Restructuring & Insolvency

The main legislation applicable to insolvencies and reorganisations in Norway are the Bankruptcy Act of 1984 and the Satisfaction of Claims Act of 1984. The Bankruptcy Act regulates both judicial debt negotiation proceedings and winding-up proceedings, and mainly provides procedural rules, including criteria for the opening, handling and finalisation of the respective proceedings. The Satisfaction of Claims Act includes, inter alia, rules on the bankruptcy estate’s automatic seizure of the debtor’s assets, avoidance (clawback or annulment of transactions), how to treat a bankrupt debtor’s contracts, as well as rules on creditors’ claims and the order of priority for such claims.

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Banks, insurance companies and certain other financial institutions, as well as parent companies of such entities, cannot be subject to insolvency proceedings pursuant to the Bankruptcy Act. Insolvency proceedings in such entities are governed by the Guarantee Schemes Act of 6 December 1996, No. 75. The act gives the government the authority to place financial institutions under public administration if they cannot fulfil their obligations as they fall due and they do not have sufficient funds to secure future operations, or if they are not capable of fulfilling capital adequacy requirements.

If possible, the board of directors will be heard before such actions are taken. If public administration proceedings are opened in a financial institution that is a parent company in a financial group, the other companies in that financial group may also be included in the proceedings.

According to the Satisfaction of Claims Act, with only a few exceptions for personal bankruptcies, all of the debtor’s assets may be subject to enforced recovery actions from creditors, and a bankruptcy estate automatically seizes all of the debtor’s assets. Examples of assets that are exempt from seizure in personal insolvency proceedings are certain personal assets as well as certain monetary contributions that the debtor receives while under insolvency proceedings.

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There is no specific insolvency legislation for government-owned enterprises and insolvent public enterprises.

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No; however, specific legislation applies to banks and financial institutions (see question 2).

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Insolvency proceedings shall be opened by the district court where the debtor has its main office or domicile. The court presides over the proceedings opened by that court, and all matters concerning the proceedings are heard by that same court, including ancillary proceedings (for example avoidance claims or disputes over a creditor’s claim).

Most court orders may be appealed within a month of their passing. An appellant has an automatic right of appeal, and does not need to obtain permission to do so. The appellant must, however, have a legal interest in the matter. There is no requirement to post security to proceed with an appeal; however, the appellant must pay a court fee. The size of the court fee varies and depends on which type of decision is appealed, whether a court hearing is held and for how many days, etc.

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A debtor wanting to commence a voluntary liquidation case must be insolvent (ie, be both illiquid and have negative net assets). The debtor must deliver a written petition for bankruptcy to the court, supported by a set minimum of documentation. The court rarely denies a petition for voluntary liquidation.

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A debtor who cannot meet its financial obligations as they fall due may file for a formal, judicial debt negotiation proceeding, even if the debtor is not insolvent. The petition to the court to open proceedings must be made in writing, and must fulfil certain contents and documentation requirements set out by the Bankruptcy Act. The court will usually ask the debtor to put up security to cover the costs of the initial proceedings.

There are no specific requirements for a debtor commencing a voluntary, out-of-court reorganisation.

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In a voluntary debt negotiation proceeding, the creditors have to be treated equally. There are no other mandatory features; however, the plan must be accepted by all creditors. In a compulsory debt negotiation proceeding where the debtor suggests a compulsory composition, the minority voters can be crammed down by the majority voters. To qualify for a cram-down, the plan must provide a minimum dividend payment of 25 per cent to all unsecured creditors with claims not ranking in priority, and the reorganisation plan requires a majority both in number of creditors and of the total amount of all claims filed to be binding on all creditors (ie, ‘double majority’). The main requirements for reaching a double majority in a compulsory composition are (the numbers referring to creditors and claims that are granted voting rights):

• if the dividend payment is at least 50 per cent, the plan must be accepted by at least three-fifths of the creditors holding at least three-fifths of the total debt; or
• if the dividend payment is less than 50 per cent (but not below 25 per cent), the plan must be accepted by at least three-quarters of the creditors holding at least three-quarters of the total debt.

