NORWAY Trends and Developments Contributed by: Nicolai Julsvoll, Øyvind Mork Karlsen and Jørn Hove, Thommessen
will result in a significant increase in transactions to which the FDI regime is applicable, but most venture capital investments are unlikely to be subject to FDI regulations. Investment methods Investment methods in Norway’s venture capital market are varied and adaptable to the needs of both investors and companies, but remain gen - erally stable. Preference shares (often favoured for their favourable terms) and convertible instru - ments (popular as bridge financing tools) are among the common investment methods. The emergence of the SLIP agreement illustrates the market’s adaptability and represents an increas - ing trend in recent years. Private limited liability companies As mentioned initially, Norwegian start-ups and early-middle-stage companies are almost exclusively private limited liability companies, governed by the Companies Act. Investors nor - mally use special purpose vehicles incorporated as private limited liability companies, owned by holding companies that may or may not be part of a fund structure. Venture capitalists and pri - vate equity funds may also use entities in fund jurisdictions (eg, Guernsey or Luxembourg) to invest directly. As the Norwegian market becomes more attractive for foreign investors, an increase in foreign investment vehicles is expected. Other than share capital and the regulation of any share classes, there are few relevant statuto - ry requirements to a company’s articles of asso - ciation, allowing shareholders great flexibility to regulate corporate governance and sharehold - ers’ rights in a shareholders’ agreement. General shareholder rights are set out in the Companies Act.
Preference shares Investors normally invest in early-stage compa - nies by acquiring preference shares, as opposed to common shares. However, note that invest - ments in common shares only also are fairly common, especially in earlier financing rounds. The Companies Act allows for separate share classes with different rights if regulated in the company’s articles of association. Preference shares generally have rights that are more advantageous than common shares, such as liquidation, anti-dilution and distribution prefer - ences. Venture capitalists and larger investors will typically demand preference shares when negotiating investment terms. Use of convertible securities and instruments In the current market, convertible loans are sometimes used as bridge financing between financing rounds – for example, if companies want to raise funds while postponing major rounds. Convertible loans are also sometimes used as a means of financing in their own right (eg, owing to generally lower interest rates than regular loans). More common than ordinary “convertible loans” is the use of the aforementioned SLIP agreement (developed by incubator Start-upLab). The SLIP agreement is often used in angel investments and seed rounds and is normally converted in later financing rounds. The investment provides the investor the right to subscribe for shares at minimum (nominal) cost in a future financing round. The right to subscribe for shares is nor - mally triggered either: • by an equity financing round of a pre-deter - mined amount; • by a corporate transaction of a predetermined size (eg, an acquisition or a merger) or
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