Running a private limited company
When you run a private limited company, there are a number of formalities that you must follow. The requirements regarding organisation are set out in the Norwegian Private Limited Liability Companies Act (aksjeloven). The same requirements apply regardless of the size of the company.
The general meeting consists of the shareholders and is the supreme authority in a private limited company. The general meeting elects the board. The board must consist of at least one member and is responsible for administering and managing the company. At least 50 % of the board members must reside in Norway or another EU/EEA country.
The board can opt to appoint a general manager, who will be responsible for the day-to-day running of the company. Even small private limited companies must hold general meetings and have a board. In private limited companies with only one shareholder, it is not uncommon for the same person to hold all the abovementioned roles. In other words, you are shareholder, chairman of the board and general manager of the company.
Encouraging businesses to conduct digital meetings during the coronavirus outbreak
The general rules under current regulations is that companies should hold physical board meetings and annual meetings. On 28 March, four regulations were passed that allows exception to the requirement of physical meetings in, among others; private limited liability companies, foundations, cooperations and general partnerships. To ensure predictability for the companies, the Government has extended the regulations in a new Act.
The purpose of the Act is to allow companies to conduct board meetings, annual meetings and meetings in other governing bodies without physical meetings. The chair of the board can decide to conduct physical meetings or electronic meetings (for example through digital meeting applications, video conference or telephone conference).
It is the responsibility of the board of directors to ensure that the meeting is conducted in a reassuring manner, and the summoning to the meeting must specify how the members should participate and how voting is conducted.
The minutes from the General Meeting can be signed electronically.
'Shareholders' is the term used to refer to those who own a private limited company. Private limited companies must have at least one shareholder. There are no restrictions on the number of people who can own shares in a private limited company. Shares can be owned by private individuals, legal persons and jointly between many shareholders. The general rule is that all shares give equal rights in the company, but exceptions from this rule may be stipulated in the articles of association.
Here are some relevant topics which you as a shareholder will need to familiarise yourself with:
In a private limited company, the founders must pay in share capital. The company's share capital must amount to at least NOK 30,000. Share capital can subsequently be altered through a capital increase or capital reduction. Share capital is an asset which can be in the form of cash or assets which can be sold and thereby converted to money. The share capital can also be a combination of money and assets. If the share capital consists of assets, this is called a non-cash contribution. It is also possible to deposit the share capital in a foreign bank account; in which case the contribution will be made in foreign currency. Invested share capital will then be considered to be a non-cash deposit and must be verified by a Norwegian public accountant.
The purpose of share capital is to provide collateral for the company's creditors.
Representation of the company externally
Unless the company's articles of association stipulate otherwise, it is the collective board which, according to the Private Limited Liability Companies Act, represents the company externally. The board can assign signatory powers or power of procuration to board members, the general manager or named employees. Signatory powers and power of procuration can be assigned to one or more people jointly.
Signature right is an authority to act and sign on behalf of the entity in any situation.
Power of procuration
Power of procuration is an authority to act and sign on behalf of the entity in connection with the day-to-day running of the business.
For more information on signature rights and power of procuration, see brreg.no:
Notification of the registration or alteration of signature rights and power of procuration is given via the Coordinated register notification.
When a private limited company (parent company) has a controlling influence in another limited company (subsidiary), this constitutes a group. 'Controlling influence' means that the parent company has more than 50% of the votes in the other company.
The parent company in a group can opt not to have the annual accounts audited if the group overall fulfils the conditions for opting not to have an audit.
In addition to the company's accounts, the parent company in a group must also prepare consolidated accounts. Consolidated accounts consist of the accounts of the parent company and the subsidiaries combined. The aim is to present the group as a single financial entity. Small enterprises are generally exempt from the obligation to prepare consolidated accounts.
In some cases, it may be appropriate to establish a private limited company which will establish and own one or more other companies. The first company, which is called the 'holding company', is only established in order to own shares in other private limited companies and manage the yields. The other company or companies is a normal operating company and it is this company that is responsible for the commercial activity.
There are two particular reasons for establishing a holding company:
It helps to spread the risk through carrying on different enterprises in different companies.
The gains made on any future sales of enterprises and dividends will be virtually tax-free for the holding company.
If a holding company reinvests all the revenues from the operating company, they will pay virtually nothing in tax (taxation of company shareholders). However, if a holding company opts to pay the surplus to their personal shareholders, this will be taxed at the rate of 22%.
The advantage of having a holding company, versus owning the shares privately, therefore lies in the opportunity to defer full taxation.
Public limited companies (ASA)
Some private limited companies are converted to public limited companies. There are many similarities between the rules which apply to private limited companies and those which apply to public limited companies. However, some key differences are:
- Unlike a private limited company, shares in a public limited company can be sold to a unspecified group of people, to "the general public". An example of the sale of shares to the public is the buying and selling of shares on a stock exchange.
- A precondition for flotation on a stock exchange is that the company is registered as a public limited company.
- Public limited companies normally have many more shareholders than private limited companies.
- Shares in public limited companies must be registered in the securities register.
- Public limited companies must have share capital amounting to at least NOK 1 million and a board comprising at least three members. The company is obliged to have a general manager and a auditor.
- The articles of association must state that the company is a public limited company. In addition, the name of the company must contain the word 'allmennaksjeselskap' (private limited company) or the abbreviation 'ASA'.
The minimum requirements concerning the articles of association of public limited companies are more comprehensive than those for private limited companies. Conversion from a private limited company to a public limited company will therefore entail certain amendments to the articles of association. However, the organisation number will remain the same.