NORWAY Law and Practice Contributed by: Ylva B Gjesdahl Petersen, Marius Holm Rynning and Johan Fredrik Brende, Thommessen
• minutes from meeting of the board of direc - tors in which the share capital increase is proposed to the general meeting; • notice of and minutes from a general meet - ing in which the share capital increase is resolved; and • updated articles of association. It can be noted that the articles of association in Norwegian companies are normally kept very short, with the majority of regulations – except for share capital, number of shares and any share classes with related rights (eg, liquidation and distribution preferences and voting rights) – being set forth in the shareholders’ agreement by and between the company, the founders, investors and any other existing shareholders. There is no established standard for investment documents or shareholders’ agreements. How - ever, major early-stage investors and venture capitalists are generally keenly aware of market practice, which ensures fairly similar terms in various investment agreements. Certain incubators provide templates and resources of varying quality that are often used by start-ups – notably, shareholders’ agreements and SLIP agreements (see below) – ensuring similar documentation in many venture deals. Some major early-stage investors also use their own standardised templates for investment agreements, as well as shareholders’ agree - ments for their portfolio companies. In very early rounds, the investment is often done on the basis of a so-called SLIP (Start-ups Lead Investment Paper, developed by incubator StartupLab), similar to the SAFE instrument that is commonly used in the USA. The concept of the SLIP is that the investor invests in the com - pany against a right to subscribe for shares at minimum (nominal) cost in a future share capital
increase. The right to subscribe for shares is nor - mally triggered by the following circumstances: • an equity financing round of a predetermined amount; • a corporate transaction of a predetermined size (typically an acquisition or a merger of the company); or • at the investor’s discretion, if so agreed. The key financial terms are typically a discount and a valuation cap, meaning the highest appli - cable amount used to calculate the number of shares allotted to the investor. Entering into and executing SLIP agreements is generally less time-consuming than a priced round. Another key benefit is that the company is not valued at a price per share upon execution. This avoids the issue of correct valuation of early-stage compa - nies and allows for incentivising core teams with shares acquired at low value. Further, the SLIP agreement is not a loan, so no interest is paid on the initial amount and there is no maturity date at which the investor can claim repayment. 3.5 Investor Safeguards Venture capital investors will often require strong downside protection mechanisms, where the following concepts are most common. • Liquidation preference/exit preference – mechanisms ensuring that the venture capital investor at least gets their investment amount back (either with or without a multiple) before any of the common shares receive any exit or liquidation proceeds are common. It varies as to whether the venture capital investor also has the right to participate pro rata in any remaining proceeds along with the common shareholders (a so-called participating liqui - dation preference).
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