NORWAY Law and Practice Contributed by: Sicilie Tveøy, Lars Christensen, Ramborg Elvebakk and Karen Margrethe Bugge, Advokatfirmaet Hjort AS
When it comes to creditors, Norwegians want to estab - lish companies with limited liability and have assets in those companies, which reduces the potential risk for responsibility. In family businesses, the owner creates a holding company and subsidiaries so that any risk in the subsidiary will not affect the family business values. It is also common to protect assets by having insur - ance; high net worth individuals ensure they have, among others, liability insurance to cover any claims raised against them. 4.2 Succession Planning Succession of family businesses in Norway is often accomplished through careful use of holding compa - nies, share classes, and incremental transfers. A regular structure is to create a family holding com - pany that owns the operating business and subsidiar - ies. The older generation (the owner) can gift shares of this holding company to the children: as Norway does not have estate tax, gifts of shares can be given when suitable. In families, different classes of shares are often used– for example, voting and non-voting shares, dividend and non-dividend shares – to transfer economic own - ership to all children equally while allowing either the elderly owner, or one child, to retain control through voting shares. In the authors’ experience, Norwegian families typical - ly strive for consensus by involving all family members in succession planning and seeking solutions through family agreements. There is a strong preference to keep shares and family assets within the family, and to avoid actions that could lead to disputes or inefficient decision-making. To ensure continuity and effective management, it is also common for families to des - ignate one child to take primary responsibility for the family business or assets. Many families choose to give one child decision-mak - ing authority over the family business, while the other children inherit rights to dividends and possibly other assets. When the family’s wealth is held in financial instruments rather than an active business, it is more
common to structure inheritances so that children can pursue separate paths and are not required to remain financially tied together. Recently it has become more relevant for high net worth families to use management training and, through that, phased leadership transfer. It is essen - tially a non-legal but important part of succession, and programmes for this have also been made in the bigger financial institutions in Norway. The older owner might start handing over day-to-day management to the heirs years in advance, while maybe staying on as a chair or adviser until they are confident the next generation can handle running the family business. 4.3 Transfer of Partial Interest Since Norway does not have gift or inheritance taxes, the concept of applying valuation discounts for trans - fer tax purposes is largely inapplicable in the tradi - tional sense. When a partial interest in a business or asset is transferred (either during life or at death), no transfer tax return is required, so there is no formal tax valuation to dispute. When it comes to real property with rights to use, it is common to reduce the value of the property because of the right-of-use limitation. In both divorce and inheritance situations in Norway, a spouse who does not own a business is generally entitled to a share of the value of the other spouse’s business shares, unless a marriage contract provides otherwise. As Norwegian families have accumulated more wealth and more individuals own businesses without marriage contracts, disputes over the valua - tion of business interests have become increasingly common. In such cases, it is important to consider that a minority stake is typically valued lower than a controlling interest, and that personal goodwill – value attributable to the individual owner’s skills or reputa - tion – is not considered a divisible asset at the cut- off date and should be excluded from the valuation. These negotiations are handled privately between the parties and their advisers, without involvement from the tax authorities. If an amicable solution is not achieved, the court must decide on the value.
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