NORWAY Law and Practice Contributed by: Ida Marie Windrup, Daniel Jovanovic, Markus Nilssen and Steffen Rogstad, BAHR
7.10 Expedited Restructurings While Norwegian law does not explicitly provide for pre-packaged or pre-arranged restructurings in the manner seen in US Chapter 11 proceedings, market practice increasingly involves informal pre-negotiation of restructuring terms before formal proceedings com - mence. In these cases, the debtor and key creditors negotiate the terms of a restructuring plan – includ - ing debt reduction, payment terms and governance arrangements – and then utilise the formal court pro - cess primarily to bind dissenting creditors and obtain the benefit of the statutory moratorium. For balance sheet restructurings that do not require operational changes, the typical approach involves debt-for-equity swaps, subordination or conversion of shareholder loans, and amendments to financial covenants. These are often accomplished through out-of-court agreements. Norwegian courts will generally respect and enforce restructuring support agreements and voting agree - ments between creditors, provided such agreements do not violate public policy or mandatory provisions of insolvency law. However, creditors remain free to vote according to their individual interests, and lock-up agreements may be challenged if they are perceived to undermine the fairness of the restructuring process.
However, in-court processes also involve loss of con - fidentiality, increased costs, and greater uncertainty. 7.9 Dissenting Lenders and Non-Consensual Restructurings Norway permits non-consensual restructurings of unsecured debt (including the part of secured debt not covered by the value of the collateral) through a compulsory composition ( tvangsakkord ) under the Reconstruction Act. A restructuring proposal binds all creditors if approved by a simple majority (50%) by value of eligible voting claims – no head-count major - ity or class voting is required. Secured creditors may only vote on undersecured portions of their claims. Claims receiving full payment, subordinated claims being extinguished, claims held by related parties, and post-filing transferred claims have no voting rights. Protections for dissenting lenders include: • Judicial fairness review – the court may refuse con - firmation if the proposal is unreasonable or unfair, offers inadequate dividend compared to bankrupt - cy, unreasonably prefers certain creditors, or lacks reasonable prospect of fulfilment. • Mandatory refusal grounds – the court must refuse confirmation for procedural violations, insufficient majority, or material non-disclosure affecting the vote. • Appeal rights – dissenting creditors who voted against the proposal may appeal the confirmation decision. • Protected claims – secured creditors remain pro - tected on in-the-money portions; priority claims are generally not bound by the composition. Underwa - ter security interests are stripped. • Debt-to-equity conversion – requires creditor consent unless the court finds refusal manifestly unreasonable based on weighty considerations. Overall, Norway’s framework provides an accessible cram-down mechanism balanced by meaningful judi - cial oversight to prevent unfairly prejudicial treatment of minorities.
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