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Legal and regulatory framework
Laws and regulations
What are the relevant statutes and regulations governing securities offerings? Which regulatory authority is primarily responsible for the administration of those rules?
The primary statutes and regulations governing securities offerings in Norway are the Norwegian Securities Trading Act of 2007 (STA) and the Norwegian Securities Trading Regulations of 2007 (STR) which implement, inter alia, the EU Prospectus Directive (2003/71/EC) (as amended). Norway has not yet implemented the EU Prospectus Regulation (2017/1129/EU). It is unclear when this will take place, but a consultation paper on the implementation was published in June 2018. The STA and the STR set out when a prospectus is required, exemptions from the prospectus requirements as well as the content and disclosure requirements for prospectuses.
The regulatory authority primarily responsible for the administration of these rules is the Financial Supervisory Authority of Norway (NFSA). The NFSA also issues certain guidelines and statements related to the prospectus rules.
Securities offerings in companies listed on a regulated market or a multilateral trading facility will also be regulated by the rules adopted by the relevant marketplace. Three marketplaces are licensed to offer trading in shares in Norway: the Oslo Stock Exchange, Oslo Axess (a regulated market operated by the Oslo Stock Exchange) and Merkur Market (a multilateral trading facility operated by the Oslo Stock Exchange). The applicable rules are found in the Continuing Obligations for Stock Exchange Listed Companies, which apply to companies with shares listed on the Oslo Stock Exchange (Børs) or Oslo Axess and the Continuing Obligations of companies admitted to trading on the Merkur Market (which applies to companies with shares listed on the Merkur Market).
What regulatory or stock exchange filings must be made in connection with a public offering of securities? What information must be included in such filings or made available to potential investors?
The type of regulatory or stock exchange filings to be made in connection with a public offering of securities will depend on the type of offering and the type of issuer.
At the outset, the requirement to publish a prospectus relates to the offering of transferable securities (ie, the STA does not differentiate between offerings of debt securities and equity securities nor between primary offerings and secondary offerings).
If a public offering of transferable securities exceeds an amount of €1 million over a 12-month period, and no relevant exemptions apply, a prospectus must be prepared prior to commencement of the offering.
If the public offering takes place in connection with a listing of transferable securities on a regulated market or the public offering will cause the share capital in a class of shares that is already listed to increase by at least 10 per cent, a prospectus will in all cases be required.
Prospectuses shall, according to the STA section 7-13, contain such information as is necessary, depending on special circumstances of the offeror and the nature of the securities offered, to enable the investors to make a properly informed assessment of the issuer’s and any guarantor’s financial position and prospects and of rights attached to the securities mentioned. The information in the prospectus shall be presented in an easily comprehensible and analysable form.
The STA differentiates between national prospectuses and European Economic Area (EEA) prospectuses. National prospectuses must be prepared for offerings in the amount of between €1 million and €5 million while EEA prospectuses must be prepared for offerings of at least €5 million. If the prospectus is prepared in connection with a listing on a regulated market as set out above, the issuers must always prepare an EEA prospectus.
The main differences between national prospectuses and EEA prospectuses are the content requirements and approval or publication process. National prospectuses have significantly less comprehensive content requirements than EEA prospectuses. EEA prospectuses must include the contents set out in the relevant annexes (depending on the issuer and offering) of the EU Prospectus Regulation of 2004 (as amended). With regard to the review and approval process, see question 3, and with regard to the implementation of the EU Prospectus Regulation (2017/1129/EU), see question 1.
For companies listed on Oslo Børs, Oslo Axess or Merkur Market, certain additional disclosure obligations will apply including disclosure of inside information relating to the public offering (see question 16). In addition, the ongoing reporting obligations of such companies require the issuer to disclose, in connection with a public offering, certain particular information in stock exchange announcements including:
- the proposal and decision of the board or general meeting to increase the share capital (in connection with a primary offering);
- key information regarding offerings directed towards existing shareholders such as rights issues and repair issues (only Oslo Børs or Oslo Axess), including the date on which the terms and conditions of the offering were announced, the last day including the right to participate, the first date excluding the right to participate, the record date, the maximum number of new shares in the offering, the subscription price, if subscription rights will be admitted to trading, the date of approval of the offering (by the relevant corporate body), as well as any other relevant key information; and
- the fact that a prospectus has been approved and where the prospectus may be obtained.