Claims ranking in priority shall be paid in full, and creditors with priority claims are therefore not entitled to vote. Nor will secured claims give voting rights, to the extent that they would be covered if the secured assets were to be sold or realised. Finally, closely related parties to the debtor do not have the right to vote.

A reorganisation plan will in itself not release non-debtor parties from liability. A release of liability would require the consent from each party against whom such protection is sought.

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A bankruptcy petition from one or more creditors must be delivered to the court in writing. The petitioner must provide documentation for the claim and its foundation, as well as, with a few exceptions, documentation showing that the debtor is insolvent. If the court finds that the claim is sufficiently documented or undisputed, the court will grant the petition and open bankruptcy proceedings in the debtor. If the claim is disputed, or if the debtor argues not to be insolvent, the court will hear the parties before deciding on whether or not to open proceedings.

If the court decides to grant the petition, the debtor is taken under bankruptcy proceedings. If the court denies the petition, proceedings are not opened and the debtor may continue its operations as usual.

There are no material differences between proceedings opened voluntarily and proceedings opened involuntary.

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Creditors cannot commence an involuntary reorganisation of a Norwegian debtor.

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Procedures for expedited reorganisations do not exist under Norwegian law.

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A voluntary debt negotiation plan cannot be carried out unless it is approved by each of the debtor’s creditors who is affected by the plan. A proposed compulsory plan is defeated if the voting requirements (see question 8) are not met. Further, the court may in certain situations decide not to accept the plan, for instance if the procedure has not been carried out in accordance with the law or if the plan does not treat the creditors equally and the creditors have not agreed to differential treatment. The court may also not accept a plan if it is found to be unreasonable or if it is considered likely that the debtor will not be able to fulfil the plan.

The court may decide that the debtor’s fulfilment of the plan shall be supervised, usually by one or more members of the debt negotiations committee. If a debtor is subject to supervision and severely or repeatedly acts against its duties, the court shall open liquidation proceedings against the debtor if petitioned by the supervisors, and if it is not clear that the debtor nevertheless will be able to fulfil the plan. If a non-supervised debtor fails to adhere to a plan, there are no automatic consequences; however, the creditors may initiate (new) debt recovery proceedings.

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Forced liquidation or dissolution proceedings follow the procedural rules of an insolvent winding-up proceeding and are also governed by the Bankruptcy Act. The law differentiates between forced dissolution and forced liquidation, as the conditions for the opening of the two proceedings are different.

The court may take charge of a dissolution process if the company has reported to the National Register of Business Enterprises that it is in the process of a regular dissolution but has not managed to complete the dissolution process within a year from delivering the first notification. The court may also take charge of a dissolution process if this is requested by shareholders representing at least one-fifth of the total shares in the company.

A company may be subject to a forced liquidation process if it has failed to fulfil certain legal requirements, including those related to the composition of the board of directors, the appointment of an authorised public auditor and the reporting of the company’s annual accounts to the Register of Company Accounts.

Insolvency is not a precondition for the opening of forced dissolution or liquidation. The business may even be solvent and ongoing and still be subject to proceedings, as the conditions to open such proceedings are objective and absolute.

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Judicial debt negotiation proceedings are a ‘make or break’ situation for a company, and are finalised either by obtaining a successful reorganisation plan, or by ending in liquidation proceedings. The conclusion is either way formally decided by the court. Liquidation proceedings are formally concluded by a court decision.

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The test to determine whether a debtor is insolvent is twofold. Firstly, the debtor has to be illiquid, meaning that the debtor cannot settle its debt as it falls due. Secondly, the total value of the debtor’s assets must be insufficient to cover the total debt.

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The board of directors in a limited liability company must act promptly if the company’s equity is not considered reasonable compared with the size and risk of the business operations. Such actions include measures to improve the company’s financial situation, convene a shareholders’ meeting to discuss the situation and, ultimately, to file for bankruptcy proceedings if it is unlikely that the financial difficulties can be resolved in the immediate future.

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If the board of directors fails to meet its obligation to act, as described in question 16, and carries on business while the company is insolvent, it may result in penal liability or liability for damages for the directors, or both.

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The most common breach of duty for which the CEO/general manager and board members are held liable in Norway is a lack of payment of employees’ tax deduction.

