Norwegian Limited and Public Limited Liability Companies Acts - Newsletter

The rules in the Limited and Public Limited Liability Companies Acts concerning notices and the arrangement of general meetings have changed on several points. The amendments to the act affect primarily listed limited liability companies, but several of the amendments also affect unlisted public limited liability companies and limited liability companies.

In addition to an extended notice period of 21 days and detailed requirements concerning information to the general meeting in the notice and on the company’s website for listed companies, several measures have been introduced to simplify the execution of general meetings and make them more accessible to the shareholders. In order to use several of the new measures, please note that the companies must actively and fully implement them through board resolutions, general meeting resolutions or amendments to the Articles of Association. A mandatory audit committee requirement has also been introduced for listed public limited liability companies.

New notice period for listed companies

The deadline for notices of general meetings for listed public limited liability companies has been extended to 21 days. Listed companies are defined as companies that are listed on Oslo Børs, Oslo Axess or another regulated market that is located in or has operations in the EEA area. There are a few exceptions, such as the allowance of a shorter notice period of two weeks for extraordinary general meetings if a resolution has been passed to this effect at the company’s last ordinary general meeting with the same majority that is required for an amendment of the articles of association and shareholders in the company can vote at general meetings electronically (see below). As far as we know, there are currently no standardised technical solutions for electronic voting at general meetings that meet the requirements of the law. It will most likely be impractical for companies to set up their own systems for electronic voting at general meetings, since there are requirements for adequate control of the participation/voting, including authentication of the sender, and these requirements will demand a lot of resources to fulfil. The practical possibility of being able to reduce the deadline for notices under this exemption must, therefore, be assumed to be limited for the time being, even if the company has adopted resolutions that allow this. Individual companies must evaluate whether they find it appropriate already at this point in time to routinely submit a proposal for a resolution that will allow a shorter notice deadline. As a consequence of the extended notice deadline, the deadline for when the auditor's report must be received by the board of directors has been set at 22 days prior to the general meeting. The notice deadline for unlisted public limited liability companies (two weeks) and limited liability companies (one week) has not been changed.


Requirements concerning information to be provided to the general meeting in the notice of the meeting and on the company’s website

The new rules contain extended requirements concerning what information must be included in the notice of the general meeting. In addition, there is a requirement that information must be made available on the company’s website from the date of the notice of the general meeting. For limited liability companies and unlisted public limited liability companies, the changes entail primarily a clarification of the current requirements for the notices. These companies are not required to publish information on the Internet either.
Statutory and regulatory provisions stipulate detailed content requirements for the notices and website for listed public limited liability companies.  For many listed companies a practical and suitable approach may be to formulate the notice so that it also meets the requirements as to what information is required on the website.  The latter requirement will be met then by publishing the notice on the company’s website, which is also an explicit requirement. Other information and documents that apply to the general meeting shall also be made available on the company’s website for shareholders in listed companies.

Publication of general meeting documents on the Internet

The changes will allow limited liability and public limited liability companies to make annual reports and other documents that are to be considered at the general meeting available on the company’s website instead of sending them to the shareholders. This must be stipulated in the company’s articles of association in advance in order for the company to be able to make use of this option. The company must still send the actual notice in a paper version to all the shareholders (or by electronic distribution to the shareholders who have expressly accepted this, through, for example, VPS Investor Services). The notice must state the Internet address and any other information the shareholders must have in order to gain access to the documents (such as a password). The company is obligated to send the general meeting documents free of charge to any shareholders who request them. When the notice for the next general meeting is to be sent, the companies should consider whether they should include a proposal to amend the articles of association to enable the use of such a procedure. Companies that feel it is highly desirable, on the basis, for example, of a cost perspective or to accentuate their environmental profile, not to send the general meeting documents for the general meetings in 2010 (or in connection with an earlier extraordinary general meeting) are free to call an extraordinary general meeting solely for the purpose of stipulating this option in the articles of association.


Voting prior to the general meeting

The new rules will allow shareholders in public limited liability companies to cast their votes in writing over a period of time prior to the general meeting, either electronically or by letter.  The scheme must be implemented by the individual company through stipulation in the articles of association in order to use it. In addition, secure means must be used to authenticate the sender. The ability to vote prior to the general meeting will be introduced as an additional option for the shareholder in addition to granting a proxy to representatives for the company or others in connection with the general meeting. The practical difference for the shareholder between voting in advance and granting a proxy in combination with voting instructions, which has been widely practiced to facilitate voting among listed companies in recent years, is probably somewhat limited. The Norwegian Central Securities Depository (VPS) is working on a system to facilitate voting in advance.


Participating at general meetings by means of electronic aids

The new rules will allow public limited liability companies to make arrangements for electronic participation at general meetings. As opposed to voting in advance, this type of participation only requires a board resolution in order for it to be permitted. The articles of association may, however, prevent the board of directors from adopting such a resolution or stipulating further requirements for electronic participation. Electronic participation may consist of real-time transmission of the general meeting (webcast etc.), real-time two-way communication (shareholders can ask questions etc.) or the shareholders being able to cast their votes “live” during the general meeting. The rules do not mean that the general meeting can be held entirely electronically.


