Financing in Norway
Norway has a long legal tradition in respect of financing investments and business enterprises. This article provides an introduction to some of the legal issues that are likely to arise when entering into a financing agreement governed by Norwegian law or dealing with Norwegian companies as parties to finance documents.
1. Loan and credit agreements
1.1. General
Most common types of loans and credit facilities are available in the Norwegian market. These include corporate working capital facilities, acquisition finance, asset finance – particularly within the shipping and real estate sectors – and letter of credit, guarantee and bond facilities.
The Norwegian lending market includes commercial banks, savings banks, mortgage companies and finance companies, as well as foreign banks operating in Norway through branches or on a cross-border basis. Larger Norwegian and Nordic banks are regularly mandated as arrangers and agents for syndicated facilities. The Financial Supervisory Authority of Norway (Finanstilsynet) is the Norwegian financial supervisory authority.
1.2. Documentation
Although the Norwegian legal system belongs to the continental European legal tradition, Norwegian loan and credit documentation is heavily influenced by the Anglo-American tradition, and English is commonly used in larger financing transactions. This may create interpretation issues, and when international-standard documentation is governed by Norwegian law, the way in which Norwegian courts may interpret the agreement should be kept in mind.
Bilateral loans from Norwegian banks are often based on the relevant bank's standard terms and conditions together with transaction-specific terms. Syndicated loans, club loans and more sophisticated credit arrangements will normally have more extensive documentation. LMA-based documentation, often adapted to Norwegian law and market practice, is commonly used.
Loan and guarantee facilities regularly contain customary representations and warranties, undertakings, financial covenants and events of default.
The Norwegian Financial Agreements Act (Act 2020/146), which entered into force on 1 January 2023 and replaced the previous Financial Agreements Act of 1999, applies to a broad range of financial agreements and services. For business customers, many of its provisions may be varied by agreement, although certain provisions remain mandatory. The Act should therefore be considered when preparing Norwegian-law loan, guarantee and other finance documentation.
Harald Sætermo, founder of LexOslo, has written a comprehensive commentary on the Norwegian Financial Agreements Act for publication by Universitetsforlaget. The Act is relevant not only to consumer finance, but also to a broad range of financing and financial services provided to business customers.
Bond financing is an established alternative to bank financing in the Norwegian market. Norwegian and international investment firms arrange bond issues, and Nordic Trustee or another bond trustee will normally act on behalf of the bondholders under the bond terms. Norwegian bonds may be admitted to trading or registration on Euronext Oslo Børs or Euronext ABM (Nordic ABM), among other venues. Euronext ABM is not a regulated market.
2. Contractual mortgages, charges and pledges
Most categories of assets belonging to a Norwegian business may be pledged or mortgaged to secure existing or future debt. Security is created by agreement, subject to the mandatory requirements of the Norwegian Mortgages and Pledges Act (Act 1980/2) and other relevant legislation.
The applicable perfection requirements depend on the asset concerned. Norwegian law does not provide for one general floating charge covering all of a company's present and future assets. A Norwegian security package therefore normally consists of separate security interests over the relevant asset categories.
Ownership and certain rights to real estate may be mortgaged by registering the mortgage in the Land Register. Aircraft, ships and certain offshore assets may similarly be mortgaged through the relevant asset registers. Security over ships registered in Norway is registered in the Norwegian Ordinary Ship Register (NOR) or Norwegian International Ship Register (NIS), as applicable.
Movable property may, depending on the asset and the circumstances, be secured through possessory pledge, registered non-possessory security or retention-of-title arrangements. A possessory pledge normally requires the pledgor to be deprived of control over the pledged asset.
A business may register security over certain categories of movable assets in the Norwegian Register of Mortgaged Moveable Property. These include floating charges over operating assets and equipment, inventory and trade receivables. Such security normally covers the relevant category of assets from time to time, rather than only the assets existing when the security is granted.
Individual monetary claims may also be pledged by giving notice to the debtor of the claim. Negotiable debt instruments and similar instruments are subject to separate perfection requirements.
Shares in a Norwegian limited liability company that are not registered in a central securities depository may generally be pledged unless the articles of association provide otherwise. The pledge obtains legal protection by notice to the company. Where shares or other financial instruments are registered in a Norwegian central securities depository, the security interest is perfected by registration in the relevant securities register.
Priority between competing security interests depends on the applicable priority and perfection rules for the asset concerned. As a practical matter, a lender should ensure that all required perfection steps are completed promptly following execution.
The parties may agree contractual priority between creditors, and intercreditor and subordination agreements are commonly used where more than one financing source is involved.
Certain claims benefit from statutory liens. Of particular importance in a bankruptcy is the bankruptcy estate's statutory lien over pledged assets. The lien generally amounts to five per cent of the relevant asset's value or sale proceeds, subject to the statutory cap for assets registered in a real register, and ranks ahead of other security interests. It may only be used to cover necessary bankruptcy administration costs.
In cross-border financings involving Norwegian borrowers or assets, the security package should be analysed asset by asset, as Norwegian law does not provide for a single all-assets floating charge. LexOslo advises banks, other lenders, borrowers and foreign law firms on Norwegian finance and security law.
3. Guarantees and letters of credit
A wide variety of guarantees is used in the Norwegian market. Parent company guarantees, subsidiary guarantees and, in some transactions, guarantees from individual owners are common.
The Financial Agreements Act contains rules concerning guarantees falling within its scope. Particular care is required where a guarantee is provided by an individual. Whether an individual qualifies as a consumer is determined under the statutory consumer definition and does not necessarily correspond to how the parties view the transaction commercially. Owners and other individuals connected with a corporate borrower may therefore, depending on the circumstances, be treated as consumers for purposes of the Act. This can materially affect the requirements applicable to the guarantee.
