How to complete a share transfer

Posted by:
Stephen Øyhovden
November 4, 2021

Aksjeloven regulates the transfer of shares unless otherwise agreed. In any case, we recommend entering into a purchase and sale agreement to secure the interests of both parties with a successful and predictable trade.

Why enter into a purchase and sale agreement?
The purpose of a purchase and sale agreement is for the parties to avoid surprises, later disagreements and, in the worst case, to end up as disputing parties in the court system.

Before the transfer takes place, it should be agreed whether there are liabilities, obstacles to competition law, consent requirements, tax law matters, financing issues or licensing requirements.

What should be regulated in a purchase and sale agreement?
As a rule, it takes a short time from the sale is agreed upon until the company's shares are transferred. Such an intermediate period can create challenges and disputes in the aftermath of the sale. As there may be uncertainty in connection with how the purchase price is to be calculated.

As a general rule, the seller is responsible and bears the risk for the operation of the company in this intermediate period. Both when it comes to value creation and value production. Therefore, we recommend including a clause in the agreement that regulates how the values ​​and losses that arise in the intermediate period are to be distributed between the parties.

Other key issues that should be included in the agreement:

  • Access to distribute dividends
  • Access to the implementation of distributions
  • Guarantee
  • Duties and rights of the various parties

Liabilities and conflicting rights
Should the shares and the company's underlying objects be non-liable, or are there circumstances that could hinder the sale or create problems in retrospect? This is also important to clarify in the agreement.

Before the sale is completed, questions of pre-emptive rights in the event of a share transfer, shareholder agreements or articles of association must be clarified. As well as whether there are pre-emptive rights related to homes or apartment buildings owned by the company. In general, it is important to have a thorough review of the company prior to the transfer.

Read more about pre-emptive rights here.

Consent requirements for transfer of shares
Before the transfer of the shares can be completed, it should be examined whether the sale of the shares requires the consent of the company's contracting parties. If the transfer requires consent, it is important to have a good dialogue, and that all clarifications take place prior to the sale of the shares. That way you avoid problems along the way and afterwards.

It is equally important to investigate internally whether special consent is required from the company's board when it comes to accepting new shareholders.

Competition rules for transfer
If the parties involved have high turnover, the competition rules may apply. The Norwegian Competition Authority (Konkurransetilsynet) must be notified if certain turnover limits are exceeded.

If the competition rules are broken, the parties risk having to pay infringement fees.

Financing of the transfer
The responsibility for financing the transfer lies with the seller and buyer. If seller credit is to be used in combination with bank financing, it will be important to clarify the requirements for security, and whether a comprehensive security is possible to establish.

The bank usually requires a mortgage on objects, where other creditors - such as the seller, are given priority after the seller.

Prioritization, disagreement and collateral can quickly create fertile ground for delays and problems around the implementation of share transfers.

Do you pay tax on the transfer of shares?
The tax conditions surrounding the transfer of shares should be assessed and clarified in advance. With the right steps in the sales process, the seller can get a tax exemption according to the exemption method. It can take several months to establish a suitable tax structure on the seller side, so be early!

We strongly recommend using a tax advisor for this.

Do not forget that if you or your holding company make investments in a start-up company, you can save a lot of money in tax deductions. Read more about this here.

We strongly recommend using a tax advisor for this.

Has the company obtained all permits and licenses?
Prior to the share transfer, it must be investigated whether the company holds licenses that are linked to natural persons. As well as whether these are transferable to the buyer. Not least, it should be clarified whether the company complies with current environmental legislation and has all the necessary permits.

If the rules on publication of information are applied, for example the obligation to notify the Oslo Stock Exchange, it should be clarified in the purchase and sale contract.

Are you planning to sell or buy shares? Or maybe you have some questions related to the transfer of shares? Contact us and we will be happy to help you.

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