The Ministry's Proposal
Public Hearing
In a Green Paper dated December 11 2001 the Ministry of Trade and Industry proposed repealing the Norwegian Business Acquisition Act. The proposal was submitted for public hearing and the ministry is currently considering the written submissions from the hearing. The ministry has stated that a White Paper will be sent to a departmental hearing in March and shortly thereafter to the Norwegian Parliament, which will hopefully consider the proposal during its spring session (2002).
The Act Relating to the Acquisition of Business Undertakings (December 23 1994 (79)) came into force on January 1 1995. It provides for a non-discriminatory notification requirement when an investor or a group of investors acquires more than one-third or at least one-half or two-thirds of a company's share capital or assets, provided that the acquired company or business has:
- a minimum turnover in excess of Nkr50 million;
- more than 50 employees; or
- received public research and development support in excess of Nkr5 million during the last eight-year period.
Unlike the old Concession Act, which only regulated foreign acquisitions of Norwegian companies or businesses, the Business Acquisition Act applies to all acquisitions made by Norwegians or foreigners. The act does not apply to the acquisition of shares in certina companies, such as insurance companies, banks and other financial institutions regulated by special legislation.
Within 30 days of the notification being considered complete the ministry must decide whether the acquisition should be subjected to a closer examination or approved. Following a closer examination, the ministry can prohibit the acquisition if it is deemed contrary to the public interest. The ministry may also approve an acquisition subject to certain conditions deemed necessary to safeguard public interest.
Until the ministry's review has been completed the acquirer cannot gain complete control over the acquired company or business. The acquirer may receive dividends and exercise preferential rights, but cannot exercise other shareholder rights such as the right to vote. Further, the acquirer cannot dispose of important assets or otherwise diminish the value of the company (eg, by selling parts of the acquired company or business). It is possible to apply for an exemption of such limitations during the notification period.
One of the main purposes behind the Business Acquisition Act was to allow the authorities to step in if the ministry had reason to believe that an acquisition could have a substantial negative effect on the company, trade in general or the public interest, including the effect on employment. However, it was not intended that the act should be an obstacle against well-founded restructuring of companies, even if such restructuring should include a reduction of production sites and number of employees.
As of November 30 2001 the ministry had received approximately 2,200 notifications under the act, of which only 13 were subjected to a closer examination. None of these 13 acquisitions were denied authorization. The ministry only laid down special conditions in eight cases. In the ministry's opinion, this record illustrates that the need for controlling acquisitions of Norwegian businesses is less than anticipated. The ministry also doubts that the Business Acquisition Act has had any particularly preventative effect, although this is difficult to measure.
Following this evaluation the ministry issued a Green Paper dated November 11 2001, proposing to repeal the act.
The European Free Trade Agreement Surveillance Authority (ESA) has claimed that the Business Acquisition Act is inconsistent with the European Economic Agreement. Norway has repudiated this. However, if the Business Acquisition Act is not repealed it is likely that the ESA will take further action against the act.
The ministry's proposal was submitted to a public hearing in December 2001 with the closing date for potential submissions set for February 3 2002. The ministry is now in the process of considering the written submissions from the hearing. The ministry has stated that a White Paper will be sent to a departmental hearing in March and shortly thereafter to the Norwegian Parliament, which will hopefully consider the proposal during its spring session (2002). However, this schedule is very tight, and hence it is uncertain when Parliament will decide upon the matter. Further, no assurance can be given as to the outcome of Parliament's decision. If it approves of the proposal during the spring term, the ministry hopes that the act will be repealed as soon as possible, hopefully with effect from July 1 2002.
If the Business Acquisition Act is repealed there will no longer be any general notification requirement for acquisitions of shares or assets in Norwegian companies or businesses. However, an acquisition may still provoke a notification requirement pursuant to other specific legislation, such as the Industrial Concession Act of 1917 or the Concession Act of 1974.
For further information on this topic please contact Joachim Bjerke or Rolf Johan Ringdal at Bugge, Arentz-Hansen & Rasmussen by telephone (+47 22 83 02 70) or by fax (+47 22 83 07 95) or by email ([email protected] or [email protected]).