The Norwegian Reconstruction Act for restructuring of companies and debt

A company may face financial challenges for many different reasons. Changes in local or international markets may reduce demand and revenues, while salaries, energy, raw materials, financing costs and other expenses increase. Existing contracts may become loss-making, and operational adjustments may take time to implement. In such circumstances, liquidity can quickly become strained.

The board of directors and management must keep themselves informed about the company's financial position and consider appropriate measures where financial difficulties arise. For Norwegian limited liability companies, the company must at all times maintain equity and liquidity that are adequate in view of the risk and scope of its business.

When we assist companies facing financial difficulties, formal reconstruction is only one of the available tools. Depending on the circumstances, alternatives may include negotiations with lenders and other creditors, refinancing, new equity, asset disposals, operational restructuring or an out-of-court restructuring.

The appropriate solution will depend on factors such as the composition and maturity of the company's debt, the available security, the asset position, the nature of the operational challenges, the ownership structure, relationships with other group companies and the financing opportunities available.

A restructuring is not only an insolvency-law process. Where secured financing is material, the restructuring strategy must also take account of the financing documents, security structure, creditor priorities and the position of existing and potential new lenders.

Below we consider some of the principal advantages and challenges of formal reconstruction proceedings under Norwegian law.

The company can get breathing space

A company with financial difficulties is likely to be under pressure from its creditors. For management and the board, the situation may also raise difficult questions about whether and how the company can continue operating.

Under the current Reconstruction Act, a company may request reconstruction where it has, or in the foreseeable future will have, serious financial problems. The company does not need to be insolvent before it can commence the process.

Opening reconstruction proceedings provides important protection against individual creditor enforcement. Subject to the statutory exceptions, bankruptcy and enforcement measures relating to pre-existing debt are restricted while the reconstruction is pending. This can give the company, its owners and creditors valuable time to assess whether a viable solution can be developed.

The breathing space is often one of the principal benefits of formal reconstruction. However, it is valuable only if the company uses the period to address the underlying financial and operational problems.

Financing with super-priority

Obtaining new financing can be difficult for a financially distressed company. At the same time, sufficient liquidity may be essential if the business is to continue operating while a restructuring solution is developed.

The current Reconstruction Act permits certain new financing to be secured with priority ahead of existing security interests. The present regime is, however, limited to specified categories of assets, including operating assets, inventory and receivables, together with a statutory lien, and is subject to a specific approval process.

The permanent regime will substantially broaden the possibility of granting super-priority security. Subject to statutory conditions, financing needed to continue the business or finance the reconstruction may be secured over the debtor's assets with priority ahead of existing security interests, including statutory liens. Existing secured creditors are also given a right to offer the financing before other providers.

For both existing lenders and providers of new money, financing is therefore likely to become an increasingly important part of Norwegian restructuring strategy.

Deferred payment and reduction of debt

Many distressed companies primarily need additional time to pay their debts, while others have a debt burden that is no longer sustainable.

The current Reconstruction Act permits a compulsory restructuring to include, among other things, deferred payment, a percentage reduction of debt, debt-to-equity conversion, transfer of all or part of the business and combinations of these measures.

Under the current regime, a proposal for compulsory restructuring is generally approved where creditors representing at least half of the voting claims support it.

The permanent rules introduce a substantially more developed voting system. Claims will be divided into voting classes where they have different ranking or receive different treatment under the plan. Secured, preferential and unsecured claims must be placed in separate classes, and shareholders will also form a class where the plan contains specified equity measures.

The court may also, subject to statutory safeguards, confirm a plan even where not all classes have approved it. This cross-class cram-down mechanism materially increases the tools available in more complex restructurings.

Secured claims

Under the current Reconstruction Act, secured claims are to a significant extent protected from being compromised by a compulsory arrangement to the extent that they are covered by the value of their security.

This means that negotiations with banks and other secured financial creditors are frequently central to whether a restructuring can succeed.

The permanent regime changes this position materially. A restructuring plan may include changes to rights and obligations relating to claims and their security, subject to valuation rules and creditor protections. Secured claims must be placed in separate classes, and where the collateral does not fully cover the debt, the claim is divided into secured and unsecured portions for voting purposes.

The treatment of secured creditors, collateral valuation and inter-creditor issues are therefore likely to become even more important under the permanent regime.

Conversion of debt to equity

A restructuring solution may also involve converting debt into equity.

