NORWAY Law and Practice Contributed by: Harald Sætermo, LexOslo
3.5 Directors’, Officers’ and Shareholders’ Liability A Norwegian private or public limited liability com - pany is a separate legal entity. As a starting point, shareholders are not personally liable for the com - pany’s obligations beyond their contribution to the share capital. This limited liability is one of the main reasons why the AS is the standard corporate vehicle for foreign investors in Norway. Board members and the general manager may, how - ever, incur personal liability. The basic rule is fault- based. A board member, general manager, member of the corporate assembly, investigator or shareholder may be liable for loss that they have intentionally or negligently caused to the company, a shareholder or a third party in that capacity. The same may apply to a person who has intentionally or negligently contrib - uted to such damage. Liability requires the ordinary conditions for damages to be met, including fault, financial loss and causation. The board is responsible for the overall management and supervision of the company, while the general manager is responsible for day-to-day management within the framework set by the board. The board must also keep itself informed of the company’s financial position and ensure that the company has adequate equity and liquidity, assessed in light of the risks and scope of its business. If the equity or liquidity position becomes inadequate, the board must consider the matter and take appropriate action. In practice, liability risk often arises where the board or management fails to act with sufficient care in financial distress, enters into obligations when the company has no realistic ability to perform, makes unlawful distributions, provides misleading information, fails to maintain proper accounts or internal controls, or dis - regards statutory requirements or creditors’ interests. Passivity may be problematic where the company’s financial position has deteriorated and the board fails to investigate, propose or implement corrective meas - ures. Shareholders are generally protected by limited liabil - ity, but they are not immune from personal liability for their own conduct or contribution to wrongful con -
The board of directors is responsible for the overall management and supervision of the company. The board also represents the company externally and may assign signatory powers or powers of procu - ration to board members, the general manager or named employees. The board is therefore not merely a supervisory body; it has both managerial and over - sight functions. An AS must have a board of directors, which may consist of one or more members. A general manager may be appointed, but is not required. Where a gen - eral manager is appointed, he or she is responsible for day-to-day management within the framework set by the board. An ASA is subject to stricter governance require - ments. It must have a board of directors with at least three members, a general manager and an auditor. Where the company has a corporate assembly, the board must have at least five members. The ASA form is therefore more formalised and is generally used for listed companies or companies seeking access to the public capital markets. A corporate assembly is mainly relevant in companies with more than 200 employees, unless validly waived. Where a corporate assembly exists, it sits between the general meeting and the board for certain purposes, including election of the board in many cases. In prac - tice, however, many private companies do not have a corporate assembly. Partnerships have more flexible management struc - tures, depending on the partnership agreement and the type of partnership. A Norwegian branch of a for - eign company (NUF) is managed by the foreign legal entity, although the foreign company may appoint a local general manager or establish a Norwegian branch board. For most foreign investors using an AS, the practi - cal governance structure is simple: shareholders act through the general meeting, the board has overall responsibility, and the general manager handles daily operations if appointed.
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