Corporate guarantees must also be considered in light of Norwegian company law, including rules on corporate authority, distributions, financial assistance and the company's interest in the transaction.
4. Financial assistance restrictions
Financial assistance rules are particularly important where Norwegian limited liability companies are borrowers, guarantors or security providers.
Under section 8-7 of the Norwegian Companies Act, a company may generally only grant credit to, or provide security for the benefit of, a shareholder or certain related parties within the amount that may lawfully be distributed as dividend, and adequate security must be provided. The Act contains important exceptions, including for ordinary commercial credit and certain intra-group and enterprise-group arrangements.
Separate rules apply where a Norwegian company provides financial assistance in connection with the acquisition of shares in the company or its parent company.
For private limited companies (AS), section 8-10 of the Companies Act permits such financial assistance subject to detailed conditions. These include requirements relating to the amount of assistance, commercial terms, corporate approvals and the board's assessment and documentation of the transaction. Special rules apply to certain acquisitions where the purchaser is established in the EEA and the transaction creates, or takes place within, a group.
These rules are particularly relevant in acquisition finance, where debt incurred to finance an acquisition may be intended to benefit from guarantees or security provided by the Norwegian target group after completion.
Similar, although not necessarily identical, restrictions apply to other Norwegian corporate forms, and the position should be assessed for the entities involved in the particular financing.
5. Leasing
Operational and financial leasing are well-established forms of financing in Norway, including for equipment, vehicles and other business assets.
Financial leasing constitutes regulated financing activity when conducted as a business and is commonly offered by banks and licensed finance companies.
The legal analysis of a leasing structure may also require consideration of ownership and creditor-protection issues, particularly where the arrangement involves sale-and-leaseback structures or where the lessee becomes insolvent.
6. Restrictions related to company law
The execution of finance documents must be authorised by the competent corporate body, and the persons executing the documents must have authority to represent the company.
For Norwegian private and public limited companies (AS and ASA), the board of directors generally represents the company externally. The board may grant signatory authority to board members, the managing director or named employees, and the articles of association may contain relevant provisions concerning signatory rights.
The managing director has statutory authority to represent the company in matters falling within the day-to-day management of the business. Material financing transactions will, depending on the circumstances of the company and the transaction, normally require board consideration.
The Companies Act, the articles of association, shareholder resolutions and other corporate arrangements may impose additional requirements. Certain transactions, including financial assistance in connection with acquisitions, are also subject to specific statutory approval procedures.
For general partnerships (ANS) and limited partnerships (KS), the applicable authority rules follow from the Partnerships Act, the partnership agreement and any internal delegations. The authority of the partnership meeting, board and general manager should therefore be assessed for the particular entity.
The directors of a Norwegian company have duties relating to the management, organisation and supervision of the company's business. A Norwegian limited liability company must at all times maintain equity and liquidity that are adequate in view of the risk and scope of its business.
If the company's equity is no longer adequate, the board has a statutory duty to address the situation and, where required, propose measures to restore the company's financial position. In a distressed situation, the board may also need to consider refinancing, restructuring or, where there is no realistic basis for continued operations, a bankruptcy filing.
7. Debt collection/enforcement
Enforcement of overdue claims and security interests is generally handled under the Norwegian Enforcement Act through the competent enforcement authorities.
Norwegian judgments and certain other enforceable instruments may provide a basis for compulsory enforcement. A creditor may, where the statutory requirements are met, obtain an execution lien over the debtor's assets, while mortgages and pledges may be enforced through the procedures applicable to the relevant collateral.
Norway has been implementing a modernised framework for certain enforcement procedures from 2026. The changes are being introduced gradually and should be checked where a specific enforcement action is contemplated.
The Financial Collateral Act (Act 2004/17), implementing the EU Financial Collateral Directive, provides a special regime for qualifying financial collateral arrangements. Where the Act applies, the parties may agree on enforcement of the collateral in accordance with their written agreement without following the ordinary enforcement procedure. The Act also contains important rules on close-out netting and insolvency protection.
Lender liability may also need to be considered in default and restructuring situations. A lender is generally entitled to exercise its contractual rights and take steps to protect its position, but liability issues may arise in exceptional circumstances where the lender's involvement goes beyond the ordinary exercise of creditor rights. Particular care may therefore be required where a lender becomes closely involved in the borrower's management or decision-making.
If the owner of a pledged asset is declared bankrupt and the collateral has no economic value for the bankruptcy estate, the estate may in appropriate circumstances abandon the asset or otherwise leave enforcement to the secured creditor.
8. Legal opinions
Legal opinions are commonly issued in Norwegian financing transactions, particularly in cross-border and syndicated financings.
Norwegian legal opinions generally follow international finance-market standards and will typically address matters such as corporate capacity and authority, due execution, validity and enforceability of the finance documents and the validity and perfection of Norwegian security interests, subject to customary assumptions and qualifications.
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The topics discussed above provide only a general introduction to financing in Norway. The legal and practical issues will depend on the transaction, the parties involved and the relevant financing and security structure.
How LexOslo can assist
Finance law is at the core of LexOslo's practice. We advise banks and other financial institutions, lenders, investors, corporate borrowers and foreign law firms on Norwegian finance law and financing transactions.
Our work includes Norwegian-law loan and security documentation, guarantees, financial assistance and corporate authorisations, legal opinions, amendments and waivers, enforcement and restructuring issues, and Norwegian law aspects of cross-border financings.
Harald Sætermo has more than 25 years of experience from legal practice and banking, including as in-house counsel at one of Northern Europe's largest financial institutions.
If you require Norwegian law assistance in connection with a financing transaction or a specific finance law issue, please contact LexOslo.
✉ Email: has@lexoslo.no
☏ Phone: +47 906 50 410
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