New rules on the conversion, merger and demerger of companies across national borders

The consultation period for the Ministry’s proposal expires on 30 September 2026. Thereafter, the Ministry must draft a bill for consideration by the Storting and seek constitutional consent for the transposition of the Directive into Norwegian law. The directive has already been incorporated into the EEA Agreement. The new legislative provisions are therefore unlikely to come into force before 1 July 2027 at the earliest.

Neither the directive nor the consultation paper covers issues relating to securities law, financial regulation or tax law. It therefore remains to be seen, amongst other things, whether the new possibility of cross-border conversion will make it possible to transfer the listing to a regulated market in another EEA state without meeting admission/prospectus requirements, whether companies with a Norwegian concession can apply for a concession in another country prior to conversion as part of redomiciliation without establishing a subsidiary, as is currently the case, and whether conversion can be carried out with tax continuity equivalent to that of a demerger or merger. With regard to the latter, the consultation paper points out that Norwegian tax rules must comply with the EEA Agreement’s rules on the four freedoms, and that differential treatment of companies in comparable situations may constitute discrimination; furthermore, the Ministry of Finance will assess whether there is a need to adapt the tax rules as a result of the changes proposed in the consultation paper. We assume that this will mean that cross-border conversions can also be carried out with tax continuity, but subject to conditions designed to prevent abuse. Under no circumstances may assets and business operations be transferred out of Norway without taxation of unrealised gains. 

The Ministry proposes procedures for cross-border conversions that largely follow the same pattern as the current rules for cross-border mergers and demergers. Under the proposal, the board must adopt a conversion plan and a report on the conversion, and ensure that an expert report is prepared by one or more independent experts. The conversion plan must be approved by the general meeting by a majority in accordance with the articles of association; it is published in the Norwegian Register of Business Enterprises and triggers a six-week creditor notice period. Some of the requirements may be waived under certain conditions, including where all shareholders consent. 

Under the Ministry’s proposal, once the conditions for the conversion have been met, the Norwegian Register of Business Enterprises shall issue a conversion certificate to the company register in the destination state. The company register there shall carry out a scrutiny of the legality on the conversion, after which the company will be registered. The company will thus have its place of business/head office in the new state and will be registered as a limited liability company in accordance with the rules of that state. The company’s assets, rights and obligations will be transferred (including employment relationships) and the shareholders will become shareholders in the new company.

Companies undergoing reorganisation proceedings, bankruptcy, crisis management, etc. cannot resolve to carry out a conversion as described above. 

The conversion plan must, in addition to the information required under the current rules on cross-border mergers and demergers, include, amongst other things, details of the timetable, a statement that shareholders who have voted against the proposal at the general meeting may demand to be redeemed at the amount offered in the conversion plan, and whether the company has received subsidies or other incentives from public authorities in the last five years.

As a general rule, the board’s report must contain one section for shareholders explaining the significance of the conversion for them, as well as their right to redemption, and one section for employees explaining any changes to terms and conditions, location, etc. The report must be made available to shareholders and employee representatives no later than six weeks before the general meeting is due to consider the conversion plan.

The expert report must, as a minimum, set out the procedure for determining the redemption price, whether this procedure was appropriate, any particular difficulties encountered, and whether the redemption price is reasonable and objectively justified, taking into account the fair value of the shares at the time the board adopted the conversion plan. The report must be made available to shareholders at least one month before the general meeting at which the conversion plan is to be considered.

Shareholders, creditors and employee representatives may submit comments on the conversion plan to the company no later than five working days before the general meeting. The Ministry states in the consultation paper that the content of such comments shall be communicated at the general meeting in the manner determined by the company, for example by sending a digital copy of the comments.

A shareholder who demands redemption in accordance with the provision mentioned above may require the company to provide adequate security for the fair value of the shares.

Foreign companies must follow equivalent procedures in accordance with the rules of their home country.

The Ministry proposes certain amendments to the rules on cross-border mergers. The requirements for the merger plan, merger report and expert report are being adjusted in several respects in line with the requirements for the corresponding documents in the case of a conversion, as described in point 1 above. Furthermore, it is stipulated that companies undergoing reorganisation proceedings, bankruptcy, etc. may not carry out a cross-border merger.

