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Due diligence requirements
What due diligence is necessary for buyers?
Norwegian law does not require a party to perform due diligence. However, if a seller encourages a purchaser to conduct due diligence and the purchaser refuses to do so, failure to conduct due diligence can limit a claim that the purchaser may have against the seller. Thus, due diligence is common. Depending on the size and complexity of the transaction, the purchaser normally conducts legal, financial, technical and tax due diligence.
What information is available to buyers?
Any document filed with the Norwegian Register of Business Enterprises and the Norwegian Register of Real Properties (eg, articles of association, formation documents, annual accounts, annual reports and titles to real properties) are publicly available.
What information can and cannot be disclosed when dealing with a public company?
Section 3(3) of the Securities Trading Act was amended as part of Norway’s implementation of the EU Market Abuse Directive (2014/596/EC). The directive was originally adopted by the European Commission in 2003. In 2014 a new market abuse regulation was published, which has a broader scope than the Market Abuse Directive as it applies to any financial instrument, either traded or for which a request is made.
Section 3(3) of the Securities Trading Act states that:
“persons possessing inside information may neither directly or indirectly, for own or third party account, subscribe, purchase, sell or exchange financial instruments or incite others to carry out such transactions. The first paragraph applies only to misuse of inside information as mentioned in section 3-2.”
Section 30 of the EU Market Abuse Regulation’s preamble noted that:
“the mere fact of having access to inside information relating to another company and using it in the context of a public takeover bid for the purpose of gaining control of that company or proposing a merger with that company should not be deemed to constitute insider dealing.”
During the preparatory work for the amendment to Section 3(3) of the Securities Trading Act, it was suggested that the word ‘misuse’ should be interpreted in line with the EU Market Abuse Regulation.
A bidder that possesses the above information due to due diligence will normally be placed on an insider list and prohibited from trading on this information (except for the purpose of the placed bid).
How is stakebuilding regulated?
Stakebuilding’ is the process of increasing the number of shares in a publicly listed company, often in order to prepare a bid to take control of that company. When the acquirer reaches certain thresholds, notification must be given via the Oslo Stock Exchange. The thresholds are a shareholding of 5%, 10%,
15%, 20%, 25%, one-third, 50%, two-thirds or 90%. These thresholds are outlined in Chapter 4 of the Securities Trading Act. If, due to stakebuilding the acquirer owns shares representing more than one-third of the voting rights, it must make an offer to buy the remaining shares.
If a shareholder represents more than 90% of the shares and voting rights in a publicly listed company, it must acquire the remaining shares by compulsion. Pursuant to Section 6(22) of the Securities Trading Act, an offeror that acquires more than 90% of the target company’s voting shares after making a voluntary bid may decide to force the transfer of the remaining shares without making a prior mandatory bid, provided that:
- the forced transfer is initiated at the latest four weeks after the acquisition of shares by voluntary bid;
- the price of the remaining shares corresponds at least to the lowest bid price that would have resulted from a mandatory bid; and
- the settlement is guaranteed by a financial institution authorised to provide such guarantees in Norway.
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