Shareholders’ agreement in Norway
In this guide, you’ll be provided with an overview of shareholders’ agreements (“SHAs”) in Norway and how these agreements complement a company’s articles of association by regulating the relationship between shareholders and key aspects of the company’s governance, ownership and future development.
This article forms part of our Doing Business in Norway guide.
Introduction
A SHA is a private contract between some or all of the shareholders in a company. Unlike the articles of association (Nw. “vedtekter”), which are publicly registered and binding on the company, a SHA is typically kept confidential and not registered with the Norwegian Registry of Business Enterprises. The SHA governs the relationship between the shareholders only and is a contractual instrument. For this reason, it is essential that the SHA is clear, precise and enforceable, and that any provisions the shareholders wish to have company law effect are also reflected in the articles of association.
We are often asked by clients whether we can send over a “standard template” SHA. There are indeed many standard provisions that appear regularly in these kinds of agreements. However, the most valuable aspect of a SHA is not the template itself, it is the process that the shareholders have to go through together to determine what the SHA should include. The SHA should be the result of the shareholders discussing how they wish to run the company and how their ownership relationship is to be governed. We recommend setting aside time for these discussions at an early stage. It may feel unnecessary during a start-up phase when everything is moving in the right direction, but that is precisely when it is easiest to discuss difficult questions openly and constructively. We have seen many examples where it has later emerged that investors had a different understanding of what was meant to apply in particular situations. When those questions arise without having been discussed in advance, disagreements arise quickly and it becomes significantly harder to find workable solutions.
What topics do a SHA typically cover?
A SHA often covers matters that the shareholders do not wish to make public, or that require more flexibility and detail than the articles of association or the rules of Norwegian corporate law can provide; such as reserved matters requiring unanimous consent, dividend policy, transfer restrictions, and exit mechanisms.
The following key topics should be considered prior to commencing the drafting of a SHA:
Ownership and roles
- How are the shareholdings divided, and what is the rationale for that division?
- What roles and responsibilities do each owner have?
- What happens if an owner fails to perform as expected? What should be the consequences?
Entry and exit
- What happens if one or more of the shareholders wishes to leave?
- Can a shareholder sell their shares freely and to whom?
- Do the remaining shareholders have a right of pre-emption (Nw. “forkjøpsrett”) on any sale of shares?
- Is there to be a lock-up period during which shareholders may not transfer their shares?
New shareholders and investors
- How much equity and what rights may be given to an external investor?
- Must new shareholders be required to accede to the shareholders’ agreement or not?
- How is dilution to be addressed on any new share issuance?
Governance and decision-making
- How are decisions made in the company and which decisions require unanimity?
- Who sits on the board, and how are new board members appointed?
- Are any shareholders to have veto rights over particular decisions?
Dividends and finance
- What is the dividend policy?
- How are situations handled where the company requires additional capital?
Exit and sale of the company
- What happens if the shareholders receive an offer to sell the entire company and they cannot agree on whether to accept?
- Are tag-along rights or drag-along obligations to apply?
- How are shares to be valued in the event of a compulsory acquisition and/or a dispute?
Next Steps
We regularly assist shareholders and investors in drafting and negotiating SHAs. Our work includes assisting clients with the initial SHA discussions, structuring the SHA to reflect the commercial reality and needs of our clients and negotiating the SHA’s terms and conditions. Whether you are setting up a new company, bringing in an external investor, seeking to formalise an existing arrangement, want to enquire about the enforceability and/or interpretation of the terms and conditions of a pre-existing SHA, or need assistance with solving a conflict that has arisen between the shareholders at your company, we can be of assistance.
Contact us today for an informal discussion.