The board of directors has certain duties when the company is experiencing financial difficulty, and failure to comply with such duties may lead to the directors being held liable for damages or criminally liable. For instance, they shall ensure that the company’s creditors are treated equally, and that the company does not incur any new debt or obligations that it cannot meet, unless the creditor is familiar with, or informed of, the company’s financial situation and the risk involved with providing new loans or credit.

If the court finds it probable in relation to a bankruptcy proceeding that corporate officers or directors are guilty of criminal violations (typically a lack of accounting duties or embezzlement) or unfit to run a business, the court may quarantine the responsible persons from establishing a new company or being a corporate officer or director in any company for the duration of the quarantine period (normally two years from the opening of the relevant bankruptcy proceedings).

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The typical allegations made against directors in the context of an insolvency or reorganisation are that a creditor has suffered a loss because of the company having traded with that creditor without being able to pay for services or goods rendered, and that the company has continued business operations after it was clearly insolvent and should have filed for bankruptcy, and this has inflicted (increased) losses on the creditors. Such actions or omissions could lead to penal liability or economic responsibility (see questions 17 and 18). However, in order for a director or officer to be liable, the act or omission must be wilful or negligent for each director or officer, and the act or omission must furthermore have inflicted an economical loss on the creditors. Whether these criteria are fulfilled shall be assessed for each creditor or claim if a claim is raised by one or more creditor or creditors, or if raised by the estate for all creditors as a group meaning that the dividend the estate is able to pay is (considerably) lower because of the acts or omissions.

Case law shows that directors may be acquitted if they can show that their acts or omissions were based on reasonable and well-founded evaluations, that they took certain steps or actions to improve the situation, and that these expectations and steps were not unrealistic, it could serve as successful defence. Even if the directors in hindsight could be said to have been too optimistic in their evaluations, as long as they have based their actions on regular, commercial assessments, and not carelessly speculated at the creditors’ cost, they are likely not to be convicted for trading while insolvent. Therefore, directors and officers in a company in distress are advised to thoroughly document their evaluations and expectations and the basis for them, as well as the steps or actions taken to attempt to improve the situation.

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The various rules on liability for board members and rules regarding the priority between claims when a company has insufficient funds to meet all their obligations, gives a de facto shift for directors’ responsibilities; going from being towards the owners and shareholders to being towards the creditors (the latter ranking higher in priority than the shareholders in an insolvency process).

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In a judicial reorganisation process in Norway, either voluntary or involuntary, the debtor retains legal powers over its assets, and the company’s board of directors maintains responsibility for the ongoing business. The debtor and its operations are, however, supervised by an administrator and a debt negotiations committee, both appointed by the court. The debtor cannot renew or obtain new debt, pledge assets or sell or lease out its real property, business premises or any asset of significant value without the consent of the administrator and debt negotiations committee.

Directors and officers are stripped of all their powers if the company is taken under insolvent winding-up proceedings, or forced liquidation or dissolution proceedings.

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The opening of a judicial insolvency proceeding triggers an automatic stay on enforcement proceedings against the debtor, including a creditor’s attempt to carry out an enforced sale of the debtor’s assets. The stay lasts six months from when the proceedings are opened. Further, the creditors are prevented from attaching an execution lien in any of the debtor’s assets throughout the proceedings, for claims originating from before the proceedings were opened.

When voluntary judicial debt negotiation proceedings are opened, there is a three-month automatic stay of any petitions for winding-up proceedings related to debt incurred prior to the opening of the proceedings. The stay may be prolonged at the discretion of the court upon a motion from the debtor. If compulsory judicial debt negotiation proceedings are opened, the automatic stay lasts throughout the proceedings.

The automatic stay is, however, not effective against a petition for winding-up proceedings filed by at least three creditors with voting rights whose claims in sum represent at least two-fifths of all claims entitled to dividend payment, even though the debt arose prior to the filing of the petition.

If the debtor at the time of the opening of liquidation proceedings is the claimant in a legal proceeding, the case is automatically paused by the court. The estate may choose to resume the case within two years. If the debtor is the defendant, however, the claimant may choose to include the bankruptcy estate as a defendant in the legal proceeding to have their claim tried by the court. Any award in the creditor’s favour against the debtor has to be filed as a claim in the estate and receive dividend payment subject to the rules on priority between claims and there being any funds for the creditors in the estate.

