LEX MUNDI

A LAWYER'S GUIDE TO NORWAY

Prepared by:

THOMMESSEN KREFTING GREVE LUND AS
Oslo - Bergen
Brussels, London, Hong-Kong, Paris

This is a general guide to certain laws applicable to doing business in Norway. The information contained in this publication is given by way of general reference only, is not intended to provide legal advice, and is not to be relied upon in any factual situation as it does not cover all laws or regulations that may be applicable in all circumstances. No responsibility will be accepted by the authors or publishers for any inaccuracy or omission or statement which might prove to be misleading. You are advised to seek your own professional advice before proceeding to invest or do business in Norway.

TABLE OF CONTENTS

I. THE COUNTRY AT A GLANCE

II. INVESTMENT PRINCIPLES AND GENERAL CONSIDERATIONS

III. INVESTMENT FRAME WORK

IV. SENSITIVE AREAS

V. DIRECT SALES

VI. EXPORTS FROM NORWAY

VII. REPRESENTATIVES -- DISTRIBUTORS -- FRANCHISERS

VIII. INTELLECTUAL PROPERTY

IX. DIRECT INVESTMENT

X. PURCHASE BY FOREIGN CORPORATION OF BUSINESS IN NORWAY

XI. INCORPORATION OF A COMPANY

XII. EXCHANGE CONTROLS

XIII. DISSOLUTION

XIV. BRANCHES

XV. TAX

XVI. LABOUR

XVII. INTERNATIONAL RELATIONSHIPS

XVIII. DISPUTE RESOLUTION

Norway forms the Western and the Northern part of the Scandinavian peninsula and has common borders with Sweden, Finland and Russia. Norway is a mountainous and coastal nation with a land area of about 125,100 square miles (325,000 km2), exclusive of overseas territories. The population of Norway was estimated at approx. 4.4 mill people as at 1 January 1998.

Oslo, the capital and largest city of Norway, is located in the South East and had a population of approx. 500,000 as at 1 January 1998 (935,200 including the Oslo metropolitan area). Other principal cities include Bergen (225,500), Trondheim (146,000) and Stavanger (107,000).

Norwegian is the official language and is closely related to the other Scandinavian languages. The major part of the population speaks English and many speak German.

Norway belongs to the central Europe time zone, that is 1 hour ahead of Greenwich mean-time, and has summer time from April to October.

II. Investment principles and general considerations

a. Political system
Norway is a constitutional monarchy with a parliamentary system of government. The executive power of the government is formally vested in the King, presently King Harald V, who exercises his authority through a cabinet, known as the Council of State which is presently composed of the prime minister and 19 other ministers. The ministers, including the Prime Minister, are formally appointed by the King who, in practice, selects them in accordance with the recommendation of the Storting (Parliament).

The legislative power is vested in the Storting, which, when passing legislation, is divided into two chambers, the Odelsting and the Lagting. The political parties currently represented in the Storting are:

The Socialist Left Party
The Labour Party
The Center Party
The Christian Democratic Party
The Liberal Party
The Conservative Party
The Progress Party
Tverrpolitisk folkevalgte

Norway has twice (1972 and 1994) rejected to join the European Union (EU) but remains closely linked as a member of the European Economic Area (EEA) since 1 January 1994. The EEA consists of the 15 EU countries as well as the three EFTA countries, Iceland, Liechtenstein and Norway.

b) Legal system
Norway has a written constitution - "Grundloven" - dating back to 1814 and based on Montesquieu's ideas of division of power into legislative power, executive power and the judicial power. The legal system in Norway is generally based on the concept of written statutes, but with some influence of common law principles.

c) Economic system
Norway's gross domestic product (GDP) per capita (approx. NOK 246,200/USD 32,830 in 1997) is among the highest in the world. The economy in Norway is based on private ownership. Norway is a very open economy with total exports and total imports in 1997 representing the equivalent of 41.3% and 34.2% respectively, of its 1997 GDP. Norway recorded a current account surplus equal to 2.5% of GDP in 1992.

