NORWAY Law and Practice Contributed by: Ylva B Gjesdahl Petersen, Marius Holm Rynning and Johan Fredrik Brende, Thommessen
2.4 Particularities Generally, domestic venture funds are classified as alternative investment funds (AIFs) pursu - ant to the AIFM Act. The Norwegian definition of an AIF implements the definition in the EU AIFMD, meaning that AIFs are collective invest - ment undertakings that are not Undertakings for Collective Investment in Transferable Securities (UCITS) and which raise capital from a number of investors for the purpose of investing the fund’s capital pursuant to a defined investment strate - gy for the benefit of said investors. AIFs must be managed by an external alternative investment fund manager (AIFM) or be managed internally, in practice by its board. The AIFM Act applies to all AIFMs. In the case of internally managed AIFs, the fund itself is considered the AIFM. All AIFMs must notify the Norwegian Financial Supervisory Authority (NFSA), also known as Finanstilsynet , before marketing an AIF to pro - fessional investors, and obtain a separate mar - keting authorisation before marketing an AIF to non-professional investors. As a principal rule, only AIFMs with authorisation – as opposed to AIFMs that are only registered (commonly referred to as “sub-threshold” AIFMs) – may market AIFs to non-professional investors. An exemption to this main rule applies to AIFMs of European venture capital ( “EuVECA” ) funds, which is increasingly common in the Norwegian market. This is an EU/EEA-wide label available to both authorised and registered AIFMs that manage AIFs that are qualifying venture capital funds as defined in the EU Regulation on Euro - pean venture capital funds. Obtaining registra - tion as an EuVECA manager, and the accompa - nying right to use the designation “EuVECA” in the marketing of qualifying funds, allow for the marketing of the fund to non-professional inves - tors meeting certain criteria and the passporting
cesses. Fund operations are principally, within the bounds of mandatory law, delegated to the investment manager and regulated by either a shareholders’ agreement and investment management agreement or a limited partner - ship agreement. The terms of fund agreements generally adhere to European best practices for venture capital funds, including Invest Europe and the Institutional Limited Partners Associa - tion’s principles and model limited partnership agreements. 2.3 Fund Regulation Equity incentivisation of the investment team is a common feature of venture capital funds in Norway and plays an important role in aligning the interests of the investment team with those of the investors. Typically, the investment team – via a distinct limited liability company – will commit an amount equal to 1‒2% of the total commitments to the fund and the fund’s equity is usually divided into preference shares and ordinary shares. The preference shares generally have a priority to a repayment of paid-in capital plus a preferred return. With regard to the carried interest model, most Norwegian venture funds opt for a European waterfall (whole-of-fund model), as opposed to an American waterfall (deal-by-deal model). Norwegian venture funds typically incorporate a claw-back provision in the fund documents to facilitate the repayment of any excess car - ried interest. Furthermore, the investment team will generally agree to reduce its rights to any accrued or future carried interest if the invest - ment manager is removed for cause. Linear vesting of carried interest may also be included in the fund documents.
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