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In a judicial reorganisation process in Norway, either voluntary or compulsory, the debtor retains legal powers over its assets, and the company’s board of directors maintains responsibility for the ongoing business. The court has a passive role in the proceedings. The debtor and its operations are, however, supervised by an administrator and a debt negotiations committee, both appointed by the court. The members of the committee are usually representatives for the largest creditors.

Creditors who supply goods or services after the filing will not be given any special treatment with respect to claims that arose prior to the reorganisation proceedings, but will be entitled to payment on regular terms for any services or goods delivered in agreement with the debtor after the opening of proceedings.

The administrator of a liquidation proceeding may choose to carry on the business operations of the debtor for a limited period of time (often merely a few days) during negotiations with potential buyers, enabling the business to be sold as a going concern. The estate will be responsible for goods and services delivered upon request from the administrator or estate after the opening of the liquidation proceedings, and the estate will normally enter into new agreements with suppliers, employees, etc to regulate the terms of delivery. In some personal bankruptcies, the debtor is allowed to continue his or her business operations while under bankruptcy proceedings.

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A debtor in liquidation may not obtain secured or unsecured loans or credit. A debtor in a formal reorganisation (judicial debt negotiation proceedings) may only obtain loans or credit if accepted by the debt negotiations committee.

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In judicial debt negotiation proceedings, the sale of the debtor’s assets is generally subject to the same rules as a company that is not in an insolvency proceeding; however, the debtor is supervised by a debt negotiations committee, which shall approve the sale of any real property and assets of significant value. See question 21.

In liquidation proceedings, the business may be sold free and clear of debt (see the Bankruptcy Act, section 117a). In such a sale, encumbrances that supersede the value of any asset sold by the bankruptcy estate may be eradicated if they are sold together with other assets, or as part of the business operations, subject to certain further statutory conditions. This provision is, however, quite narrow and hardly ever used in practice, meaning that a bankruptcy estate must usually respect any legally perfected security rights in the debtor’s assets.

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There is no practice of ‘stalking horse’ bids in sale procedures in Norwegian insolvency proceedings. Credit bidding in sales is not practised in Norwegian insolvency proceedings, except if the bidder has a security interest (ie, a pledge or lien) in the respective asset. An unsecured creditor cannot purchase assets from the insolvent debtor by reducing the amount of their claim against the debtor. Any encumbered asset of the debtor may be transferred to the pledgee holding security in that asset, in exchange for the pledgee reducing its claim against the debtor accordingly (see the Bankruptcy Act, section 117c).

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A debtor undergoing judicial debt negotiation proceedings may not reject or disclaim an unfavourable contract merely because of the opening of proceedings; the debtor’s contracts remain unchanged when the proceedings are opened. In liquidation proceedings, however, the bankruptcy estate may choose to become a party to or disregard any of the debtor’s contracts. As for tenancy agreements and employment contracts, the bankruptcy estate automatically becomes a party unless it explicitly declares to the contractual parties within four and three weeks, respectively, that it does not want to become a party to the relevant contract.

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In insolvency proceedings, IP agreements are treated as most of the debtor’s contracts: the estate has a right to enter into the contract as a party (see question 27). This means that the IP licensor or owner may not terminate the debtor’s right to use the asset if the estate enters into the contract as a party. If the estate does not want to become a party to the contract, however, the debtor’s contractual party may terminate the agreement.

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In general, the estate has the right to use or transfer personal information or customer data collected by the debtor to the same extent as the debtor.

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Arbitration is never used for the actual insolvency proceedings or for claims arising from the proceedings, such as claw-back claims. Arbitration may, however, be used for disputes deriving from the debtor, such as contractual disputes.

If the debtor was party to an arbitration proceeding when the insolvency proceedings were opened, the estate may choose to continue those proceedings.

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Besides a bankruptcy estate’s automatic seizure of assets, there are no processes by which some or all of the assets of a business may be seized outside of court proceedings.

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Unsecured creditors can attempt to recover their undisputed claim through a regular debt collection procedure, by attaching an execution lien in the debtor’s assets, and/or by filing for bankruptcy in the debtor. A disputed claim cannot be subject to regular debt collection, but the creditor may file for bankruptcy of the debtor. A disputed claim will be assessed by the court when considering the bankruptcy petition.