Norwegian industry has traditionally been based upon Norway's natural resources and abundant hydroelectric power. Today Norway is a diverse industrial society with a well developed service sector. Norway's petroleum industries such as crude oil and gas production, as well as pipe line transportation, have had a growing and significant effect on the Norwegian economy since the early 1970's. Today Norway is the largest supplier of natural gas to the Western European energy market. Norway's primary manufacturing industries are pulp and paper products, metals, shipbuilding, industrial chemicals, machinery and electric equipment. Within the service sector, shipping still maintains a leading position.

d) Court system
See section XVIII

e) Financial system
The currency unit in Norway is Norwegian kroner (NOK). The following tables show the average rates for USD in terms of NOK at year end for the periods indicated, as quoted at the Oslo Stock Exchange:

1994: 6.76
1995: 6.32
1996: 6.44
1997: 7.32
1998: 7.35

With effect from October 1990 the Norwegian krone was linked to ECU. Following the tensions within the EMS (the European Monetary System) arising in the fall of 1992, the consequent devaluations and departures of several currencies from Exchange Rate Mechanism (ERM) and the decisions of Finland and Sweden to permit their respective currencies to float, the Ministry of Finance temporarily suspended the Norwegian Central Bank's (Norges Bank) obligation to intervene. In January 1993 a Royal Decree was adopted that allowed the Norwegian krone to float.

Today the monetary policy is set forth in a regulation of May 1994. The regulation states that the monetary policy will be aimed at maintaining a stable exchange rate against European currencies. The Central Bank will not intervene, apart from in situations of significant changes in the exchange rate, when this could be considered. As a non-member of the EU, Norway remains outside the EMU (European Monetary Union) which became effective 1 January 1999. As at 1 January 1999 one Euro equalled NOK 8.12.

f) Culture
Norway is a modern European country. In spite of its limited population the nation has contributed significantly to European culture, for instance Henrik Ibsen (literature), Edvard Grieg (music) and Edvard Munch (paintings). The capital Oslo, presently boasts housing one of the world's leading symphony orchestras. Norway was host to the Winter Olympic Games in 1952 (Oslo) and in 1994 (Lillehammer), and Norwegian soccer players are hired by leading European teams.

The education level in Norway is high, based on 10 years mandatory schooling, and with approx. 46.3 % of the population taking supplementary education. Approx. 20.2% hold a university degree.

The religion of the Norwegian state is Protestant-Lutheran, and the majority of the population belong to this church which is administered by the State through a special Ministry.

III. Investment Frame Work

Norwegian authorities encourage foreign investments to take place in Norway, although there are no special incentives for foreign enterprises establishing in Norway.

Sector Restrictions
There are certain sectors where specific regulations apply to investors:

- Acquisition of waterfalls, power supply rights and mining rights, are subject to concession under the 1917 Industrial Concession Act;
- Acquisition of land and real estate, or long term lease - more than 10 years - is subject to the 1974 General Concession Act. These regulations apply to direct acquisition as well as indirect acquisition by way of buying companies which own real estate or holding long term leases.
- Acquisition of more than one third of a Norwegian commercial company must be notified to the Ministry of Industry under the 1994 Acquisition of Businesses Act when:

• the company has more than 50 employees, or
• the company has had a turnover exceeding NOK 50 million for the last fiscal year, or
• the company has received governmental support for Research and Development during the last 8 years by way of contributions exceeding NOK 5 million for at least one single project.

The Ministry of Industry may intervene within 30 days from the receipt of notification. The acquisition may be prohibited or subjected to conditions.

- Traditionally, only Norwegian financial institutions could operate in Norway. Under the EEA Treaty, which entered into force on 1 January 1994, the financial sector has been liberalised and financial institutions from other EEA countries may now establish Norwegian branches and provide transborder services in accordance with ordinary EU directives and regulations. Investors, Norwegian or foreign, may purchase up to 10% of the share capital in a Norwegian financial institution without any permission. There are several exemptions from the ownership/voting restrictions, including that a foreign financial institution may own a subsidiary in Norway.

