NORWAY Law and Practice Contributed by: Karoline Ulleland Hoel, Sigurd Opedal, Ole Henrik Wille and Daniel Nygaard Nyberg, Wikborg Rein Advokatfirma AS
9. Portfolio Company Oversight 9.1 Shareholder Control and Information Rights Norwegian private equity funds typically seek control over portfolio companies to exercise active ownership, achieved through majority shareholding and typically governed by a shareholders’ agreement (which is also an alternative if a controlling interest is not obtained). The funds typically secure right to information, board control and all key decisions, including share issues, major acquisitions, business changes or asset dispos - als, borrowing, business plans and budget, and pro - cedures for liquidation and exit. While the sharehold - ers’ agreement may also include veto rights for the private equity fund, these are at the outset redundant where the fund possesses a controlling interest. 9.2 Shareholder Liability Pursuant to Norwegian law, a company and its shareholder(s) are separate legal entities, generally not liable for each other’s obligations. This applies regard - less of the company’s structure, including subsidiary- parent arrangements. In general, the limitations on shareholders’ liability under Norwegian law are robust. Case law predominantly supports maintaining the corporate veil, even where the company is engaged in high-risk business, reserving its piercing only for exceptional cases. There is no Supreme Court prec - edent for piercing the corporate veil. There is, how - ever, a risk that a shareholder (and especially a parent company) may incur liability for a subsidiary’s envi - ronmental obligations under Norwegian environmental legislation.
cally limited to areas where the target previously oper - ated. Furthermore, the Norwegian Working Environment Act stipulates that non-compete clauses imposed by employers must compensate employees and can - not extend beyond 12 months post-employment, except for agreements entered into with CEOs. There is scope to treat restrictive covenants in the employ - ment agreement separate from those applicable to the employee in its capacity as a shareholder and/or selling shareholder. 8.5 Minority Protection for Manager Shareholders It is uncommon for management shareholders to be granted minority protection rights beyond what is provided under the Norwegian company legislation, unless they possess a significant minority interest and negotiation power. Under Norwegian company law, minority shareholders enjoy certain rights – either by holding one share, or by representing a certain percentage of the share capital and/or voting rights – including the right to challenge corporate resolu - tions in court, attending and speaking at shareholder meetings, as well as certain disclosure rights. While some of these rights can be waived in the sharehold - ers’ agreement, others are statutory and cannot be waived. Minority rights are often limited through mechanisms like different share classes with varied voting and financial rights, and by incorporating leaver provisions in the shareholders’ agreement. Pooling management investments into a separate ManCo (indirectly) con - trolled by the private equity fund also mitigates the influence of minority protections. Management is rarely granted anti-dilution protec - tion, veto rights or control over exits. Management may be granted the right to board representation or an observer seat, but in practice this does not give management shareholders any influence or control over the portfolio company.
10. Exits 10.1 Types of Exit
The typical target holding period for Norwegian private equity investments ranges from three to five years, as funds aim to return capital with appreciation to inves - tors within a reasonable timeframe. Trade sales and IPOs have historically been consid - ered the preferred exit strategies. Before 2020, trade sales to industrial investors or secondary sales to
479 CHAMBERS.COM
Powered by FlippingBook