The process of obtaining an execution lien might take months to complete. An execution lien gives the creditor a lien comparable to a pledge or mortgage, and serves as a foundation for requesting a forced sale of the asset in question. The process is usually fairly straightforward and is not expensive.

It will normally take at least one to two months from when the creditor sends notice of a bankruptcy petition to the debtor until bankruptcy proceedings are opened. The difficulty of the process depends on the claim and whether it is disputed by the debtor. A creditor has to pay a fee upon delivering the petition to the court, which at the moment is 57,500 kroner, as security for the costs of the bankruptcy proceedings.

If an unsecured creditor is worried that the debtor will dispose of assets and reduce the creditor’s chances of obtaining coverage for their claim, it may file an injunction petition. The court then decides whether or not to grant the petition and issue an order preventing the debtor from, for example, disposing of one or more assets.

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In compulsory judicial debt negotiation proceedings, the debt negotiations committee shall hold a meeting for the creditors; no earlier than four weeks and no later than eight weeks after proceedings are opened.

The court-appointed administrator in a bankruptcy case shall inform all known creditors of the bankruptcy proceedings. In liquidation proceedings, the court usually schedules a creditors’ meeting within two to four weeks after proceedings are opened. In that meeting, the court-appointed administrator delivers a report regarding the status and findings of the proceedings so far, which is also made available to all creditors. Unless there are special circumstances that necessitate a second or more creditors’ meetings, no further such meetings are held. The date and time of the first creditors’ meeting is stated in the court’s decision to open proceedings. If the proceedings last longer than a year or for several years, the court-appointed administrator and creditors’ committee shall each year prepare an annual report to the court. The report may also be made available to all creditors. A creditor may ask for, but has no specific right to receive, further information regarding the estate and the proceedings. A request for transparency is considered and decided on in each separate case.

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When liquidation proceedings are opened, the court often appoints one or more individuals to form a creditors’ committee. The committee more or less functions as a ‘board of directors’ for the estate, with the trustee as chairman and other members as directors. The committee makes decisions for the estate, for example deciding when and how to realise assets of significant value, and whether or not to pursue larger claims, and is responsible for testing claims filed in the estate before paying any distribution to the creditors. Usually, the trustee suggests to the court one or more creditor representatives to appoint as members of the creditors’ committee. A creditor who is interested in being on the committee may notify the trustee.

In larger cases, the committee usually has at least two creditor representatives, and often a representative for the employees. The creditors’ committee’s members’ expenses are paid from the estate, provided that the estate has sufficient funds to do so. In bankruptcy estates where there are no means for the creditors, the members of the creditors’ committee might not receive any remuneration.

A creditors’ committee in judicial debt negotiation proceedings has more of a supervisory function. See questions 21 and 23.

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If the liquidator has no assets to pursue a claim, it is not uncommon that a creditor provides funding to the estate to pursue the claim through an agreement between the estate and the creditor. The fruits of the remedy will under such circumstances belong to the estate, but because the funding creditor takes a risk by financing the estate’s pursuit, the agreement will often provide the funding creditor with a percentage of the outcome in addition to a mere refund of costs as well as any regular dividend payment from the estate.

If the liquidator (or the creditors’ committee, where such has been appointed) is in doubt regarding whether or not to pursue a claim, or refuses to pursue a claim, the question may be decided by the creditors in a creditors’ meeting. If the creditors then decide that the estate shall not pursue the claim, any creditor who voted against that decision may pursue the claim on behalf of the estate within a deadline set by the court, unless the matter is settled between the estate and the opposite party. The creditor must fund such a pursuit; however, if the pursuit results in increased gross assets in the estate, the creditor may request that its reasonable costs are covered from the estate’s proceeds.

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When the court opens insolvency proceedings, it sets a time limit of three to six weeks for filing claims in the estate. The time limit is, however, not preclusive, and claims filed after the time limit has expired, but before the proceedings are finalised, will be registered in the estate.