- The regulation of the oil industry originally contained conditions with preference for Norwegian industry. This system has disappeared with the entering into force of the EEA Agreement. However, direct investments in petroleum exploration and exploitation will still be subject to a special governmental license as required by the Petroleum Act 1986.

Following the entry into force of the EEA Agreement in 1994 most Sector Restrictions will be practised on a non-discriminatory basis towards persons from EFTA states and EU states (except Switzerland). However, the EEA Agreement does not apply to the agricultural sector and the specific set of regulations concerning acquisition of Norwegian farmland and forest will remain. For all practical purposes it is very difficult for non-Norwegian citizens to acquire such land unless they are willing to take up permanent Norwegian residence.

Exchange Control
Effective from 1 July 1990 most exchange control regulations in Norway were abolished. There is no longer any licensing requirement for currency transactions, but there remains a reporting obligation required primarily for statistical and tax purposes. All currency transactions should be made through local commercial banks which will cover the reporting obligations. In case of an acquisition of shares by a foreign entity, it is the Norwegian seller's obligation to report the payment as described above.

Competition and Anti-Trust
As an EEA member state Norway applies the general competition and anti-trust regime of the EU. In addition, the domestic 1993 Competition Act applies. In general these regulations prohibit concerted practices or agreements which might influence prices or competition as well as attempts at market sharing. There is no duty to notify mergers, but the Competition Authority may investigate and intervene in mergers and acquisitions within 6 months (or under certain circumstances 12 months) from the completion of a final and binding agreement. If the parties do notify the deal, the Competition Authority must act within 3 months. (It should be observed that regardless of the Competition Authorities a merger will also have to be cleared under the Acquisition of Business Act - see section III (i) above).

IV. Sensitive areas

In general foreign investors do not meet many sensitive or uncertain areas of investment policies in Norway. However, the following sections might be of interest for a foreign investor.

a. Implications of labour law
Trade unions have traditionally held a prominent position in Norway, and it is a characteristic feature of the Norwegian labour law system that strong emphasis is placed on the central organisations of employers and employees respectively, and on the collective agreements between these parties.

The Norwegian employment legislation encompasses a wide variety of issues, such as: (a) employee representation in the governing bodies of companies, (b) safety measures regarding the working environment, (c) regulations regarding maternity leave and leave during children's sickness, (d) working restrictions, (e) termination of employment, (f) holiday entitlement (four weeks + 1 day per calendar year) and, (g) restrictions on the use of short term employment contracts and the operation of labour distribution agencies. We refer to section XV for further details.

b. Environmental Protection
The Norwegian Environmental Protection Act (1981) sets up rules and regulations concerning protection of the environment. The act and the regulations are administered by the Ministry of Environment. These regulations are generally adjusted to comply with the prevailing directives of the EC. However, certain supplementary national rules will apply, for instance the requirement for an investor to prepare - at the planning stage - a comprehensive analysis of possible environmental effects following the erection of plants and other industrial installations of a certain magnitude.

V. Direct Sales

a. In general, Norway has not many restrictions on importing goods, except for live animals and a wide range of agricultural commodities. However, import of a number of products requires an import license. The need for a license depends partly on the origin of the goods, partly on the type of goods. Most detailed are import license requirements on clothes, textiles and raw materials for the textile industry. Textiles originating from the Far East are given the greatest consideration. Import licenses are, however not difficult to obtain. Please note that Norway has ratified CITES (Convention on International Trade of Endangered Species).

b. Who may import
In general, anyone may order goods from abroad. Consumers ordering commodities directly from abroad will receive the shipment through the customs office and will have to clear all taxes before the shipment is released. Companies frequently receiving supplies from abroad and professional transporters, may obtain a credit agreement with the customs allowing payment of taxes to take place at a later stage.

c. Import taxes
All shipments to Norway must be cleared through the customs office for duties, excise taxes and VAT. The VAT will be deductible by the recipient provided the goods are intended for use in a VAT chargeable business. In general, goods - apart from agricultural products - originating from an EEA state are free of duty, and apart from such imports the usual custom rates range from 5 to 10%. The rates are applied on a stipulated import value of the goods in question, in general based on the invoice value.

d. Excise tax
Excise taxes are substantial and represent a vital part of the government's revenue. Excise taxes are levied on several commodities including alcohol, soft drinks, sugar, candy, cars, mineral oil, gas and coal. Excise taxes are levied on the producer and/or the importer of the commodity.