In addition, companies seeking admission to trading of their securities in connection with an initial public offering (IPO) on Oslo Børs, Oslo Axess or Merkur Market, must submit an introductory report and subsequent listing application to the Oslo Stock Exchange.
Review of filings
What are the steps of the registration and filing process? May an offering commence while regulatory review is in progress? How long does it typically take for the review process to be completed?
As described in question 2, the STA differentiates between national prospectuses and EEA prospectuses.
A national prospectus prepared in connection with an offering shall only be submitted in final and signed form by email to the Norwegian Register of Business Enterprises. This Register will not conduct a review of the national prospectus but will announce through its electronic announcement portal that a prospectus from the relevant issuer has been published. Following the submission of the prospectus, the offeror of securities may publish the prospectus and commence the offering.
An EEA prospectus prepared in connection with an offering must be filed with the NFSA for their review and approval. An offering may not commence until the prospectus has been approved by the NFSA.
The NFSA requires that the first draft of the prospectus that is submitted for review is as complete as possible, however, so that it will allow some information to be included later in the review process in the event that such information is not ready upon first filing. The prospectus must be accompanied with cross-reference lists setting out where applicable requirements from relevant annexes to the Prospectus Regulation and, if applicable, the ESMA recommendation of 20 March 2013, paragraphs 128 to 145 for specialist issuers, are fulfilled.
Following the first submission of the draft prospectus, the NFSA will revert with its comments within seven business days (for listed companies) or 10 business days (for unlisted companies). A review process typically takes around five weeks, with approximately three to five iterations between the offeror and the NFSA.
What publicity restrictions apply to a public offering of securities? Are there any restrictions on the ability of the underwriters to issue research reports?
As set out in question 3, a national prospectus may not be published until it has been submitted to the Norwegian Register of Business Enterprises. An EEA prospectus may not be published until it has been approved by the NFSA.
If the offeror informs about the offer in advertisements or other ways, it must at the same time inform that further information is given in the prospectus, as well as where the prospectus can be obtained. Any such information included in advertisements or other ways must be in accordance with the information in the prospectus.
In addition, the Norwegian Stockbrokers’ Association has issued guidelines setting out restrictions on publication of research reports in connection with public offerings and IPOs.
In connection with public offerings (primary or secondary), research reports shall be published at the latest seven days before publication of the prospectus and at the earliest 30 days after allocation.
In connection with IPOs, research reports shall be published at the latest seven days before publication of the prospectus and at the earliest 30 days after the first day of listing.
In connection with repair issues (see question 7), research reports shall be published at the latest seven days before publication of the prospectus and at the earliest the first day after expiry of the subscription period.
For private placement, there are no similar guidelines but the advisers must consider applying restrictions on a case-by-case basis.
Content and distribution of research reports are regulated in section 3-10 of the STA with secondary regulations, implementing relevant provisions from the EU Market Abuse Directive (2003/6/EC) and Regulation 2003/125/EC. There are also provided supplementary guidelines by the Norwegian Stockbrokers’ Association. Norway has not yet implemented the EU Market Abuse Regulation (596/2014/EU) and it is uncertain when this will enter into force in Norway. A white paper is expected from the Ministry of Finance in the near future, but regulation has not yet been included in the EEA Agreement.
The managers or underwriters must take reasonable care to ensure that information is correct and that they fairly disclose their interests or indicate conflicts of interest concerning the financial instruments or the issuer to which that information relates. The underwriters or managers must therefore disclose in the reports all relationships and circumstances that may reasonably be expected to impair the objectivity of the research.
