Member Article

With ‘financial assistance’ in this context, we refer to assistance granted by a company in connection with the purchase of the shares in that company or its parent company. The most common example is that a company grants a guarantee or security in connection with the purchaser’s financing of the purchase price for the acquisition of shares in the company.

Norwegian law has traditionally been reluctant to accept such financial assistance on the grounds that this may transfer values from the company to the purchaser to the detriment of the company’s other stakeholders.

As from 2020, the Norwegian legislator has introduced a new exception to the prohibition against such financial assistance whereby a Norwegian private limited company is permitted to grant financial assistance if:

• the financial assistance is granted on customary business terms and principles (i.e. on arm’s length terms);
• the purchaser is domiciled in an EEA member state; and
• the company and the purchaser are, or will become, part of the same group of companies.
  
  

This exception is, however, subject to a comprehensive whitewash procedure, which includes resolutions from both the company’s board of directors and shareholders. It is also required that the relevant board members conduct a credit appraisal of the party benefitting from the company’s financial assistance (to assess the risk in connection with the financial assistance) and register a statement and declaration with the Norwegian Register of Business Enterprises. Such statement and declaration shall, amongst other things, include:

• an assessment of the company’s interest in granting the financial assistance;
• an assessment of the consequences that the financial assistance will have for the company’s equity and liquidity;
• a declaration that it is in the company’s (sole) interest to grant the financial assistance; and
• a declaration that the company will comply with the statutory requirements for minimum equity and liquidity.
  
  

This new exception is wide-ranging but is only applicable if the board members actually can vouch for the financial assistance being in the best interest of the company. This is in principle a case-by-case evaluation and not always a straightforward assessment. The board members will also need to assess whether the company should require any consideration or security for doing this. If the board members cannot make the required confirmations, the company will not be able to validly grant any financial assistance under this exception.

Please note that, dependent on the facts of the transaction in question, also other legal restrictions and required procedures may apply to financial assistance and agreements between related companies in Norway.

We are closely following the practice developing for this new exception and continue to provide support and guidance to purchasers, board members and lenders on an ongoing basis. Please contact us should you have any questions or need any other assistance related to financial assistance.