Any import of products to Norway incurs VAT (presently levied at the rate of 23%). The VAT is based on the import value plus customs and excise taxes levied on import. The party liable to the customs office is the owner of the goods when they cross the border. This will mainly be decided on basis of the agreement between the parties.

A foreign supplier delivering c.i.f. Norway is considered performing a VAT chargeable supply in Norway. If such supplies are made on a regular basis, the supplier is subject to registration for VAT purposes. The absence of a place of business in Norway, the registration must be made by way of a Norwegian representative. Such representation alone will not, however, create any basis for income tax in Norway.

If the goods are sold ex factory or f.o.b. abroad, the purchaser will be the importer and as such be responsible for the customs clearance.

e. International organisations
Norway is member of a number of international organisations, including the Organisation of Economic Cooperation and Development (OECD) and the International Energy Bureau (IEA). Norway is also a party to the General Agreement on Tariffs and Trade (GATT) and has been member of the European Free Trade Association (EFTA) since the organisation was founded. On 1 January 1994 Norway became a member of the EEA creating close links with the European Union without becoming a full EU member.

Norway has double taxation treaties with most countries. The treaties are based on the OECD model system and foreign companies will not be liable for Norwegian taxation unless operations are conducted through a Permanent Establishment in Norway.

VI. Exports from Norway

a. Basic Policy on Exports from Norway
Basically no licenses are required for commercial transactions with foreign countries. However, certain products deemed to be of strategic importance - such as armaments and certain kinds of electronics, as well as certain agricultural goods - are subject to export regulations. Details may be obtained from the Foreign Office Section for Export and Import Control, P.O. Box 8121 Dep., N-0032 Oslo (telephone +47 22 24 36 36).

b. Export Incentives
The major export incentives are channelled through three institutions:

(i) Norwegian Trade Council
(ii) Eksportfinans A/S
(iii) Garantiinstituttet for Eksportkreditt (GIEK)

The Norwegian Trade Council is a semi-public institution with a network of offices abroad. Apart from assisting exporters in obtaining contacts in the respective markets, it may also grant certain financial support for export ventures - be it as contributions to specific market campaigns or marketing efforts of a more general nature. You may enquire at your local Norwegian Embassy for the nearest NTC representative.

Eksportfinans A/S is a private institution owned by the larger commercial banks. It grants loans for export purposes on standard OECD-terms, which require a cash payment of at least 15 per cent of the purchase price from the customer to the exporter. Due to low interest funding, Eksportfinans is able to grant loans at interest rates lower than ordinary market rate.

GIEK is a public institution granting guarantees securing export loans provided goods or services to be exported are of Norwegian origin for at least 70% of the export value. Insurance against political and commercial risks may be obtained for up to 80% of the export value. Furthermore, cash contributions may be obtained to partly cover marketing campaigns.

VII. Representatives - distributors - franchisers

a. Agents
The legal position of commercial agents in Norway is regulated by the Act on Commercial Agents. This Act entered into force 1 January 1993, and is adapted to relevant EEC directive No 86/653/EEC of 18 December 1986. Thus, in principle, the legal status of commercial agents is the same in Norway as in the European Community.

The Act applies to agents, i.e. intermediary who takes up orders in the name of the principal. Agreements thus concluded by the agent commit only the principal, and not the agent. The agent is not an employee of the principal, and unless otherwise agreed, the agent does not acquire any additional rights like an employee.

The Act is sets up certain mandatory rights and obligations, such as the right to have an agreement in writing, the fundamental obligations of the agent and his principal, the right to compensation if either party does not fulfil these obligations or their obligations in accordance with the agency agreement, the right to receive commission, rights in connection with termination of the agreement and restriction of competition between the agent and the principal after the termination of the agreement.

