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Doing business in norway

2 Doing Business in Norway

1 GENERAL INFORMATION .............................................................................................. 4 1.1 Legal system .......................................................................................................... 4 1.2 Monetary system .................................................................................................. 5 1.3 Financial incentives ............................................................................................... 5 1.4 Starting a business................................................................................................ 5

2 BUSINESS ENTITIES ....................................................................................................... 6 2.1 General................................................................................................................... 6 2.2 Limited Liability Companies .................................................................................. 6 2.2.1 Overview ................................................................................................... 6 2.2.2 Shareholders and Share Capital............................................................... 6 2.2.3 Board of Directors and Managing Director ............................................. 7 2.3 Branch of Foreign Company ................................................................................. 8 2.4 Financial reporting and auditing requirements .................................................... 8 2.5 Piercing of the corporate veil ............................................................................... 9

3 EMPLOYMENT ................................................................................................................ 10 3.1 Overview ............................................................................................................... 10 3.2 Working hours and holiday entitlement ............................................................... 10 3.3 Sickness benefit .................................................................................................... 11 3.4 Parental leave ........................................................................................................ 11 3.5 Termination of employment .................................................................................. 11 3.6 Loyalty 12 3.7 Occupational safety and health ........................................................................... 12

4 TAXATION ................................................................................................................... 12 4.1 Overview ............................................................................................................... 12 4.2 Tax treaties ............................................................................................................ 13 4.3 Exemptions for Capital Gains and Dividends....................................................... 14

5 ACQUISITIONS................................................................................................................. 15 5.1 General................................................................................................................... 15 5.2 Competition law .................................................................................................... 15

6 MIGRATION ................................................................................................................... 16

7 INTELLECTUAL PROPERTY RIGHTS ............................................................................ 16

8 PRODUCT LIABILITY ....................................................................................................... 16

9 DISPUTE RESOLUTION .................................................................................................. 18 9.1 Court system ......................................................................................................... 18 9.2 Arbitration .............................................................................................................. 18

Contents

Doing Business in Norway 3


1 GENERAL INFORMATION

1.1 LEGAL SYSTEM The Norwegian legal system is based on civil law, i.e. statutory law supplemented by case law.

Although not a member of the EU, Norway has been a party to the Agree-ment on the European Economic Area (EEA) since 24 June 1994. While EEA

member states are not directly bound by EU regulations, they are required to implement all regulations within the scope of the EEA through incorporation.

Norway also adheres to a number of international treaties and conventions, including the 1980 UN Convention on the International Sale of Goods (CISG), as well as the 1958 New York Convention and the 2007 Lugano Convention. In order to be


enforceable in Norway, international agreements need to be incorporated into Norwegian national law.

1.2 MONETARY SYSTEM The currency in Norway is the Norwegian krone (NOK), in plural called kroner. 1 Euro is approximately equal to 7.7 NOK and 1 US Dollar is approximately equal to 5,9 NOK (April 2013). The only exchange control requirement is a reporting requirement for international payments and financial transactions. Such reporting is generally taken care of by the transaction bank.

1.3 FINANCIAL INCENTIvES There are no special incentives for foreign investors. However, the general incentives for Norwegian industry apply to both national and foreign investments.

The Norwegian state and the municipaliti-es control a wide range of different economic incentives. In general, the incentives are primarily for scarcely populated districts and economically weak areas.

The state incentives are administered by Innovation Norway and the counties. The purpose of Innovation Norway is to encourage and promote potentially profitable businesses. Innovation Norway may offer loans, guarantees and equity capital. The aggregate total assets of the fund exceed NOK 23,400 million. The most important incentives are contributi-

ons to projects in special districts.

1.4 STARTING A BUSINESS Starting up a business in Norway is a relatively simple process. Local and central government in Norway widely encourage foreign investments. Altinn.no, which is a part of the Norwegian Brønnøysund Register Centre, provides general informa-tion related to how to start up a business in Norway. It is not necessary to have a Norwegian partner to start up. No operating licenses are required to conduct business in Norway, with a few exceptions for specific areas such as insurance, banking and financial services. However, investors approved by EU countries may benefit from mutual recognition of such licenses.