If the acquiring company is not to be governed by Norwegian law, shareholders who have voted against the merger plan are entitled to demand that their shares be redeemed at the amount offered in the merger plan. Shareholders who have not made such a claim may bring legal proceedings alleging that the share exchange ratio is not reasonable and objectively justified, and demand additional consideration. Whilst under Swedish law such consideration must be paid in cash, under the proposal it may be provided in the form of any asset of economic value. The merger may be registered and take effect before a final judgment has been made.

Shareholders, creditors and elected representatives may submit comments on the merger plan to the company no later than five working days before the general meeting; see the detailed discussion in point 1 above, which will apply mutatis mutandis.

The Norwegian Register of Business Enterprises shall carry out a scrutiny of the legality on the merger as specified in the proposal, and issue a merger certificate to the company register in the acquiring company’s home state if all requirements are met.

The Ministry also takes this opportunity to clarify that the simplified rules for mergers between a parent company and a wholly-owned subsidiary apply where the parent company is to be the acquiring company. This has previously been based solely on interpretations in legal theory. Furthermore, a provision is introduced concerning cross-border mergers without consideration where the companies involved have the same owner, directly or indirectly, of all the shares in the companies, and where all the shareholders have the same relative shareholding in both companies.

The rules on cross-border demergers are largely based on the same model as the rules on cross-border conversions and mergers discussed in points 1 and 2 above. The requirements for a demerger plan, demerger report and expert report are adjusted in several respects in line with the corresponding requirements for conversions and mergers. Furthermore, it is stipulated that companies undergoing reorganisation proceedings, bankruptcy, etc. may not carry out a cross-border demerger.

The Ministry proposes a new form of demerger: demerger by spin-off. Under this form of demerger, the transferring company, and not the shareholders of the transferring company, receives the consideration. This contrasts with demergers by dissolution and demergers by capital reduction, where the shareholders of the transferring company receive the consideration. The Ministry proposes that the consideration may include additional consideration of up to 20 per cent of the total consideration, which is the same threshold that applies to additional consideration under current Norwegian law, cf. Section 14-2, first and second paragraphs, of the Norwegian Public Limited Companies Act and the corresponding provisions in the Norwegian Private Limited Liability Companies Act. The threshold of 20 per cent of the total consideration may be exceeded if the legislation governing one of the companies participating in the demerger so permits. Demergers by spin-off are also proposed to be introduced for demergers where all participating companies are Norwegian.

The Ministry proposes rules on cross-border demergers involving the transfer of assets, etc., to newly formed companies and to existing companies. This is a continuation of current Norwegian law and goes beyond the minimum requirements of the directive, which only covers demergers to newly formed companies.

In the case of a demerger by spin-off, shareholders who have voted against the demerger plan are not entitled to demand redemption, unlike in the case of a demerger by dissolution and a demerger by capital reduction. In the case of the latter forms of demerger, shareholders who have voted against the demerger plan may demand redemption at the amount offered in the demerger plan, and shareholders who have not made such a demand may bring legal proceedings claiming that the share exchange ratio is not reasonable and objectively justified, and demand additional consideration.

Joint and several liability applies to liabilities not allocated in the demerger plan, and secondary joint and several liability, limited to the net value accruing to each company, applies if a company to which the demerger plan has assigned a liability fails to fulfil it.

Shareholders, creditors and elected representatives may submit comments on the demerger plan to the company no later than five working days before the general meeting; see the detailed discussion in point 1 above, which shall apply mutatis mutandis.

The Norwegian Register of Business Enterprises shall carry out a scrutiny of the legality on the demerger as specified in the proposal, and issue a demerger certificate to the company register in the home country or countries of the acquiring company or companies if all requirements are met.

For demergers by spin-off where the acquiring company or companies are newly formed, simplified requirements for implementation are proposed: there is no requirement for an exchange ratio for shares, a report to shareholders and employees or an expert’s report, and, as mentioned, shareholders do not have a right of redemption.