The agent is entitled to commission during the validity of the agreement, and under certain conditions also after the termination of the agreement. During the validity of the agreement, the agent is entitled to commission on all sales based on orders obtained by him as well as sales obtained by others if the agent earlier has obtained corresponding orders from the contracting party in question. The same applies if the contracting party in question belongs to a territory or group of customers which has been assigned to the agent. If the conclusion of a sale after the termination of the agreement is due to the efforts of the agent, he is entitled to commission even after the end of the agreed period.

The parties may agree on the commission in their individual agreements. In the absence of such agreement, the agent is entitled to the commission which is customary for goods in question in the place where the agent is operating. If no customary commission can be determined, the commission will be set at a reasonable level.

Agency agreements may be concluded for a predetermined period, or for an indefinite period. If the duration of the agreement is not determined, both parties may terminate the agreement. The notice period is one month during the first year of the agency agreement, increasing by one month per year to a maximum of 6 months. The parties may not agree on shorter periods of notice. Longer periods of notice may be agreed upon provided that these are equally long for termination on the part of the principal and the agent.

In case of termination the agent may be entitled to compensation provided the agent has not terminated the agreement, or is in breach of the agreement. Furthermore, it is a condition that the agent has brought the principal new customers, or significantly increased the volume of business with existing customers. The level of the compensation shall be reasonable and shall in no event exceed one year's commission calculated from the agent's average annual commission over the preceding 5 years.

The agency agreement may include a competition clause restricting the business activities of the agent following termination of the agreement. Such clauses are valid for maximum 2 years, and may be revised under the Act on Contracts 1918.

The foreign company will in general only be subject to income tax on sales in Norway if the agent constitutes a permanent establishment of the company in Norway. An independent agent does not constitute a permanent establishment.

b. Distributors
The main difference between agents and distributors is that the distributor concludes contracts in his own name and for his own account.

There is no statute act in Norway which explicitly deals with distribution agreements. However, the general provisions in the Act on Contracts 1918 and the Competition Act 1993 may be relevant to distribution agreements. Furthermore, the European Community's competition rules may be applicable if the agreements have influence on the common market. The application of the European Community's competition rules are extended to the EFTA market through the Agreement establishing the European Economic Area (the EEA agreement), as from 1 January 1994. Thus, the EEA rules apply on distribution agreements which have influence on competition and trade between the EC and/or EFTA countries.

It is customary to include provisions in distribution agreements concerning inter alia exclusivity, marketing activities, trade marks, sales prices of the principal, termination of the agreement and non-competition during and after the end of the agreed contract period.

It is unclear to what extent a distributor may claim compensation for losses suffered due to termination of an agreement if the agreement provides no solution to this question. In practice, Norwegian courts have accepted claims for compensation in cases where the principal has acted in breach of the contract or general principles of law, or where the distributor has created significant goodwill for the goods in question over a long term period and the term of notice given is deemed too short.

c. Franchising
No statute explicitly governs franchising. The Act on Contracts 1918 and the Competition Act 1993 will, however, be relevant also in this context. Furthermore, EC competition rules on franchising apply if the agreement has influence on the EC market, and from the entry into force of the EEA agreement, if there is an effect on the EEA market.

VIII. Intellectual property

a. In general
Norwegian legislation provides protectional rights in all main fields of intellectual property including patents, trademarks, designs and utility models, copyright and topography of semi-conductors. The statutes governing these respective subjects have to a great extent been harmonized with the corresponding European Community legislation.

Norway has signed and ratified the Paris Convention 1883 (1967 version), the Arrangement of Nice 1957 (1977 version), the Locarno Union 1968, the Patent Cooperation Treaty 1970, the Strasbourg Agreement on Classification of Patents 1971, the Budapest Treaty 1977, the Berne Convention 1886 (Paris text – 1971), the Universal Copyright Convention 1952 (Paris text – 1971), the Convention establishing the World Intellectual Property Organization 1967, the Rome Convention 1961, the Phonogram Convention 1971, the European Convention on the protection of TV Broadcasting 1960, the Protocol relating to the Madrid Agreement 1989 concerning international registration of trademarks and the TRIPS Agreement.

b. Patents

Subject matter and requirements for issuance of patent:
To be patentable an invention must be capable of being exploited in industry and exhibit novelty and inventiveness. (Novelty means that the invention has not been made available to the public before the filing date). Methods for surgical treatment, therapy or diagnosis performed on animals or humans, scientific theories and mathematical methods, and inventions contrary to morality or public order are not patentable in Norway. Additionally, Norway does not grant patents for plant and animal varieties, or essential biological methods for propagating plants or animals.