Claims filed in the estate will only be tested if there are sufficient funds in the estate to give distribution to the class of claims in which the respective claims belong. The trustee tests the claims by assessing documentation provided by the creditor, and decides whether or not to recommend to the creditors’ committee to allow the claim. If a claim is disallowed, and the creditor and estate do not reach an amicable agreement, the trustee informs the court of the matter, and the court sets a deadline of three weeks for the creditor to take legal action to have the court decide on the matter. If the creditor does not take legal action within the deadline, the claim will be treated in accordance with the trustee’s recommendation, without any possibility of appeal.

A claim filed in the estate may be transferred. A transfer shall be notified the estate. Contingent claims may be recognised and recommended. However, such claims will only receive dividend payment to the extent that the condition has occurred. If the condition has not occurred at the time of distribution to the creditors, the dividend payment for the contingent claim shall be preserved on account by the trustee and only paid out to the creditor if and when the condition occurs.

A claim acquired at a discount may usually be enforced for its full face value. Interest accrued after insolvency proceedings were opened may be filed as a claim in the estate; however, it will rank last in priority.

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The general rule is that a creditor may exercise its right to set-off its claim after insolvency proceedings have been opened in the debtor, provided that the general terms of set-off are fulfilled and a set-off, therefore, was possible before proceedings were opened. If the debtor’s claim against the creditor fell due before proceedings were opened, and the creditor’s claim does not fall due until after proceedings were opened, the creditor is, however, cut off from setting off its claim.

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The court may decide what is the correct priority of a claim; however, it may not change a priority that is correctly stated.

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Claims that have arisen after the opening of bankruptcy proceedings (claims against the bankruptcy estate; eg, payment for a service requested by the estate) shall be covered before any creditors with dividend claims (claims against the debtor) receive any distribution.

Employees’ claims for unpaid wages, with certain limitations, rank first in priority. With some limitations and up to a certain maximum amount, outstanding wages will, in the event of a bankruptcy, be paid out to the employees by the Norwegian Wages Guarantee Fund (the Fund). The Fund then subrogates the employee’s claim and becomes a creditor in the estate for the same amount that was paid by the Fund to the employee, ranking first in priority.

Certain tax and VAT claims rank second in priority. Remaining claims have no priority, except for interest accrued after the bankruptcy proceedings were opened and certain other claims, which rank last in priority, after all other claims.

Creditors with a valid and perfected security for their claims in certain assets will have priority to the revenue from the sale or disposal of such assets. Any part of a secured creditor’s claim that exceeds the value of such assets will be a claim in the estate, subject to the rules on priority.

Further, a bankruptcy estate holds a statutory lien in all assets pledged by the debtor or by a third party as security for the debtor’s obligtions. The lien is capped at 5 per cent of the relevant asset’s net value, and the bankruptcy estate may only apply the lien to cover necessary costs in relation to the handling of the bankruptcy proceeding.

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In a liquidation proceeding, the bankruptcy estate automatically becomes a party to all employment contracts, unless it, within three weeks, expressly declares to the employees that it will not be a party to the respective contract. There are no bankruptcy-specific employee claims that arise where employees are terminated during a restructuring or liquidation.

The procedures for termination of employment contracts in a restructuring are the same as outside a restructuring. In a liquidation proceeding, the estate may choose not to continue the employment contract with any or all employees, by issuing termination notices to each and every one of the employees.

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Pension-related claims against an employer in insolvency proceedings may be subject to more or less the same rules as claims for salary, depending on the type of pension right (see question 39).

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Any environmental problems that arose prior to the opening of insolvency proceedings are usually left with the debtor, and no liabilities are imposed on the insolvency administrator or estate. There could, however, be grounds for liability for the debtor’s officers and directors. If environmental problems are caused by the bankruptcy estate, the estate, the insolvency administrator or both could be held liable, depending on the circumstances.

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Liabilities of personal debtors (ie, debtors that are not limited liability companies or other structures with limited liability) survive an insolvency or a reorganisation. This entails that the debtor’s debt and liabilities are not forgiven when the proceedings are finalised. The debt may, however, be reduced or waived by the creditors as part of the process, or the debtor and its insolvency estate may carry out a compulsory composition, forcing a reduction of debt. There is a separate legal regime for the forgiveness of debt for private (real) persons, regulated by the Debt Settlement Act.