2 BUSINESS ENTITIES 2.1 GENERAL There are many different business entities in Norway; limited liability companies, branch of a foreign company, trading partnership, limited partnership and several others. The most common choices for foreign companies intending to do business in Norway, are setting up limited liability companies or doing business through a Norwegian branch of the foreign company.


2.2 LIMITED LIABILITY COMPANIES

2.2.1 OvERvIEW There are two main categories of limited liability companies, private (No: aksjesel-skap or AS) and public (No: allmennaksje-selskap or ASA). The primary difference between the two categories is related to the right to turn to the public for capital; only public companies can issue shares or other securities intended for trade on a stock exchange or other regulated market places. The business activities must be in accordance with the Limited Liability Companies Acts (No: aksjeloven and allmennaksjeloven) and the adopted articles of association (No: vedtekter).

In a limited liability company, the sharehol-ders are as the main rule not personally liable for the obligations of the company, and the corporate veil is not easily pierced under Norwegian law. To form a legal entity, the limited liability company must be registered in the Register of Business Enterprises (No: foretaksregisteret). The company name must contain the word “aksjeselskap” or the abbreviation “AS”. A public company’s name must contain the word “allmennaksjeselskap” or the abbreviation “ASA”. The company name must not be such that it may be confused with an existing company or trademark. The Limited Liability Companies Acts also list certain requirements to the articles of association; i.a. must the company’s registered office be specified.

2.2.2 SHAREHOLDERS AND SHARE CAPITAL There are no restrictions regarding nationality with regards to the sharehol-ders. Nor are there restrictions concerning the total number of shares in the compa-ny.

The share capital must be at least NOK 30,000 in a private limited liability company and at least NOK 1,000,000 in a public limited liability company. All shares carry equal rights unless otherwise stated in the articles of association, which may prescri-be two or more classes of shares. The various classes of shares may give the shareholders holding shares of different classes different voting rights or different rights to the assets or profits in the company. The face value of the shares may on the other side not differ between the share classes.

The shareholders’ rights are exercised at the Shareholders’ general meeting (No: Generalforsamlingen). Decisions are generally made by simple majority, although certain resolutions require a qualified majority.

2.2.3 BOARD OF DIRECTORS AND MANAGING DIRECTOR The board’s formal responsibilities and liabilities are regulated in the Limited Liability Companies Act, as well as in formal guidelines such as the Norwegian Code of Practice for Corporate Governan-


ce. The board shall manage the company’s affairs in the best interest of the company and its shareholders. The board’s responsi-bilities include all such activities that do not require approval by the shareholders’ general meeting; both long-term decisions concerning policy, strategic planning and short-term decisions concerning the day to day management. The board may delegate tasks to individuals outside the board, such as a CEO. However, the overall liability resides with the board.

The board of directors must consist of at least three board members; or if the company is a public limited liability

company with more than 200 employees, the board must have at least five mem-bers. Both public and private limited liability companies are required to have a managing director (No: daglig leder). The managing director and at least half of the members of the board, must reside in Norway, or another EEA country. The Ministry of Justice may grant exemptions from this rule. In public limited liability companies there are sex quota rules, which require that both sexes are repre-sented in the board. The managing director may not be the chairman of the board at the same time as holding the position of managing director.


In small private limited liability companies there are a few exceptions to the rules above: Companies with a share capital of less than NOK 3 million are allowed to have less than three members of the board. Furthermore, such small companies are not required to have a managing director, and if they do have a managing director, the position may be held by the chairman of the board.

The Limited Liability Companies Acts prescribe minutes for all board meetings, which shall provide a clear representation of matters discussed and the decisions taken.

There are statutory requirements on employee representation in the board. The provisions apply to all companies with 30 or more employees, but the requirements vary in extent depending on the number of employees, as well as other factors.