Duration, working requirements and annuities:
In Norway patent protection lasts twenty years from the application date subject to the payment of increasing annuities. These annuities range from USD 200 up to USD 750. Additional patents (granted on applications filed prior to 1980) last the duration of the main patent without a need for paying annuities. Compulsory license may be granted if three years have elapse from the grant of the patent and four years from the filing of the patent application if the invention has not been worked to a reasonable extent in Norway.

Procedure, time and costs:
To obtain a patent in Norway, an applicant must file a patent application with the Norwegian Patent Office in Oslo. Non-residential applicants must appoint a Norwegian agent. The application is examined for novelty and inventiveness by the Patent Office. If the application complies with the prescribed requirements and there are no other obstacles, the applicant is notified that patent may be granted. Within two months from this notification, the applicant has to pay a fee. Thereafter the application will be accepted. After having published the decision that the application is accepted, the Patent Office grants the patent. At the same time, the Patent Office publishes a patent specification, and all documents of the application shall from that date (when the patent was granted) be available to the public. (When 18 months have passed from the filing date, or possibly from the date from which priority was claimed, the documents are made available to the public even if the patent has not yet been granted). Any person may file an opposition to a granted patent within nine months from the date of grant of the patent. Additionally, the decision of the Patent Office may be challenged before the courts. Generally it seldom takes less than two years to obtain a patent registration in Norway. The filing costs range from USD 2,000 upwards, not including professional fees.

c. Trademarks
Subject matter and requirements for protection:

Protection can be obtained by registration or through extensive use. Service marks, certification marks and association marks are registrable.

Duration and use requirements:
Trademark protection lasts ten years from the date of registration and is renewable for ten-years periods. If the trademark holder has not taken the registered trademark into use in relation to the goods for which it has been registered in Norway within five years from the date of registration, or if the use has been interrupted for five consecutive years, the registration may be deleted by a court ruling.

Procedure, time and costs:
Applications for trademark registration must be filed with the Norwegian Patent Office in Oslo. Non-residential applicants must appoint a Norwegian agent. The application (with enclosures and all documents pertaining to the application case) are available to anyone. If the application is not in the prescribed form, or if there are other obstacles which prevent registration, the applicant is notified by the Patent Office. The applicant is given the opportunity to make necessary corrections. If the applicant does not respond within the time limit set, the application is considered withdrawn. However, the application may be resumed upon the applicant's response within two months after the expiration of the time limit, subject to the payment of a fee. If the application is in the prescribed form, and if there are no other obstacles that prevent registration, the trademark is registered. Notice of the registration is published. Thereafter any person may file an opposition to the registration within two months from the date of publication. The Patent Office may reject the opposition, or take account of the opposition. The decision of the Patent Office can be challenged before the courts. Generally, the costs of filing for trademark registration of a single mark in a single class are approximately USD 170, not including professional fees.

d. Industrial designs and models

Subject matter and requirements for protection:
An ornament or the appearance of a product may be protected as a design. To obtain protection the design must differ substantially from what is known before the application date. According to Norwegian design law a design is registrable even if the appearance of the product is governed merely by functional considerations.

Duration and use requirements:
Industrial designs and models are protected for a period of five years from the date of application. The protection period can be renewed for two further five-year periods, subject to the payment of a fee. There are no working requirements.

Procedure and costs:
Design applications are filed with the Norwegian Patent Office in Oslo. Non-residential applicants must appoint a Norwegian agent. The application must show the design in its entirety. The application is examined by the Patent Office for compliance with the formal requirements and, to a limited extent, for novelty. The cost of registering an industrial design is approximately USD 120, not including professional fees.

