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Newsletter - proposal for several legislative amendments in relation to implementation of EU - directive/828

The Norwegian Ministry of Trade, Industry and Fisheries has released a proposal for several legislative amendments in order to implement EU-directive 2017/828. The most important part of the proposal is a significant liberalization of the Norwegian financial assistance rules that have constrained acquisition financing. The Ministry also proposes simplify the procedure for approving certain related party transactions as well as measures aimed at increasing transparency and shareholder rights in public limited liability companies.

Financial assistance:

Paragraph 8-10 of the Norwegian Private Limited Liability Companies Act and Norwegian Public Limited Liability Companies Act regulates when a company may finance third parties' acquisition of shares in the company. Under the current legislation, such credit or security can only be granted to a third party acquirer if the credit or security is within the dividend capacity (retained earnings) and sufficient security is provided.  The Ministry now proposes the following amendments to paragraph 8-10:

Related party transactions:

Paragraph 3-8 of the Norwegian Private Limited Liability Companies Act and Norwegian Public Limited Liability Companies Act regulates under which conditions an agreement between the company and a shareholder, a shareholder`s parent company, a director or the general manager is binding for the company i.e. valid. 

Today, one requirement for the agreement to be binding is that the agreement must be approved by the general meeting if the company’s performance under the agreement exceeds one tenth of the company`s real value (for Private Limited Liability Companies) or if the company`s performance under the agreement exceeds one twentieth of the share capital (for Public Limited Liability Companies). The ministry proposes the following amendments (for both Private and Public Limited Liability Companies):

Transparency and shareholder rights in public limited liability companies

The Ministry proposes a set of new measures to increase transparency and facilitate the exercise of shareholder rights in public limited liability companies, such as:

The Ministry has found that the rules regarding accessibility of the shareholders identity, and rules regarding exercise of shareholder rights, in EU-directive 2017/828 is in conformity with the already existing Norwegian internal laws. Therefore, the ministry proposed no amendments to these rules.  

The public consultation period ends on 14 March 2019, and a legislative proposal is expected to be presented to the parliament in the second half of 2019.  Any legislative amendments will likely not be effective until 1 January 2020, at the earliest.

 

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