Registration date for participation at the general meeting

With the new rules, public limited liability companies are allowed to stipulate in the articles of association that participation or voting at general meetings can only be exercised when the acquisition of shares has been entered in the register of shareholders on the fifth working day prior to the general meeting (registration date). With such a stipulation in the articles of association, the companies can obtain better control of participation at general meetings for shares that change ownership prior to the general meeting. Previously (and for companies that do not stipulate this in their articles of association) the rule has been that the shareholders who are listed in the register of shareholders on the day of the general meeting or can otherwise document their acquisition of shares can participate and vote at the general meeting. A consequence of introducing a registration date will be, provided the acquisition of shares is subject to the normal VPS settlement routines, the fact that shares cannot be voted for if they have been acquired during the last eight working days prior to the general meeting.  In the event of controversial general meeting votes, this will allow less time for shareholders to increase their ownership in the company, and this appears to be not so shareholder friendly.  In addition, there will be less time to register shares that are registered in a nominee account over to the underlying shareholder’s VPS account. For such shareholders, much of the advantage of having an extended notice deadline will thus be lost by the introduction of a registration date. Information on the registration date shall be included in the notice.


Shareholders’ right to have matters considered and put forward resolution proposals

Prior to the statutory amendments, shareholders in limited liability companies and public limited liability companies have been entitled to have matters considered by the general meeting if they were submitted in writing more than two weeks prior to the general meeting. After the amendments they must be submitted to the board of directors no later than seven days prior to the notice deadline for the general meeting. The request must also be accompanied by a resolution proposal or grounds for placing the item on the agenda. The deadline ensures that the companies are not pressed for time by the submission of proposals from shareholders just before the notice deadline.


Recording the voting results from general meetings

Both the Norwegian Limited and Public Limited Liability Companies Acts include requirements concerning how the voting results for general meeting resolutions shall be recorded in the minutes. For companies with one class of shares, we assume that the rules will be complied with if the number of votes cast, number of votes for, number of votes against and any blank votes are recorded for each item. For listed public limited liability companies, the voting results shall be published on the company’s website within 15 working days after the general meeting. This can be accomplished in practice by making the minutes available.


Audit committee

For public limited liability companies with securities listed in a regulated market there is a requirement that an audit committee must be established. The rules apply not only to companies that have listed shares, but also companies with listed bond issues. The audit committee rules apply from the ordinary general meeting in 2010.
The audit committee has a preparatory and advisory function in relation to the board of directors and is not an independent corporate body. It can, therefore, not make any decisions on behalf of the company. An audit committee is also required for other “public interest” companies. The text here is limited to public limited liability companies.

There is an exception for companies that can be classified as small companies based on statutory size criteria pursuant to the new rules, but, the board of directors is then supposed to carry out the duties that are ascribed to the audit committee by law. The requirements concerning the composition of the audit committee do, therefore, not apply. However, board chairmen who are also leading employees cannot participate in meetings when such duties are being carried out.

Companies that are not encompassed by the exception are allowed to stipulate that the board of directors shall function as an audit committee in the articles of association. As opposed to the exception cases, the company is regarded then as having an audit committee, and the board of directors must comply with the requirements that apply to the composition of the audit committee. For companies that would like to let the board of directors fill the audit committee role, it will be natural to prepare such an amendment of the articles of association at the ordinary general meeting in 2010.

The board of directors elects the audit committee from among the board members. The board members who are also leading employees in the company cannot be elected. The audit committee must have the qualifications that are required to perform the required duties based on the company’s organisation and operations. At least one member on the audit committee must be independent of the business and have accounting or auditing qualifications. There are formal qualification requirements in this context, but a specific assessment is to be made. The qualification requirements will vary dependent on the size and complexity of the business. The independence requirement entails that employee representatives on the board of directors cannot fill the role of the member with professional qualifications.

Since the audit committee must be elected from among the board members, the board of directors must be composed so that it is possible to put together an audit committee that meets the requirements among the board members. The board of directors or the nomination committee should therefore evaluate whether there is a need to change the composition of the board of directors in light of this prior to the ordinary general meeting in 2010. When nominating candidates for the board of directors who are intended to fill the independent expert role on the audit committee, then these qualifications should be explained in particular when recommending the candidate to the general meeting.

Audit committee’s duties are to (i) prepare the board of directors’ follow-up of the financial reporting process,
(ii) monitor the internal control and risk management systems (and possibly internal auditing), (iii) have continuous contact with the company’s auditor concerning the auditing of the annual accounts and (iv) evaluate and monitor the independence of the auditor. For companies that are required to have an audit committee (i.e. those that are not encompassed by the exception for small companies), a statement from the audit committee shall be presented to the general meeting prior to the election of a new auditor. In this connection it can be mentioned that rules have also been introduced prescribing that a replacement of the auditor decided on by the company prior to the expiry of the auditor’s term (by means of an extraordinary general meeting) shall be reported to the Financial Supervisory Authority of Norway and grounds shall be given for the decision. The same applies if the auditor resigns his commission outside the ordinary general meeting. In the aforementioned situation, the company can only relieve the auditor of his duties if there is a valid reason for doing so.

For more information, contact Tone Østensen, Sverre Sandvik or Simen Mejlænder




Date: 11/2/2009