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Distributions to creditors may be carried out both during the proceedings and after the proceedings have been finalised. The main prerequisite for distributing dividend payments to creditors during the proceedings is that there must clearly be sufficient funds in the estate to make such payments. Prior to any distribution, the claims are tested (see question 36).

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The principal type of security taken on immovable (real) property is a mortgage. Ownership, encumbrances and certain other information about real estate is registered in public national registers, and a mortgage registered in such a register obtains legal protection and extinguishes any argument from a third party claiming to have been in good faith in assuming that the property was not encumbered upon purchase.

Standard forms (in Norwegian) are being used to register mortgages, pledges, etc, and the entire registration process can usually be done in a few days if urgent and handled by a professional. The fees for registering a security interest are very modest. If a creditor has an adequate legal basis, he or she can deliver a petition for an execution lien in the debtor’s property.

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One cannot generally pledge ‘everything that one owns or will own’. It is, however, possible to get a floating charge over certain categories of assets, including ‘machinery and plant’, ‘inventory and stock’, ‘motor vehicles and construction machines’ and ‘trade receivables’. A floating charge is registered with a fixed maximum amount and includes all the company’s assets within that category. Legal protection is obtained by registering the floating charge in the Norwegian Register of Mortgaged Movable Properties, which will also give protection against alleged bona fide acquirers. This public register also includes a registration of pledges in specified vehicles.

Pledges in assets that are registered in national registers have to be registered in the relevant register to obtain legal protection. The registration costs are low, and the process of registering the security interest usually takes from a few days to one or two weeks. As described in question 32, a creditor might be able to attach an execution lien to the debtor’s assets. An execution lien may also be effectuated as attachment of earnings.

A vendor’s fixed charge or retention of title may be agreed in most types of movable property, except inventory and stock meant for resale, real property, ships and aircrafts, to secure the purchase price and any interest and expenses related to the purchase of that specific asset. If the buyer finances the purchase with a loan that is paid directly from the lender to the seller as settlement of the purchase price, a vendor’s fixed charge may also secure such loan. This security cannot be agreed for assets that the buyer has a right to resell before they are paid.

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There are several provisions regulating different kinds of transactions that may be set aside (eg, transactions considered to be extraordinary payments, gifts, security for old debt and certain cases of set-off). In general, the transaction in question must have been performed within three months prior to the date on which the court received the bankruptcy petition (for gift transactions, the general time limit is one year). However, older transactions may also be annulled if the beneficiary and the debtor were closely related parties (applying a two-year time limit), or if the beneficiary has not acted in good faith with regard to the poor economic state of the debtor and the unfairness of the transaction (applying a more subjective element of assessment and a 10-year time limit).

Generally, if a transaction is annulled, the receiving party of the transaction in question must return to the estate what was received from the debtor, or any enrichment it has obtained. If the receiving party is considered to have been in bad faith when the annulled transaction was carried out, the receiving party might have to indemnify the estate for the economic loss or any damages suffered as a result of the transaction.

Annulment may only be claimed by the administrator or trustee of either compulsory judicial reorganisation proceedings or liquidation proceedings, and not, for example, by the creditors themselves.

The estate has one year from the opening of bankruptcy proceedings to forward a clawback claim.

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In general, there are no restrictions on such claims; however, such creditors may not have voting rights for compositions proposed by the debtor.

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It is very uncommon that Norwegian courts allow claims that ‘pierce the corporate veil’.

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In insolvency proceedings involving a corporate group, the proceedings in the parent and its subsidiaries are often combined only in the sense that the same administrator is appointed for each separate proceeding. However, the decision of who to appoint as trustee is subject to the sole discretion of the court that opens the proceedings, and there is no automatic appointment of the same trustee for the insolvency proceedings of all companies in a group.

The assets and liabilities of companies in the same company group and under insolvency proceedings may not be pooled for distribution purposes; each estate handles its own assets and claims, and any distribution is paid from each individual estate.

Specific legislation applies to banks and financial institutions (see question 2).

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In April 2016, the Ministry of Justice and Public Security published a legislative proposal to add a chapter to the Norwegian Bankruptcy Act, with new provisions on cross-border insolvency matters. The chapter was added by an amending act dated 17 June 2016, but has not yet entered into force and as of October 2019, no date has been set for when the new chapter will enter into force. The chapter includes provisions on territorial and factual jurisdiction and choice of law, as well as recognition of foreign insolvency proceedings and which impact foreign proceedings shall have in Norway. When the new rules enter into force, the legislation on international matters, and especially those discussed in questions 51, 54, 55 and 56, will be somewhat different.

