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Preliminary agreements

What preliminary agreements are commonly drafted?

The most common types of preliminary agreement include confidentiality agreements, exclusivity agreements and letters of intent.

A confidentiality agreement will normally be entered into before the potential buyer starts a due diligence process. Such an agreement can also be entered into before the start of negotiations for a share or asset purchase agreement. An exclusivity agreement will normally be combined with a letter of intent, which can:

  • be general and related to shares or assets being sold, as well as pricing; or
  • contain detailed provisions similar to term sheet. 

Principal documentation

What documents are required?

Norwegian law does not require parties to draw up agreements in writing; however, parties normally always draw up share or asset purchase agreements. 

In the case of statutory mergers, the Companies Act requires several corporate documents to be drafted, such as a merger plan and an assessment from the board of directors.

For publicly listed companies, a written offer document must be submitted by the bidder in accordance with Chapter 6 of the Securities Trading Act.

Which side normally prepares the first drafts?

Generally, the purchaser prepares the first draft. Where there is an auction process, the seller normally prepares the first draft. 

What are the substantive clauses that comprise an acquisition agreement?

An acquisition agreement will normally include:

  • the object of the purchase, which may be shares or assets;
  • the purchase price, including any adjustment mechanisms (eg, working capital or cash or debt earn outs) and the method and timing of payment;
  • conditions precedent for closing;
  • buyer’s and seller’s covenants, including pre-closing covenants for the interim period between signing, closing and post-closing covenants;
  • a description of the due diligence to be conducted by the buyer;
  • undertakings on how to conduct business from signing to closing;
  • non-compete and non-solicitation clauses;
  • representations and warranties, mainly made by the seller;
  • specific indemnities and indemnification mechanisms for breaches of covenants, representations and warranties; and
  • general provisions relating to confidentiality, termination, assignment, costs, governing law, dispute resolution and legal venue. 

What provisions are made for deal protection?

The deal protection provisions include an exclusivity agreement for the time needed to negotiate the deal. In public deals, an exclusivity agreement may be more complicated, as it may question whether this will be in the interest of the target. In public deals, pre-acceptance by major shareholders is common when some major shareholders are willing sellers. 

Closing documentation

What documents are normally executed at signing and closing?

A transaction normally has two steps. The first step is signing, when the asset or share purchase agreement (including any annexes and appendices) is executed.

Subject to the conditions precedent, the second step is closing. At closing, the transfer of the shares or assets will be executed. Signing and closing commonly take place a few months apart.

At closing, a memorandum of closing is commonly executed, along with evidence of the conditions precedent and documents relating to the transferred object. For instance, an updated and executed shareholder register where the purchaser is recorded as a shareholder will normally be executed.

Are there formalities for the execution of documents by foreign companies?

In general, no. Foreign entities are treated as domestic entities. However, it is common practice to provide evidence that the person executing the document is entitled to do so by providing a certificate from the relevant jurisdiction.

Further, in the case of some assets recorded in Norwegian public registers, such as real estate and aircraft, the execution and signature of title deeds and mortgage deeds must be accompanied by an apostille confirmation from a notary public in the relevant jurisdiction. 

Are digital signatures binding and enforceable?

Yes. A signature on a digital scanned document is treated the same as a signature on a physical executed copy. Thus, a document will be equally binding and enforceable regardless of whether the document is signed physically or electronically. However, certain assets that are recorded in Norwegian public registers, such as real estate and aircraft, are subject to special provisions that require the transfer of the title to be made in writing. The same applies for an enforceable debt certificate. 

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