Private placingsSpecific regulation
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.Investor information
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.