NORWAY Law and Practice Contributed by: Ylva B Gjesdahl Petersen, Marius Holm Rynning and Johan Fredrik Brende, Thommessen
through, for instance, a lock-up period for their shares. • Employee stock ownership plans (ESOPs) – venture capital companies often have an ESOPs in place, allowing founders and key employees to increase their ownership in the company. Such programmes can be option programmes or share purchase programmes. Vesting of options is often time-based, but can also be linked to the achievement of agreed key performance indicators. • Private equity-style management incentive programmes (MIPs) – some venture capital investors prefer a private equity-style MIP for the companies in which they invest. Such programmes are mostly appropriate for growth companies and not early-stage companies. 5.2 Securities The instruments/securities used for the purpose of incentivising founders/employees range from co-investments with or without vesting sched - ules and share option programmes to more complex structures providing substantial gear - ing to management’s investment and a differ - ent return profile, with the latter mostly used in growth companies. Share options are less tax-efficient than other forms of equity-based incentivisation and will normally be most relevant for management incentives in publicly listed companies and early phase VCs. Reference is made to 5.1 General regarding terms relating to such instruments. 5.3 Taxation of Instruments Management of the portfolio companies is gen - erally expected to co-invest alongside the fund. The extent of management’s investment typi -
cally varies based on their seniority and existing equity holdings that can be rolled. Investments by management are usually structured through a preference and ordinary shares structure. At the fund level, the investment team’s investments are typically equity-based and subject to certain limitations as outlined in the AIFM Act (see 2.2 Fund Economics ). Capital gains and dividends for management are principally fully taxable as capital income at an effective rate of 37.84% minus a risk-free return. However, if management invests through a personal holding vehicle, capital gains and dividends are principally exempt (0.66% tax on dividends). In comparison, employment income is taxed at a marginal rate of 47.4% and subject to national insurance contributions of 14.1%. 5.4 Implementation Normally, the key terms and structure (including size) of an employee incentive programme is one of the key terms that are negotiated with venture capital investors in a financing round. Such key terms are then set out in the investment agree - ment and/or shareholders’ agreement and, in most cases, left to the (new) board of directors to implement following completion of the financ - ing round. Rarely is the employee incentive pro - gramme observed as having any impact on the venture capital investment process as such.
6. Exits 6.1 Investor Exit Rights
In Norway, the shareholders’ rights in relation to a sale, IPO or other liquidity event, as well as transfer restrictions and exit triggers, are typi - cally governed by the company’s shareholders’ agreement. The exit-related provisions typically set out the exit triggers, how the exit process
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