheet for (i) incorporation where share contribution can be made in kind or where someone is provided certain rights in the company, for (ii) merger, (iii) demerger and (iv) transformation.
  • To repeal the requirement for an external confirmation of receipt for cash contributions below NOK 100,000 related to incorporation of an LLC, but the requirement is kept for later capital increases in cash.

Corporate governance

  • A proposal, on certain conditions, to allow for advance voting at general meetings.
  • The general meeting may be held electronically and without physical presence provided that the board finds this to be «reassuring».
  • The requirement for a «special circumstance» to retire as a board member is repealed.
  • The general meeting shall without preceding dealing by the board and provided that all shareholders approve, be competent to decide on inter alia distribution, capital increase by issue of new shares, issue of warrants and of certain forms of loans.
  • The fact that the equity is less than half the registered share capital shall no longer trigger an obligation to act for the board; the obligation shall only be triggered if the company’s equity or liquidity fails the adequate test. When the obligation to act is triggered, the board must prepare an action plan.

Auditor, audit and special attestations

  • The company only needs to have an auditor if decided at the incorporation or later.
  • The requirement for auditing an interim balance sheet for extraordinary dividend is repealed, provided that the company has not appointed an auditor.
  • The requirements for attestations connected to incorporation, capital increases and merger without a capital increase are proposed to be reduced and more flexible.

File retention period for corporate documentation; notices between the company and the shareholders

  • The file retention period for corporate documentation is proposed to be reduced from 10 to 5 years, and there are no requirements to the storage facilities.
  • The company may make notification to the shareholders in the form of e-mails.
  • The shareholders may make notices to the company, as a starting point, via e-mail.
  • Corporate documentation, including minutes from general meetings, may be drawn up digitally, and with electronic signatures.

Dissolution and winding-up

  • The requirement for winding down accounts and a final settlement is repealed. Provided that the company has no auditor, the requirement for annual financial accounts for the liquidation period is repealed.
  • The requirement for a liquidation board is removed; the existing board may continue.