In connection with public offerings and IPOs, the managers will customarily prepare research guidelines outlining the principles to be followed for issuance of research reports in connection with the relevant transaction.
Are there any special rules that differentiate between primary and secondary offerings? What are the liability issues for the seller of securities in a secondary offering?
Pursuant to section 10-4 of the Norwegian Public Limited Liability Companies Act and section 10-4 of the Norwegian Private Limited Liability Companies Act, existing shareholders of a company have a preferential right to subscribe for new shares to be issued. The preferential rights in primary offerings may be deviated from subject to approval from a two-thirds majority of the shareholders at the company’s general meeting and provided that such deviation will not represent a breach of the company law principle of equal treatment of shareholders.
The principle of equal treatment as set out in applicable company and securities law is outlined in more detail in question 7.
There is no similar statutory preferential right or principle of equal treatment for secondary offerings.
In offerings involving the publication of a prospectus, there is also a difference between primary and secondary offerings with respect to the statement of responsibility that is included in the prospectus (ie, the declaration that, having taken all reasonable care to ensure that such is the case, the information contained in the prospectus is, to the best of the responsible party’s knowledge, in accordance with the facts and contains no omissions likely to affect its import). Section 7-18(1) of the STA specifically states that in the event there is an offer to subscribe or purchase shares from the company who has issued the shares offered (ie, primary offering) then the board of directors of such issuer is responsible for the prospectus and consequently must sign the statement of responsibility in the prospectus. With respect to secondary offerings, there is no similar requirement for the board of directors of the seller or offeror to sign the prospectus and it is assumed (and common practice) that the statement of responsibility in such cases may be signed by the seller or offeror as the responsible entity (as opposed to the individual board members). In IPO prospectuses that comprise both a primary offering by the issuer and a secondary offering by the existing shareholders, the board of directors of the issuer will usually assume sole responsibility for the entire prospectus while the selling shareholder only provides a statement confirming that the shares in the secondary offering are being offered free of any liens or encumbrances.
What is the typical settlement process for sales of securities in a public offering?
All listed companies in Norway have their shares registered electronically in book-entry form in the Norwegian Central Securities Depository (VPS) and settlement of securities transactions is usually carried out automatically through the VPS.
The typical settlement process for sales of securities in a public offering will depend on whether the offering is done as a pure share sale (secondary offering) or as a share sale in connection with a primary offering. The latter will usually entail that settlement is not carried out until the share capital increase pertaining to the issue of shares in the primary offering has been registered with the Norwegian Register of Business Enterprises while in the event of a pure secondary offering, settlement will usually take place directly following the payment date.
Are there specific rules for the private placing of securities? What procedures must be implemented to effect a valid private placing?
Private placements are very common in the Norwegian market as they allow for capital raisings in a timely and cost-efficient manner. This applies both to listed and unlisted companies.
When completing a private placement, the issuer and its advisers must observe the principle of good business conduct as further outlined in question 8 and applicable prospectus rules. Except for that, there are no particular statutory securities law provisions regulating private placements.
The most relevant prospectus exemptions used in private placements in the Norwegian market are: offers made to fewer than 150 non-professional investors; and offers with a minimum subscription of at least €100,000.
In the event that the securities issued in the private placement are to be admitted to trading on a regulated market, the private placement will trigger an obligation to publish a prospectus regardless of whether the above exemptions are applicable if the capital increase pertaining to the private placement amounts to at least 10 per cent of the number of shares already listed in the same class of shares, calculated over a 12-month period (see section 7-5, No. 1 of the STA). Such listing prospectus must be published before the first day of listing of the new shares.
There are no specific procedures that must be implemented to effect a valid private placement.
It should be noted that for companies with shares listed on the Oslo Stock Exchange or Oslo Axess, the Oslo Stock Exchange will monitor compliance with the securities law principle of equal treatment of shareholders, which follows from section 5-14 of the STA and the Continuing Obligations for Stock Exchange Listed Companies and is similar to the equal treatment principle set out in Norwegian company law. The provisions read:
(1) Issuers of financial instruments admitted to trading on a Norwegian regulated market shall treat the holders of their financial instruments on a non-discriminatory basis. Issuers must not subject the holders of the financial instruments to discriminatory treatment that is not objectively based in the issuer’s and the holders’ mutual interests.
