Norway operates with several different types of legal entities. The kind most commonly used in corporate law is companies, but all the different entities have their unique properties which make them applicable in different situations.
Companies: Norway doesn’t have a legal definition of a company. This is because company law deals with a lot of sub-entities which differ greatly. This isn’t a problem in reality as we don’t need a sharply defined definition for what a company is. The main characteristic of a company that differentiates it from other legal entities is that participants are owners of the company - which is a business -, making them entitled to any benefits that come from traditional ownership like making decisions and collecting any profit.
Foundation: A foundation is a legal entity which governs an asset that has been allocated to a certain purpose. It is usually established through a testament or a similar situation, and the purpose is often humanitarian, but it doesn’t have to be. A foundation is self-owned, meaning the participants have no entitlements from the foundation. This - the ownership of the asset - is the main difference between a company and a foundation.
Union: A union is a voluntary association of people who enter into an agreement to accomplish a purpose. This can be both economic and non-economic. A union is self-owned, meaning there are no ownership claims to profits etc. As in the case of a company, the members can, however, agree to pay out any profits. The key difference between a foundation and a union is that a union has members that can influence the purpose of the union, while the foundation has its purpose firmly established when it’s created. As such, a union is a democratic entity, while a foundation is not.
Cooperatives: Cooperatives are a form of partnership with limited liability, in a way similar to some companies. Cooperatives are economic entities that are responsible for promoting their members’ interests. Anyone who can have their economic interests governed by a cooperative, has the right to join the cooperative. While a cooperative is an economic entity, it cannot freely pay out any profits to its members. If it could, then it would in reality be a company, and would be forced to organize itself as a company. Instead, the members get discounts on their dealings with the cooperative, making it profitable for a person to be a member and buying from the cooperative.
Joint ownership: A joint ownership refers to when two or more parties own something together, like a property for instance. The parties all have ownership claims regarding the asset and they are also equally liable. The key difference between joint ownership and a company is that a joint ownership at its core isn’t a business, although it can be. If it is, then it might be regarded as a company instead.
Norway has several different types of companies. The different types of companies are roughly divided into two types, liable companies and limited liability companies. Within each of these groups the different companies are governed by the same set of laws, making them similar in many ways. There are, however, many detailed differences regarding company law and tax law. None of the companies can be said to be used more often, as they all fit their own unique role.
Liable company: A liable company, abbreviated ‘ANS’, is the default company in Norway. If no other type of company has been specified, it is regarded as a liable company. For a company of this type to be established, it needs to be a business with at least two or more owners. The owners are responsible for any debt the company accrues. They may, however, specify what percentage of any debt each of the owners are responsible for, in which case it would be referred to as a ‘DA’ instead of an ANS.
An ANS is formed on the basis of a partnership agreement between all the owners, which regulates all the key aspects of the company. It requires no starting investment capital from the founders, and they are not required to contribute anything to the company unless it is specified in the partnership agreement.
The company is managed by the owners collectively in a partnership assembly. A manager or a board can be appointed to run the business. Unless it is specified in the partnership agreement, shares in the business cannot be sold unless it’s approved by all the other owners. An owner can instead demand that the other owner buys out his shares.
An ANS is usually used by smaller, low risk businesses that need a company.
Sole proprietorship: While an ANS requires two or more owners, a single person may establish a sole proprietorship, referred to as ‘ENK’. As with ANS, this person has unlimited liability for any debts. While ENKs aren’t legally considered to be companies, and are not legal entities, they are commonly used in businesses by contract workers etc.
Limited liability company: In a limited liability company, referred to as ‘AS’, the owners’ liability is limited to the funds and assets in the company. An AS requires a starting capital of 30.000 NOK, roughly 3.500 EUR. It can be established by a sole person or by a group of people, and is done so by drawing up a founding document, which among other things, contains the company’s by-laws. The owners are issued shares that denote their interest in the company.
The annual general meeting is the highest governing body in an AS. Every AS is required to have a board of directors, and an AS with a share capital of 3.000.000 NOK or more is required to have a general manager as well.
Shares may be sold if nothing else is written in the company’s by-laws. Acquisitions of shares are subject to approval of the other shareholders. The other shareholders have the right of first refusal to these shares.
An AS is often used in businesses with economically risky ventures.
Public limited company: A public limited company, ASA, is a lot like a limited liability company. ASAs are meant for larger companies than ASs. These are usually the kind of companies that are noted on the stock exchange. For this presentation, the only noteworthy differences are that ASAs require a starting capital of 1.000.000 NOK, and shares in an ASA may be traded freely and without interference from other stockholders.
Limited partnership: Limited partnerships are a hybrid company model where at least one owner has unlimited liability and at least one owner has limited liability. It’s legally treated much the same as an ANS.
Norway doesn’t differentiate between limited liability companies and stock companies. They both use the AS / ASA-company model.To merge two companies of this type, the companies need to agree to a merger. They then need to form a merger plan, notify the public registry, and all of their creditors.
A Norwegian AS / ASA can only merge with a foreign company that belongs to the European Economic Area (EEA) if it’s considered comparable to a AS / ASA under its national laws.
Appointing a new director and modifying the By-laws can be done by the annual general meeting. An extraordinary general meeting may be held if shareholders who between them hold at least 10% of the share capital demand it.
Appointing a new director only needs a majority of votes from the shareholders represented at the meeting.
To modify the By-laws, a two thirds majority is required.
A company is managed by a board, which can have one or any number of members.
The director(s) all have full authority and can also empower others with this authority.
All companies are required to have a board that directly manages the company on behalf of the shareholders. Companies may choose to have a two-tier system. Any AS / ASA with more than 200 employees are required to have a form of secondary board with representatives from both the shareholders and the employees. This secondary board has some influence on the company. It elects the board members and approves their salary. It also approves dividends and approves any major investments or decisions that will affect the work force. It also has the right to comment on any issues regarding the company.
Liquidating a company may be decided by the shareholders with a two thirds majority, or it may be liquidated by the courts in some instances if a shareholder demands it.
This information was compiled by Advokathuset Liljedahl DA.