Legal guide for company directors and CEOs in Norway

Because environmental, social and governance (ESG) is such an increasing focal point of good corporate governance, we address ESG duties and responsibilities first. For more general duties and responsibilities of directors and CEOs, please scroll down the page or use the navigator to jump to the relevant section. 

Yes. According to the Norwegian Private and Public Limited Liability Acts, the directors are responsible for the management of the company and for ensuring its proper organisation. This means that the directors have the primary responsibility of compliance with relevant law, including ESG regulations such as environmental, employment and reporting requirements. In Norway, ESG-related regulations are stipulated in several laws, for example:

The Working Environment Act

• The Pollution Act 
• The Sale of Goods Act
• The Human Rights Act
• The Transparency Act
• The Equality and Discrimination Act 

Additionally, the directors are required to act in the “best interest of the company” when executing management tasks. This may impose an obligation to consider ESG in the performance of tasks, depending on each company, their purpose, and other circumstances. Hereby, the directors are required to identify ESG issues which need to be addressed, propose appropriate measures and ensure the proper implementation of such measures.  

Yes – this is covered in question 1.

Some of the recent changes worth mentioning:

• The EU Taxonomy Regulation. The taxonomy has been adopted in Norwegian legislation through the Act on Disclosure of Sustainability Information in the Financial Sector, which came into force on January 1, 2023.
• The Norwegian Transparency Act, which impose on certain companies’ requirements regarding due diligence on the company’s supply chains, and to provide information regarding the findings of the due diligence.
• CSRD – Corporate Sustainability Reporting Directive. The CRSD requires companies to report on the impact of corporate activities on the environment and society. The directive is expected to be adopted in Norwegian legislation during 2024.  

As of January 2024, only certain companies are obliged to prepare and disclose a report on non-financial and diversity information. However, CSRD is expected to be adopted in Norwegian legislation by 2024. The implementation of CSRD will have implications on what number of companies who is obliged to prepare a report and a significant expansion in the information required to be reported.  

In Norway, companies normally have a single board of directors. The role of the board is to supervise the management of the company. In most cases the management responsibility lies with the corporate body “daglig leder”, which normally translates to CEO or “managing director”. However, for private limited liability companies, having a managing director is not mandatory, opposed to public limited liability companies. If the board chooses not to have a managing director, the managing responsibility lies with the board itself.   

For private limited companies (“aksjeselskaper”), the board must consist of at least one person. If the board consists of only one person, that person is also appointed as the chair of the board. If the company has a corporate assembly (“bedriftsforsamling”), there is a requirement that the board should consist of at least five people. In such case, the corporate assembly chooses the chair of the board. In other cases, the chair of the board is chosen by the board itself, if not elected by the general meeting.

For public limited companies (“allmennaksjeselskaper”), there is a minimum requirement that the board consists of at least three people. If the company has a corporate assembly, there is a requirement that the board should consist of at least five people. 

The members of the board of directors are normally non-executive directors, the reason for this being that the executive powers and responsibility lies with the managing director. However, if the company does not have a managing director, the executive powers and responsibilities lies with the board of directors.

The role of the board of directors is to ensure proper organization and management of the company. Furthermore, the board of directors must draw up guidelines and budgets for the company’s business. The board of directors is obliged to keep itself informed of the company’s financial position and to ensure that activities, accounts, and capital management are subject to adequate control.

The board of directors is also required to supervise the day-to-day management and the company’s business in general.

Finally, If the equity is deemed insufficient relative to the risk and scope of the company’s business, the board of directors must promptly address the issue. The board of directors must within a reasonable time call a general meeting and provide a report on the company’s financial status and propose remedying measures. If the board of directors fails to identify measures to ensure adequate equity, it must propose the dissolution of the company. 

According to Norwegian company law, the only requirement for being appointed as a director is that the person is of legal age. In addition, it is required that the managing director and at least half of the board members must be residents in an EEA state, the United Kingdom of Great Britain, or the Swiss Confederation.

Furthermore, Norwegian company law includes specific provisions regarding gender composition requirements for the board of directors. These rules apply to all public private limited liability companies and to private limited liability companies that, on the balance sheet date for the annual financial statements, either have total operating and financial income exceeding NOK 50 million or employ more than 30 individuals.    

As a starting point, the directors of the board are appointed by the general assembly. Meanwhile, some exceptions may apply:

• For some companies, the employees or the corporate assembly may have a right to appoint one or more of the directors.
• It can be stipulated in the articles of association that the general meeting's election right according to the main rule shall be transferred to others. However, more than half of the board members shall still be elected by the general meeting unless the election right is transferred to a statutory corporate body.

The managing director is appointed by the board of directors, unless the articles of association stipulates that this authority lies with the general assembly. Furthermore, in the case of a company with a corporate assembly, the articles of association may stipulate that the appointing authority lies with the corporate assembly. 

Members of the Board of Directors

A director is appointed for two years, unless otherwise stated in the articles of association. However, the director cannot be appointed for more than four years according to Norwegian company law. The term of service is calculated from the election, unless otherwise specified. It terminates at the conclusion of the regular general meeting in the year the term of service expires. The director may choose to resign before the term of service is due.

The director may also be removed by the appointing authority. The appointing authority may remove the board member without specific cause. There is no requirement for a justifiable reason; it is sufficient that the board member is no longer desired.

Managing director

As a starting point, the managing director is protected by employment security under the Working Environment Act, provided that an employment contract exists between the managing director and the company. However, it is common for the managing director to waive employment security, in exchange for the agreement regulating issues such as back pay or similar matters. Consequently, the managing director can be dismissed by the board if the board deems it reasonable for the company.

The board of directors as a corporate body jointly represents the company and has authority to sign on behalf of the company. The board of directors may authorize an individual director or the managing director to sign on behalf of the company. Such an authorization may also be stated in the company’s articles of association.