(2) When trading in or issuing financial instruments or rights to such instruments, the issuer’s governing bodies, officers or senior employees must not take measures that are liable to provide them, individual holders of financial instruments or third parties with any unreasonable advantage at the expense of other holders or the issuer. The same applies to the trading in or issuance of financial instruments or rights attached to such instruments within the group of which the issuer is a part.
Similar rules have also been included in the continuing obligations of companies listed on Merkur Market.
Subsequent repair offerings directed towards existing shareholders who were not invited to participate, or not allocated shares in the private placement, are common practice in the Norwegian market as a mitigating factor with respect to a private placement’s inherent deviation from the equal treatment principle.
As follows from the provision on equal treatment above, there is no differentiation between primary and secondary offerings.
What information must be made available to potential investors in connection with a private placing of securities?
Private placements in the Norwegian market are, as described in question 7, often subject to an exemption to publish an offering prospectus. As long as there is no obligation to publish a prospectus, there are no formal requirements for specific information to be made available to potential investors.
However, as set out above, section 3-9 of the STA includes a general provision on good business conduct in securities transactions, which set out that conduct of business rules shall be observed in approaches addressed to the general public or to individuals that contain an offer or encouragement to make an offer to purchase, sell or subscribe to financial instruments, or that are otherwise intended to promote trade in financial instruments. The requirement of good business conduct must be seen together with customary market practice. If the information provided to potential investors is in line with customary market practice, then the provision will most likely be satisfied with respect to this point. Usually, potential investors in a private placement will receive a company or investor presentation or similar describing the company, the market, risk factors, key financials and transaction details.
Transfer of placed securities
Do restrictions apply to the transferability of securities acquired in a private placing? And are any mechanisms used to enhance the liquidity of securities sold in a private placing?
Generally, there are no transfer restrictions on shares in Norwegian public companies unless this specifically follows from a particular agreement among shareholders or the company’s articles of association. For private limited liability companies, the Norwegian Private Limited Liability Act provides that the board of directors must consent to any share transfers unless otherwise follows from the articles of association; however, any refusal to consent must have reasonable cause.
There are no specific statutory restrictions that apply to the transferability of securities acquired in a private placement.
Participants in private placements may in some cases enter into lock-up agreements with the seller or issuer or managers.
There are no specific mechanisms used to enhance the liquidity of securities sold in a private placement.
What specific domestic rules apply to offerings of securities outside your jurisdiction made by an issuer domiciled in your jurisdiction?
Issuers domiciled in Norway will, of course, be bound by Norwegian company law, including the principle of shareholders’ preferential right. However, there are no specific domestic Norwegian rules that regulate offerings of securities outside of Norway made by an issuer domiciled in Norway. Issuers in Norway carrying out offerings outside of Norway must consider applicable foreign securities law. In the event that the offering is carried out in another EEA member state by an issuer domiciled in Norway, the NFSA will be the relevant prospectus authority unless an application is made and approved for the transfer of the prospectus authority to the relevant EEA member state where the offering is being made.
Offerings of other securities
What special considerations apply to offerings of exchangeable or convertible securities, warrants or depositary shares or rights offerings?
As long as the offering comprises tradable securities, which will normally include convertible bonds, warrants and depositary shares, the prospectus rules will apply.
Rights offerings in the form of an offer to existing shareholders will likely be subject to the simplified prospectus disclosure regime pursuant to the STR section 7-20 of the EU Prospectus Regulation (EC/809/2004) article 26a. With regard to the implementation of the EU Prospectus Regulation (2017/1129/EU), see question 1.
Types of arrangement
What types of underwriting arrangements are commonly used?