Some protection for industrial designs will also be enjoyed under the Norwegian Marketing Act 1972, and this protection is not subject to any registration.

e. Copyrights

Formalities and duration:
In Norway there are no formalities for copyright protection; registration is not possible and notice is not necessary, but may be advantageous. Copyright protection starts the moment the work is created and lasts during the life of the author plus seventy years after the author's death. Neighbouring rights are protected for shorter periods, i.e. the rights of performers as well as film- and phonogram producers and broadcasting companies are protected for 50 years; databases and "catalogues" are protected for 15 years whereas photographic pictures (photographs not fulfilling the criteria for being a photographic work) are protected for 15 years beyond the death of the photographer but not less than 50 years from the making of the photograph.

Subject matter:
Copyright protection extends to any work in the field of literature, science or art created through intellectual effort and originality. Mere labour or skill is insufficient to justify copyright protection. The Norwegian Copyright Act of 1961 grants copyright protection to a non-exhaustive list of works including writings of all kinds, oral lectures, stage performance works, musical works, paintings, drawings, sculptures, architectural designs and buildings, maps, cinematographic work and software programs.

Copyright protection of software:
Norwegian copyright law grants protection to computer software extending to the source code, the object code, and screen displays, although screen displays may be regarded as "temporary reproduction" which are not protected. Software protection does not (yet) require deposit or disclosure of source code.

Moral and other related rights:
The moral rights prescribed by the Berne Convention are incorporated in the Copyright Act. Thus, the author has a right to be named and is protected against a presentation of the work to the public in a way or in a context which violates the literary, scientific or artistic reputation or characteristic of the author or the work. This right can be waived only if a permitted use is restricted with respect to its kind and extent. Anyway, the author is entitled to demand either that the presentation does not occur under his name or that it is made clear that the changes do not stem from him. Even after expiry of the copyright protection the government has the right to forbid such presentations or presentations which otherwise may harm public cultural interests. All rights which can be asserted by the author, can also be asserted by his heirs.

Compulsory licenses:
The Norwegian Copyright Act provides compulsory licenses for specific purposes, such as fixations of works for health institutions, homes for the elderly, et al; the making of copies for certain disabled persons as well as reproduction of minor parts of works which have been published more than five years ago for the use in collective works intended for use in religious service and education. In addition the act contains important and wide-ranging provisions regarding collective licenses for photocopying and retransmission of works which are included in a broadcast.

f. Topography of semi-conductors
Protection is granted to new topography of semi-conductors without any requirement of registration or notification.

g. Trade secrets
Trade secrets and know-how are protected under the Norwegian Marketing Act 1972. There are no formalities required for protection of trade secrets in Norway, and there are no time limits on such protection.

h. Licensing

Governmental approval:
Intellectual property licenses or payments of royalties need not be approved or registered with a government agency. Patent licenses and transfers must be registered in the Patent Register in order to be protected against conflicting licenses (and transfers) to other parties.

Royalty
The government imposes no limitation on royalty rates, however unjustified and unreasonably high royalty may in special cases be revised under the rules of the Contract Act and Competition Act.

Currency restrictions and withholding or other taxes:
There are for the time being no withholding taxes or other taxes imposed on the payment of royalties to entities outside of the country provided the royalties are normal and stipulated on an arm's length basis. There are no restrictions on the transfer of intellectual property.

IX. Direct investment

a. Methods of direct investment
In Norway foreign investors may carry out business on a permanent basis either through a branch office or through a separate legal entity. Such separate legal entity may be a limited company or a general or limited partnership. A separate legal entity may either be created from scratch or created based upon the purchase of an established entity.

M & A operations are well known and are generally performed to internationally recognised standards. Specific procedures and governmental approvals may apply depending on the circumstances.

Joint ventures may be structured by incorporation of a limited company acting as the joint venture company, with its shares distributed among the joint venture participants and the relationship between the participants governed by a shareholders' agreement. Alternatively, a joint venture may be established by means of a partnership. It should be noted that although not formally structured as a separate legal entity by the participants, many joint venture agreements do in fact constitute partnerships as defined by the Norwegian Companies Act 1985.

