Understanding pre-emptive rights to shares in Norwegian transactions?

The Norwegian Private Limited Liability Companies Act contains rules on pre-emptive rights to shares that change ownership. These rules may be supplemented by provisions in the articles of association, shareholder agreements, and other contracts. Focusing on the statutory regulations, a key question often arises: who has pre-emptive rights to shares that change ownership?

Those who wish to exercise pre-emptive rights must be "shareholders"
The pre-emptive right benefits shareholders. The rationale behind this right is to prevent outsiders from entering the company and to allow existing shareholders to maintain their ownership stake and influence. If non-shareholders are to have pre-emptive rights, this must be stipulated in the articles of association or arise from an agreement.

It is usually straightforward to identify current shareholders who can exercise pre-emptive rights under the law. An individual who has acquired shares can likely exercise pre-emptive rights once the acquisition is recorded in the share register or when the acquisition is reported and documented without being hindered by statutory or article-based transfer restrictions. The seller of a share can, in principle, exercise pre-emptive rights if the right has not passed to the buyer.

All shareholders in the company have equal priority to acquire the shares. If multiple shareholders wish to assert pre-emptive rights, the shares are distributed proportionally based on each one's shareholding. If there are multiple share classes, shareholders within a class have priority over those in other classes. Shares that cannot be evenly distributed are allocated by drawing lots.

The share must have changed owner
Under the act, the pre-emptive right arises after the share has changed owner. Any form of ownership change triggers pre-emptive rights, including voluntary transfers and transfers resulting from forced sales. Ownership changes through exchange, gift, and inheritance are also covered.

Typically, pledging a share does not trigger pre-emptive rights. However, if the pledgee gains extensive rights to the share, the situation may require further assessment. Transfers of ownership through mergers or demergers likely do not trigger pre-emptive rights either.

No pre-emptive rights upon transfer to related parties
The statutory pre-emptive right does not apply when shares are transferred to the previous owner's personal close associates or relatives in direct ascending or descending line.

Personal close associates include:

• The previous owner's spouse or cohabitant in a marriage-like relationship
• The previous owner's minor children or children of a spouse/cohabitant who live with the previous owner
• Companies where the previous owner or their spouse/cohabitant/children, as mentioned above, have controlling influence

All or nothing
The pre-emptive right must be asserted for all shares to which it applies. In cases of consecutive sales of multiple shareholdings from the same or different owners, the pre-emptive right must be exercised for all shares collectively.

Important to notify
When shares change ownership and the company is notified, it must inform the other shareholders. A two-month deadline then begins for asserting pre-emptive rights, calculated from the date the company received notice. The company must receive the notification of exercising pre-emptive rights within this period, and there is an obligation to clarify the redemption amount within the deadline.

Many deviations from the statutory scheme
As noted initially, various exceptions and special rules may apply in practice. Firstly, differing rules may be specified in the articles of association, which should be reviewed. The articles may also stipulate that there are no pre-emptive rights to the shares.

Furthermore, for companies established before the 1997 Companies Act came into force (i.e., before 1 January 1999), there is likely no statutory pre-emptive right to shares that change ownership unless it is provided for in the articles of association.

The above rules apply only to private limited companies (AS), not to public limited companies (ASA). For public limited companies, the default legal position is that there are no pre-emptive rights upon share transfer. Finally, specific legal provisions in individual cases may exclude pre-emptive rights.