2.3 BRANCH OF FOREIGN COMPANY A foreign company wishing to establish business in Norway without setting up a Norwegian company, may conduct its business activities through a Norwegian branch (No: Norskregistrert utenlandsk foretak or NUF). The branch is not considered to be a legal entity of its own, but instead a divisional office of the foreign-based company. The foreign main company is thus responsible for the duties and obligations of its Norwegian branch. This is an important difference between

doing business in Norway through a branch, and a limited liability company.

Foreign companies intending to do business in Norway through a branch, must register with the Register of Business Enterprises. The Norwegian branch is not required to use the same company name as its foreign-based main office. The name used in Norway must however not be suited to mislead custo-mers. The branch has to keep its own accounting records separate from the foreign-based company even though the assets and liabilities of the branch are a part of the foreign-based company’s total assets. The branch is subject to Norwegi-an law and has to follow decisions made by Norwegian courts and/or administrative bodies relevant for the enterprise.

2.4 FINANCIAL REPORTING AND AUDITING REQUIREMENTS Limited liability companies and branches of foreign companies, as well as most other business entities in Norway, have to maintain accounting records under the Bookkeeping Act (No: Regnskapsloven) and are required by this act to adhere to generally accepted accounting principles. Although there are some exceptions for small companies, most companies are required to have their financial statements audited by an auditor authorised by the Financial Supervisory Authority of Norway.


2.5 PIERCING OF THE CORPORATE vEIL As said above, shareholders and parent companies of limited liability companies are generally not liable for the debts and liabilities of its subsidiaries. The Supreme Court of Norway has nevertheless expressed that there might be exceptions if faced with extraordinary cases.

3 EMPLOYMENT

3.1 OvERvIEW The Norwegian labour market is regulated by both legislation and through collective bargaining agreements (No: tariffavtale). Trade unions traditionally hold a powerful position in Norway. In addition to the basic terms for employment as set out in the


Norwegian Act relating to working environment, working hours and employ-ment protection (No: Arbeidsmiljøloven) and collective agreements, every employer must provide their employees with an individual employment agreement contai-ning the key terms of employment.

3.2 WORKING HOURS AND HOLIDAY ENTITLEMENT Ordinary working hours for full time employees are usually limited to 40 hours per week, excluding lunch. There are, however, a number of collective agree-ments which specify a shorter normal working week for particular types of work. Normal working hours may, under special circumstances, exceed 40 hours a week,

as long as the average does not exceed 13 hours a day or 48 hours per any 7 days. The provisions on working hours do not apply to employees in senior posts or particularly independent posts.All employees are entitled to a minimum of 25 days paid annual vacation in addition to public holidays. Employees above the age of 60 are granted 6 additional vacation days per year.

3.3 SICKNESS BENEFIT Employers must pay sickness benefit during the first 16 days of each period of an employee’s sick leave. The sickness benefit amounts to 100 % of the salary. After this period, the Norwegian National Insurance (No: Folketrygden) is responsi-


ble for sickness benefit. The state funded sick compensation is capped at approxi-mately NOK 500,000 (April 2013). A collective bargaining agreement may determine that the employer has to provide for additional compensation.

3.4 PARENTAL LEAvE Parental leave is a legal right for all parents (regardless of gender) in Norway, and all employers are obliged by law to give a parent time off. From 1 July 2013, parental leave may be fully paid by the Norwegian National Insurance for a maximum of 49 weeks (or maximum 59 weeks of 80 % pay). Parental leave may be freely distribu-ted among the parents, except that 14 weeks are reserved for each parent and that the first 9 weeks of the leave is reser-ved for the mother. The compensation is capped at approximately NOK 500,000.

The employer may pay additional compen-sation to cover the gap between the ordinary salary and the maximum compen-sation paid by the Norwegian National Insurance. Parents of children up to twelve years of age, and sometimes for children up to eighteen, can also get state compensation when they need to take time off work to look after a sick child.

3.5 TERMINATION OF EMPLOYMENT According to the Norwegian Labour Act, employer’s termination of an employment contract must be based on justifiable basis. Termination grounds must relate to

the operation of the business or the employee, for example redundancy, serious misconduct or disloyalty.