An insolvency proceeding in another country is in general not recognised by Norwegian courts unless that country has a mutual agreement with Norway. A Supreme Court decision from 2013, however, implies that although a foreign insolvency proceeding does not impose a stay on creditors’ debt recovery proceedings against any assets the foreign debtor has in Norway, a foreign bankruptcy estate will be acknowledged in Norwegian courts as a representative for the common interests of the debtor’s creditors. In other words, according to the decision the foreign bankruptcy estate might be treated equal to and have the same debt recovery possibilities as any other unsecured creditor of the debtor.

Foreign judgments or orders are recognised to the extent that they are subject to either the Lugano Convention or another convention or agreement between Norway and that state. In addition to the Lugano Convention, Norway is a party to the Nordic Convention on Bankruptcy, which, inter alia, regulates cross-border insolvencies within Norway and the other member states: Denmark, Sweden, Finland and Iceland. The Nordic Convention also has rules on recognition and enforcement as well as choice of law in various situations.

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The UNCITRAL Model Law on Cross-Border Insolvency has not been adopted by Norway.

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Foreign creditors in a Norwegian insolvency proceeding are generally not treated differently from domestic creditors.

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Norwegian law generally does not allow for a mere transfer of assets from an administration in Norway to an administration in another country.

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Under Norwegian law, a company’s COMI is generally where the company has its registered main office or business address. However, if the company has its actual centre of business elsewhere, the COMI may be decided to be where the actual main centre of business is located.

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Norway does provide for recognition of foreign insolvency proceedings where there is a mutual agreement in place between the states (see question 51). Domestic and foreign courts rarely cooperate. While lower courts in Norway have accepted recognition of foreign insolvency proceedings, the Supreme Court refused recognition in a 2013 decision and ruled that acknowledgement of insolvency proceedings in another state must primarily be in accordance with mutual agreements or legislation.

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We are not familiar with cases where the Norwegian courts have communicated or held joint hearings with courts in other countries.

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Norwegian courts can only open winding-up proceedings based on a petition from either the debtor or a creditor (see questions 6 and 9), and winding-up proceedings can only be opened by a Norwegian court if the debtor has its main business centre in Norway (see question 55). Because of these preconditions, Norwegian courts, as a main rule, cannot open winding-up proceedings in foreign companies merely doing business in Norway. However, foreign companies with extensive business in Norway often establish a Norwegian Registered Foreign Company, which in practice is a branch of the main foreign company with a Norwegian business company number. If such an entity exists, a Norwegian court could, if it is proven, find that the foreign company has its main business centre in Norway and decide to open winding-up proceedings. A bankruptcy petition will in such an event be against the main company (ie, the foreign entity), and the Norwegian court, provided that the abovementioned criteria are fulfilled, may decide to open winding-up proceedings in Norway.

Forced liquidation or dissolution proceedings can only be decided for registered Norwegian limited liability companies and public companies.

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Trends and reforms

59 Are there any emerging trends or hot topics in the law of insolvency and restructuring? Is there any new or pending legislation affecting domestic bankruptcy procedures, international bankruptcy cooperation or recognition of foreign judgments and orders?

A new chapter regarding international insolvencies was added to the Norwegian Bankruptcy Act in 2016, but it has not yet entered into force (see question 51).

Further, the statutory restructuring scheme in Norway is currently under review, but the time perspective of a legislative bill being finalised is yet unknown.

Another hot topic involves choice of law rules for transboundary pledges in receivables when the owner of the receivables goes bankrupt, as well as which law should be applied to decide the validity and legal protection of these pledges: the law of the bankruptcy venue, the law of the pledge agreement, or the law of the pledger’s domicile. Briefly summarised, the Supreme Court in 2018 ruled that the law of the bankruptcy venue should prevail, and that Norwegian courts had jurisdiction to hear the case. The issue currently pending before Norwegian courts is whether or not the pledgee had obtained legal protection for the pledge.

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