We are often asked how the company and the investment banks can follow these rules, and ensure that the investment banks receive the required protection.
The most common solution is for the private limited company to be converted into a public limited company. In that case, the converted private limited company falls under the exemption in the Public Limited Liability Companies Act. This is a fairly simple process, but it should be started in time so as not to delay the listing process. Formally, the conversion is adopted by the private limited company's general meeting, following a proposal from the board.
If a private limited company is to be converted into a public limited company, it should be aware of a number of differences between the two company types. A public limited company must have at least NOK 1 million in share capital, and in connection with the conversion, a statement and auditor's confirmation must be prepared confirming that the company has coverage for the company's registered share capital. We sometimes see that companies that have had significant development costs have to adjust the company's share capital to meet this requirement. Furthermore, the company's shares must be registered in a securities register, which is not the case for a private limited company. This last requirement can take several weeks to get in place, and can sometimes be a practical challenge for companies with a dispersed, international shareholder structure. The requirement must in any case be met before listing, but if the purpose of the conversion is to be able to provide a guarantee to the investment banks, this means that the registration must take place early on in the process. For companies that intend to apply for listing it is also worth noting that all its shareholders must also have Norwegian securities register (VPS) accounts. If the company has a wide-spread shareholder structure, or international shareholders, this is also something that can take time to facilitate in part because of internal approval requirements within each shareholder and in part for KYC reasons.
A public limited company must also have at least three board members, and the general manager cannot be a member of the board. A public limited company must have a general manager. Furthermore, there are requirements for gender balance among the board members of a public limited company, and there are a number of other administrative requirements. A public limited company must, for example, convene a general meeting with 21 days' notice if the company's shares are listed, and 14 days' notice if the company's shares are not listed, compared to a seven day notice requirement for non-listed private limited liability companies. A public limited liability company will also not have access to certain simplified administrative rules that apply to private limited companies. An important difference in practical terms is also that a public limited company will be regarded as a large company for accounting purposes, and therefore may have to change its accounting practices.
On the other hand, a public limited company, in contrast to a private limited company, will be able to carry out public offerings. The company also retains its name unless the general meeting decides otherwise (other than the suffix AS being changed to ASA), and it also retains its original company registration number.