As for the managing director, the authorization to represent the company is limited to issues that are part of the “daily management”. What matters form part of the “daily management” must be assessed on a case-by-case basis considering the company’s operations and other relevant factors.   

The operation of the board is quite flexible, and generally there are few requirements in this regard.

It lies with the managing director to prepare matters to be addressed by the board in consultation with the chairman of the board. All issues shall be prepared and presented in a manner that provides the board with a satisfactory basis for consideration. Board meetings are duly notified in an appropriate manner and with an appropriate deadline.

The board shall deliberate on matters in meetings, unless the chairman of the board determines that the issue can be presented in writing or addressed through another means. It is required that the method of handling shall ensure confidence and assurance.

The managing director has both the right and an obligation to participate in the board’s consideration of matters and to express opinions, unless otherwise determined by the board in each specific case.

The board may make decisions when more than half of the members are present or participating in the board proceedings, unless stricter requirements are stipulated in the articles of association. However, the board cannot make a decision without providing all board members with the opportunity to participate in the deliberation of the matter to the extent possible. A decision by the board requires that the majority of the board members participating in the deliberation of a matter have voted in favour. In case of a tie, the decision supported by the chairperson prevails. However, those who have voted in favour of a proposal involving a change must always constitute more than one-third of all board members.

The board's deliberation of matters shall be recorded in minutes. The minutes shall specify the time and place of the meeting, the attendees, the method of handling, and the matters discussed. If the board's decision is not unanimous, it shall be noted who voted for and against a matter. If a board member or managing director disagrees with the decision, they may request to have their opinion recorded in the minutes.

Appointment as a member of the board of directors does not itself create a contractual relationship between the director and the company. The director’s entitlement to remuneration is stipulated in the articles of association or adopted by the general assembly.

Regarding managing directors, it is common, but not required, that the company enters a contract of employment with the managing director. Alternatively, the board will enter a service agreement with the managing director on behalf of the company, unless it is stipulated in the articles of association that this authority lies with the general assembly. The service agreement will govern the rights and obligations of the managing director towards the company.   

Under Norwegian company law, conflict of interest is defined as an “issue that hold such significant importance for oneself or for any closely related individual that the member must be considered to have a prominent personal or financial vested interest in the matter”. The legislation states that the board of directors cannot participate in the handling of such matters, and a central aspect of the case law-based duty of loyalty, also entails that the members of the board of directors must refrain from prioritizing their personal interests over those of the company.

While Norwegian statutory law does not contain specific provisions that outright prohibit or limit the members of the board of directors' participation in competing businesses, the duty of loyalty implies that the board members must exercise caution regarding potential conflicts of interest between the company’s interests and those of the board members, including participation in competing businesses. Additionally, there are no restrictions preventing the inclusion of boundaries for involvement in competing businesses within the engagement agreement of the board of directors.

The general duties of the board of directors are governed by various statutory provisions, which, in a simplified manner, includes the following:

Organization and management of the company.

The board of directors are required to ensure that the company is properly organised, and for this purpose establish plans and budgets, as well as guidelines for the company’s operations. They are also required to report on the company's financial position and obligations, and to oversee operations, accounting, and asset management.

Supervision of the company.

The board of directors are required to supervise the daily management and other activities of the company.

Ensuring sufficient capital in the company.

The board of directors must ensure that the company has adequate capital at any given time and are required to act in the event of insolvency. In accordance with Norwegian company law, it is mandatory for the company to maintain sufficient equity and liquidity relative to the risk and scope of the company’s operations. Should the equity fail to align with the risk and scope of the company’s operations, the board of directors must promptly address the matter. If this is not done, and the board fails to implement necessary measures, the board shall propose the dissolution of the company. 

The board of directors primarily owe obligations to the company and its shareholders. These obligations include the duty to act in the best interests of the company, exercise care and caution in managing the company, and ensure that the activities of the company comply with relevant laws and regulations.

Furthermore, the board of directors are obligated to adhere to the company’s articles of association, and to act loyally towards the company. Board members may be held liable for violations of their duties in accordance with the Norwegian Private Limited Liability Companies Act, and for violations of their duties in accordance with the company’s internal guidelines.    

If the equity of the company is deemed insufficient relative to the risk and scope of the company’s business, the board of directors must promptly address the issue. The board of directors must within a reasonable time call a general meeting and provide a report on the company’s financial status and propose remedying measures. If the board of directors fails to identify measures to ensure adequate equity, it must propose the dissolution of the company.

These obligations may be said to represent a shift in the director’s duties. As outlined in question 11, the director’s owe duties to the stakeholders and the best interests of the company. In the case of financial difficulties, directors must exercise heightened diligence and prudence in their decision-making to safeguard the interests of creditors and shareholders. 

The company, a shareholder or others may hold the general manager and/or a member of the board of directors personally and jointly liable for any damage which they, in the capacity mentioned, have intentionally or negligently caused such party.

The managing director or a member of the board of directors may also be punished by fines or imprisonment for up to one year for intentional or negligent infringement of any provision issued in or pursuant to the Norwegian Private Limited Liability Companies Act. Complicity will be similarly punished. 

In Norway, companies may procure directors liability insurance. This insurance covers losses incurred by a board member’s negligence. Intentional misconduct will not be covered by the insurance.

The general meeting may also adopt a resolution granting discharge of liability, or a resolution that governs or restricts the liability to board members. Such a resolution absolves the board member from liability towards the company. However, it is worth noting that the company may still pursue claims arising from circumstances about which the general meeting did not receive accurate and complete information when the resolution was adopted. It must also be noted that the resolution of discharge of liability is only effective between the company and the board members. The shareholders and others may still hold the company liable.