In the Norwegian market, the typical international underwriting arrangement, whereby the underwriter (usually an investment bank or similar) purchases the securities in the offering in order to resell them to potential investors, is not common other than in international IPO processes involving Norwegian issuers (which is seldom).
The most common underwriting arrangement in Norway is that the issuer’s financial adviser or the investment firm assisting the issuer in carrying out the offering establishes an underwriting syndicate among the potential participants in an offering or private placement, most commonly the largest shareholders. The investment firm is not usually part of the syndicate. The syndicate guarantees part or full subscription of the shares to be offered in the event that the offer is not fully subscribed. The underwriting agreements seldom include payment guarantees.
What does the underwriting agreement typically provide with respect to indemnity, force majeure clauses, success fees and overallotment options?
Underwriting agreements will depend on the type of arrangement. With respect to the typical Norwegian arrangement (being subscription guarantees from certain investors as described in question 12), indemnification of the underwriters, termination in the event of force majeure, success fees and overallotment options will rarely be included in the underwriting agreement. These types of provisions may, however, be included in the transaction manager’s engagement letter or other agreements between the issuer and the manager.
What additional regulations apply to underwriting arrangements?
Typical underwriting arrangements, as described in question 12, are subject to certain regulations with respect to disclosure of information.
In the event of a primary offering, the issuer is required, pursuant to Norwegian company law, to disclose the amount of the underwriting or guarantee commission paid in the general meeting’s resolution to issue the shares.
In addition, for companies listed on Oslo Børs, Oslo Axess and Merkur Market there is an obligation in the Continuing Obligations for Stock Exchange Listed Companies and the Continuing Obligations for Companies Listed on Merkur Market to provide the market with information on any underwriting consortium, including the members of the consortium and their guarantee obligations, as well as information on any advance subscription or allotment.
Ongoing reporting obligations
Applicability of the obligation
In which instances does an issuer of securities become subject to ongoing reporting obligations?
Issuers with financial instruments admitted to trading on a regulated market or multilateral trading facility in Norway will be subject to reporting obligations as set out in the STA. Certain reporting obligations apply from the time the issuer has applied for listing.
Unlisted issuers may be subject to reporting obligations pursuant to agreement with investors. This is often seen in bond agreements in the Norwegian market.
Information to be disclosed
What information is a reporting company required to make available to the public?
The STA differentiates between ongoing and periodic reporting (duty of disclosure).
Issuers with financial instruments listed on a regulated market or multilateral trading facility or issuers who have applied for listing on a regulated market must, at their own initiative, immediately publish inside information, unless an exemption to delay disclosure applies. Delayed disclosure may be applied in order not to prejudice the issuer’s legitimate interests, provided that the public is not misled by the delay and information is kept confidential.
Furthermore, from the time of listing the issuer becomes subject to a number of specific reporting requirements set out in the Continuing Obligations for Stock Exchange Listing and the Continuing Obligations for companies admitted to trading on the Merkur Market. These rules require, for instance, the companies to immediately disclose the following information related to corporate actions, etc, as per the Continuing Obligations for Stock Exchange Listed Companies section 3.2:
1. Any changes in the rights attaching to the company’s shares, including any changes in related financial instruments issued by the company;
2. The issue of new loans, including any guarantees or collateral provided in that connection. If the issue is in respect of a convertible or subordinated loan, this must be stated. Any issue of similar convertible rights must also be made public;
3. Proposals and decisions by the board of directors, general meeting or other corporate body on a) dividends; b) mergers; c) demergers; d) increases or decreases in share capital; e) mandates to increase the company’s share capital; and f) share splits or reverse splits. Information on allocation and payment of dividends, as well on issuance of shares, including information on any arrangements for allotment, subscription, cancellation and conversion;
4. Proposals and decisions on the issue of subscription rights;
5. In the event of the issue of a loan or an increase in share capital as mentioned in items 1, 2 and 3, information shall be given in particular on any underwriting consortium, including the members of the consortium and their guarantee obligations, as well as information on any advance subscription or allotment;
6. Registered change of company name;
7. Registered change in the nominal value of the company’s shares;
8. Decisions on changes to the company’s board of directors, managing director or financial director, including notice of resignation given by any such person.