Under the current regime, debt-to-equity conversion is one of the restructuring measures expressly permitted, although creditors generally cannot be forced to participate in such a conversion.

The permanent regime provides a more integrated framework for equity measures. A restructuring plan may include capital increases, capital reductions and the issuance of financial instruments, and a confirmed plan can, subject to the statutory requirements, replace shareholder resolutions that would otherwise be required.

Debt-to-equity solutions may significantly alter the ownership and governance of the business and require careful consideration of valuation and the respective interests of creditors and existing shareholders.

Time to implement additional measures

One challenge for financially distressed companies is that they may have assets that can be sold, operations that can be transferred or other measures that could materially improve their position, but these processes take time to implement.

The current Reconstruction Act allows restructuring solutions that include transfers of all or part of the debtor's business and assets.

More generally, the reconstruction period may provide an opportunity to sell assets, raise new capital, renegotiate financing, implement operational changes or complete a business transfer.

In many cases, a successful restructuring will involve a combination of measures rather than debt relief alone.

Although the restructuring regime provides useful tools, formal proceedings also involve important practical challenges.

The company must develop a viable solution

A company cannot simply file for reconstruction and expect the court or the reconstructor to solve its financial problems.

The company and its advisers must identify the causes of the difficulties and develop a credible plan for restoring the company's viability. Under both the present regime and the enacted permanent rules, the debtor is expected to provide the court with information about how the reconstruction is intended to be carried out and how the business will be financed during the process.

Preparation before filing can therefore be critical. Entering formal proceedings without a realistic restructuring and financing strategy may substantially reduce the likelihood of success.

Solutions with financial creditors are often critical

Our experience is that many companies facing reconstruction have significant secured debt to banks and other financial creditors.

Under the current regime, secured claims are only affected to a limited extent by a compulsory restructuring, which means that a negotiated solution with secured lenders may be decisive.

The permanent rules provide more tools for dealing with secured debt but also introduce greater complexity. Secured creditors will vote in separate classes, collateral valuations may determine how claims are divided and treated, and disputes over priority and valuation may become central to the restructuring process.

This makes a thorough understanding of finance law, security structures and creditor priorities particularly important.

The company is subject to a strict regime during a reconstruction

Formal reconstruction proceedings necessarily involve court supervision and restrictions on the company's freedom of action.

The company remains in possession of its business and assets but operates under the supervision of the reconstructor and reconstruction committee. Material new debt, security and certain disposals require approval under the statutory regime. Similar controls form part of the permanent framework.

For some businesses, an out-of-court restructuring may therefore be preferable where a consensual solution can realistically be achieved.

If the reconstruction is not successful

Formal reconstruction does not guarantee that the business will survive.

If a viable restructuring cannot be developed or obtain the required support and court confirmation, bankruptcy may ultimately follow.

The prospect of bankruptcy is also an important part of the negotiations. Creditors, shareholders and potential investors will generally compare the proposed restructuring with the outcome they could expect if the restructuring fails.

Under the permanent regime, this comparison is expressly incorporated into the statutory creditor-protection rules: a creditor cannot generally be left worse off under the restructuring plan than it could expect in bankruptcy or the relevant alternative outcome.

Norway adopted permanent rules on restructuring in June 2026 through amendments to the Bankruptcy Act. The legislation was sanctioned on 19 June 2026 but, apart from the transitional amendment to the temporary Reconstruction Act, the new rules will enter into force from a date determined by the Government.

The temporary Reconstruction Act will remain applicable until the new provisions in the Bankruptcy Act enter into force, at which point the temporary Act will be repealed.

The permanent regime retains several features of the temporary system but provides substantially more sophisticated tools for larger and more complex restructurings. Important developments include:

• class formation and class voting;
• cross-class cram-down;
• greater scope for secured claims to be affected by a restructuring plan;
• a broader regime for super-priority financing;
• more developed creditor-protection and valuation rules; and
• the possibility for a confirmed restructuring plan to implement certain equity measures without separate shareholder resolutions.

The new tools increase the flexibility of the Norwegian regime, but they are also likely to make valuation, secured financing and inter-creditor issues more important in contested restructurings.

For lenders, borrowers, shareholders and investors, the permanent regime therefore represents a material development in Norwegian restructuring law.


(Initially published 7 March 2025 – Updated August 2026)