Prior to any action to dismiss an employee, the employer must discuss the matter with the employee and the employee’s elected representatives. The statutory period of notice of termination varies between one and six months, depending on the duration of the employment and the age of the employer. The periods of notice may not be set aside by the parties in collective or other agreements conclu-ded prior to notice being given. Further, the notice of dismissal must meet certain formal requirements. Summary dismissal is only possible if an employee has grossly neglected its duties towards the employer.

The principles regarding dismissal do not apply to the chief executive officer if he or she has in a prior agreement waived such rights in exchange for compensation on termination of employment.

3.6 LOYALTY Employees have a far-reaching obligation to be loyal to their employers. The concept of employment loyalty covers an array of different obligations such as obligations for the employee to put the interests of the employer ahead of personal interests and to avoid situations entailing a collision of interests. An employee must not act in such a way as to harm the employer, must observe confidentiality and must refrain


from competition during their terms of employment.

3.7 OCCUPATIONAL SAFETY AND HEALTH The Norwegian Labour Act (No: Arbeids-miljøloven) requires the employer and the employees to cooperate to create a satisfactory work environment. Every work place must have routines on risk assess-ment, accident and emergency plans, as well as action plans for such deficiencies and health risks that cannot be eliminated immediately. Such routines shall apply with regards to not only physical but also mental and social well-being.

The safety officer (No: verneombud) is the employee representative with regards to occupational safety and health, and is required in every work place with at least ten employees. The safety officer can call for action whenever he recognizes a health risk. However, there are no direct responsibilities belayed on the safety officer. Asafety committee shall be appointed in every work place with at least fifty employers.

4 TAXATION

4.1 OvERvIEW A resident limited liability company is liable to income tax on worldwide profits, with the exemption of income from foreign real estate or from a foreign branch (which is

usually exempt under a tax treaty with the relevant foreign country). A company is considered resident in Norway when it is incorporated in Norway, or, regardless of where the company is incorporated, when the effective centre of its management is located in Norway.

A non-resident company is liable to pay income tax on profits attributable to the activity of Norwegian permanent establis-hment (as such term is defined in the text treaties), on income from real estate in Norway, and on capital gains on disposal of certain kinds of non-business assets provided these are located in Norway.

The tax rate is generally 28% on income from all sources other than the income deriving from shares in Norwegian and EEA resident companies. Thus, the tax rate of 28% also applies to interest, royalties, and service fees.

The employer must also pay a social security contribution varying from 0 to 14.1 % according to regional differentiation (2013). Employer contributions are based on paid wages and benefits to its employ-ees. Most employers must further contribute with a minimum of 2 % of the salary funds to the mandatory Occupatio-nal Pension Scheme.

4.2 TAX TREATIESNorway has entered into double-tax treaties with most countries. In general,


the Norwegian taxation system provides for double-tax relief for taxes paid by a resident company in territories outside Norway with which Norway has dou-ble-taxation treaties. Tax paid in territories not covered by such a treaty are, under

certain conditions, deductible from the Norwegian tax imposed on worldwide profits. However, deduction for foreign income tax is limited to the calculated Norwegian tax on income which has been taxed abroad.


4.3 EXEMPTIONS FOR CAPITAL GAINS AND DIvIDENDS Income deriving from shares, both capital gains and dividends, is to a large extent exempt from Norwegian tax. Correspon-dingly, losses and costs regarding such income are not deductible for tax purpo-ses. However, current costs regarding such income are deductible, and they can be deducted at once.

From 1 January 2012, three per. cent of dividends on shares is regarded as taxable income at a rate of 28%, making effective taxation on dividends only 0.84 per. cent. Share capital gains are still fully tax free. The exemption model applies to income and loss from shares in companies that are resident in Norway or the EEA. Income and loss from shares in companies resident in countries outside the EEA are also

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5 ACQUISITIONS

5.1 GENERAL Acquisitions of unlisted companies are not governed by any specific rules save for the general rules in the Limited Liability Act (No: Aksjeloven). Specific provisions may, however, be prescribed in the articles of association, or in a shareholders’ agree-ment (No: Aksjonæravtale). Acquiring shares or the assets of a private company is not governed by any requirements, but may be regulated in the articles of associa-tion in each company. It is though customary to have a written agreement and the transfer has to be registered in the target company’s share register.