The above disclosure requirements apply at all times, regardless of the opening hours of the relevant marketplace.
The relevant regulated market is responsible for carrying out supervision of the compliance with the requirements related to the ongoing disclosure requirements.
The STA requires issuers with Norway as the home state and who have securities admitted to trading on a regulated market to publish annual and half-year financial reports. The NFSA is the authority that carries out supervision of this requirement.
Finally, the STA and applicable stock exchange rules require issuers to report certain information to the relevant stock exchange or the NFSA, such as if the auditor finds that the financial statements should not be approved as they stand, or the auditor has made comments, clarifications or audit reservations in the audit report; see section 5-5 (5).
What are the main rules prohibiting manipulative practices in securities offerings and secondary market transactions?
The main rules prohibiting manipulative practices in securities offerings and secondary market transactions are set out in the STA section 3-8. Pursuant to such, no one must undertake market manipulation in connection with financial instruments.
Market manipulation is defined in the STA section 3-8 as:
1. transactions or orders to trade which give, or are likely to give, false, incorrect or misleading signals as to the supply of, demand for or price of financial instruments, or which secure the price of one or several financial instruments at an abnormal or artificial level, unless the person or persons who entered into the transactions or issued the orders to trade establish that their reasons for doing so are legitimate and that these transactions or orders to trade conform to conduct accepted by Finanstilsynet as market practice on the market concerned, or
2. transactions entered into or orders to trade given in relation to any form of misleading conduct, or
3. dissemination of information through the media, including the internet, or by any other means, which gives, or is likely to give, false, incorrect or misleading signals as to financial instruments, including the dissemination of rumours and news, where the person who made the dissemination knew, or should have known, that the information was false, incorrect or misleading. In respect of journalists acting in their professional capacity, such dissemination of information is to be assessed taking into account the rules governing their profession, unless those persons derive, directly or indirectly, an advantage or profits from the dissemination of the information concerned.
Norway has not yet implemented the new EU Market Abuse Regulation and it is still unclear when this will take place, see question 4.
Permitted stabilisation measures
What measures are permitted in your jurisdiction to support the price of securities in connection with an offering?
Price stabilisation may, depending on the individual circumstances, constitute market manipulation. However, pursuant to the STA sections 3-12, the prohibition against market manipulation does not apply to price stabilisation undertaken in accordance with the safe harbour provisions set out in EU Regulation 2273/2003 on exemptions for buy-back programmes and stabilisation of financial instruments. As set out in question 4, the EU Market Abuse Regulation, including the provisions replacing EU Regulation 2273/2003, has not yet been implemented in Norwegian law.
Price stabilisation is usually carried out in connection with IPOs by overallotment to one of the lead managers.
Liabilities and enforcement
Bases of liability
What are the most common bases of liability for a securities transaction?
Liability cases in connection with securities transactions are, and have historically been, limited in number. Thus, it is generally difficult to single out the most common bases of liability for a securities transaction. Participants in securities transactions must naturally adhere to the market abuse rules.
Persons or companies may be subject to civil liability and claims from investors on the basis of lack of information or misleading or untrue information in investor documentation.
What are the main mechanisms for seeking remedies and sanctions for improper securities activities?
The STA includes a number of alternative mechanisms for seeking remedies and sanctions for improper activities, including administrative proceeds such as criminal prosecution.
Wilful or negligent violation of the STA’s provisions on market abuse and prospectus rules may be subject to sanctions such as surrender of gain, fines and imprisonment. Any such violation will at first be investigated by the NFSA, but criminal prosecution is carried out by the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim).
The NFSA may impose a violation penalty in the form of fines if an issuer violates the obligations of issuers under the STA’s prospectus rules.
In the event that anyone has incurred a financial loss owing to a third party’s improper securities activities, civil litigation by way of lawsuits may also be relevant, depending on the circumstances.