NORWAY Trends and Developments Contributed by: Sicilie Tveøy, Thomas Alnæs, Ramborg Elvebakk and Karen Margrethe Bugge, Advokatfirmaet Hjort AS
If a Business Owner Dies: Spouse’s and Heirs’ Inheritance Rights No one likes to consider the possibility of death when starting a business, but planning for such events is essential for business continuity. It is important for co-owners to have arrangements in place to ensure that the business can continue operating smoothly if one of the partners passes away. In Norway, when a business owner dies, Norwegian inheritance law and the marital property regime deter - mine what happens to the shares. Key points if a busi - ness owner dies without any special estate planning are as follows. • Marital property split first – At death, a marriage is dissolved just like in divorce in terms of property. If all assets were part of the marital estate, the sur - viving spouse immediately is entitled to half of the couple’s property value. The remaining half value constitutes the deceased’s estate. As said above, this should be planned for by entering into a mar - riage agreement, where all shares are considered to be separate property and valuation is taken out of the picture. • Inheritance shares for spouses and children – From the deceased’s half, the spouse is also entitled to an inheritance portion of 25% of the estate (¼) and the children inherit the other 75% (split among them). If the family consists of just common chil - dren, the spouse is entitled to take over the busi - ness in what is called an undivided estate – mean - ing they disposes of all assets (and values) the first spouse leaves behind, according to law, and until they later die. • Under Norwegian inheritance law, a business own - er can, by will and provided the spouse is informed before death, limit the spouse’s right to undivided possession of the estate and reduce the spouse’s inheritance to the statutory minimum (approximate - ly NOK200,000 in 2025), and each child’s inherit - ance to about NOK1.8 million. This allows the owner to direct the majority of the estate according to their wishes and protect business continuity. Spouse receives majority value The combination of the Norwegian marriage law and inheritance law means that the spouse receives a
majority value of the business. If spouses only have value that shall be shared equally (with no separate property), including company shares, the surviving spouse first receives half of the value of the shares through the matrimonial property division. The remain - ing half, which belonged to the deceased, is then dis - tributed according to inheritance rules: the spouse inherits one quarter of this half, while the children inherit the remaining three quarters. That inheritance of one quarter of one half equals 12.5% of the total assets. In total, the spouse ends up with 62.5% of the shares (50% + 12.5%), and the business owner’s children share 37.5%. This legal outcome can be very problematic for a busi - ness. Other shareholders may find that suddenly a large chunk of share value shall be directed to the deceased’s spouse. Or if the children inherit but they are minors, their mother (the spouse) might manage their shares. Alternatively, if the child inherits in major - ity, they might have to pay out the step-parent in cash for that one quarter share – which again raises the issue of where to find the money. That can be a huge burden. Forced sale In some cases, it might force a sale of the company or its assets to raise funds for the spouse’s share. This is clearly not ideal for business continuity or for any remaining co-founders. Corporate Risk Factors – Personal Circumstances Should Be Taken Into Account As part of a comprehensive assessment of corporate risk factors, business partners should take person - al circumstances into account. Proactive measures should be implemented to safeguard the continuity of operations in the event of separation or death. Shareholders’ agreement If there are co-founders or investors, it is very com - mon to have a shareholders’ agreement in a Norwe - gian company, especially necessary for a start-up. In that agreement, co-founders regularly forget to, but should, include clauses to protect the company from shareholders’ personal issues. The following exam - ples should be considered.
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