Listed companies are obliged to reveal essential information, and important decisions and events have to be publically announced. The Oslo Stock Exchange has established extensive regulations that app-ly to all listed companies.

5.2 COMPETITION LAWConcentrations between undertakings, e.g. mergers, acquisitions and other transactions whereby lasting control of an undertaking is transferred, are subject to a notification obligation to the the Norwegi-

an Competition Authority (No: Konkurran-setilsynet) if certain turnover thresholds are met. The notification should be submitted by way of a standardized notification. The notification shall be made by the party or parties acquiring control. In case of mergers, the obligation to notify normally rests with the merging parties jointly.

There is no deadline for notifying concen-trations to the Norwegian Competition Authority, provided that the parties have not started to implement the concentrati-on. Implementation of the concentration is prohibited until the Norwegian Competiti-on Authority has processed the case. A concentration having an EEA or EU dimension, i.e. that meets the thresholds set out in the EC Merger Regulation and/or the merger rules of the EEA agreement, is not covered by the obligation to notify under the Norwegian Competition Act.

6 MIGRATION

A non-EEA citizen who wishes to reside in Norway, must apply for a residence permit. Persons who have dominating influence over the company through ownership or otherwise, is eligible to apply for a residence for the self-employed. Other employees must apply for a regular work permit.

The application for the residence permit


and the working permit is made at a Norwegian Embassy or consulate in the applicant’s country of origin or country of domicile. In China this may be done at the Norwegian Embassy in Beijing, or the Norwegian consulate general in Shanghai. The processing time for residence permits that also allow the applicant to work in Norway is normally two months. If the applicant desires to bring his or her family to Norway, the processing time is normally three months.

The application procedure for work permits may vary for different positions and type of work, but the applicant is required to provide evidence of employ-ment contract or alternatively a job offer. The applications fees are (per 2013): residence/work permit NOK 3,000; residence permits for groups NOK 1,100 per employee, permits for accompanying adults NOK 3,750.

7 INTELLECTUAL PROPERTY RIGHTS

There are a set of different statutes that regulate intellectual property rights. Patents, copyrights, trademarks and designs are all governed by specific laws. Registration is requ-ired to enjoy protection for most IPR’s. The terms of the protection vary from five years to indefinite. Norway adheres to several different international conventions concerning IPR’s.

8 PRODUCT LIABILITY

Product liability is governed by the Product Liability Act (No: Produktansvars-loven). The Act imposes strict liability for defective products on the seller, the importer or the manufacturer depending on the situation. Liability applies to personal injuries as well as damages to personal property caused by a defective product. The manufacturer may also be held liable for damages in general tort and contract law.

Under the Product Control Act (No: Produktkontrolloven) the seller, importer and manufacturer of products are subject to certain duties. The Product Control Act also allows the public authorities to restrict or prohibit marketing and sales of services and products due to safety reasons.

9 DISPUTE RESOLUTION

9.1 COURT SYSTEMThe courts in Norway have jurisdiction in both civil and criminal cases. There are also specialized administrative organs which handle legal conflicts in special areas such as welfare and consumer law. Each court system is divided into three levels, the District Court, the Court of Appeals, and the Supreme Court.

In addition to the regular courts, Norway


also has a system of Conciliation Boards (No: Forliksråd), which handle smaller cases. Many of the smaller cases may not be brought before the ordinary courts before a hearing has taken place before

the Conciliation Board.

Norway is a signatory to the 2007 Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and

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Commercial Matters. Consequently, judgements from other signatories of the 2007 Lugano Convention may be enforced in Norway regardless of where the proceedings took place (and vice versa).

9.2 ARBITRATION Arbitration in Norway is mainly governed by the Norwegian Arbitration Act (No: voldgiftsloven). An arbitration award is considered to be final; it is not subject to substantive review. However, serious procedural errors or public policy grounds may be basis for challenging the award.

Norway is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Consequently, arbitration awards from other signatories of the 1958 New York Convention may be enforced in Norway regardless of where the proceedings took place (and vice versa).

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