A new option when structuring a joint venture set-up is to establish a European Economic Interest Grouping (EEIG). Such grouping may be registered on the basis of EU directive 2137/85, as incorporated in Norwegian law, and may have its registered address in Norway. The EEIG structure has previously been adopted in joint ventures between lawfirms, consultancy firms and other providers of professional business services.

No method of direct investment is generally preferable. The choice of method will depend on the specific circumstances, including considerations as to tax, liability and capital structure.

b. Restrictions on foreign investors
Statutory limitations on foreign ownership of Norwegian businesses have been abolished, leading to the distinction between freely transferable and restricted shares being rendered obsolete. Previous legislation has been replaced by an omnibus Acquisition of Business Entities Act, covering most industries. The Act makes no distinction between Norwegian and foreign ownership. Based on our experience it is anticipated that only a very limited share of proposed transactions will meet with refusal under the Act. The authorities may still impose certain conditions prior to giving a transaction the go-ahead, but no conditions may be imposed on grounds of nationality.

To supplement the liberalisation in respect of ownership there has also been a relaxation of the regulatory regime regarding directorships. Previous restrictions pertaining to Norwegian citizenship and domicile have been abandoned in favour of a principle of non-discrimination among EEA citizens and residents.

c. Registration and notification requirements
All Norwegian companies are registered with the Registry of Companies ("Foretaksregisteret") as well as with the Registry of Business Entities ("Enhetsregisteret") which is a central database for the country. (For limited companies see section XII below.) The same registration requirements apply to branches of foreign entities (see section XI below). Furthermore, a foreign legal entity has to be similarly registered if it undertakes business activities of a permanent nature in Norway, irrespective of whether or not a subsidiary, branch or physical office has been set up in the country.

Furthermore, a VAT registration with the tax authorities will be required if the foreign entity is to sell its products or services in the Norwegian market.

If the foreign legal entity wants to employ local labour it must also be registered as an employer with the tax authorities.

The Competition Act 1993 empowers the Competition Control board to make the transaction subject to a number of conditions as well as to refuse approval to the transaction, if the transaction will result in, or reinforce, a substantial reduction in competition, and this will be detrimental to the public interest. These domestic regulations are inspired by - but not identical to - the EU competition regulations. Thus, Norwegian commercial activities are subject to a two-pronged system of competition rules:

1) the Competition Act 1993 which applies to all commercial activity in Norway, and

2) the EEA Agreement and the EU aquis communautaire for activities having an EEA or EU dimension.

d. Types of legal entities
The most important types of Norwegian legal entities are as follows:

1. Limited companies

The shareholder's liability for such a company is limited to the share capital of the company in question. There are two types of limited companies: Private Limited Companies ("private aksjeselskaper", abbreviated "AS") and Public Limited Companies ("allmenne aksjeselskaper", abbreviated "ASA").

Limited companies are required to register with the Companies Registry within three months of incorporation, and until such registration has taken place the person(s) dealing on behalf of the company will be personally liable for the obligations of the company. The registration fee is NOK 4770 (approx. USD 610).

Payment of dividends by a limited company is restricted to its accumulated net profits less any funds needed to fulfil certain applicable statutory requirements.

The regulations concerning limited companies are described in more detail in section XII.

2. General partnership ("Ansvarlig selskap", abbreviated "ANS")

The partnership and the relationship between the partners is governed by the Companies Act 1985, supplemented by the partnership agreement. The partners will be jointly and severally liable for all obligations of the partnership. However, the partnership agreement may provide that the partners, although having unlimited liability, shall only be liable for a pro rata share of the obligations of the general partnership ("Selskap med delt ansvar", abbreviated "DA").

Both individuals and legal entities may be partners.

A partnership must keep accounts in accordance with the Accounts Act 1998, such accounts to be audited in accordance with the Auditing Act 1964. However, unlike limited companies, it is not necessary for the annual accounts to be filed with the Registry of Companies, implying that the accounts of partnerships do not have to be published.

All general partnerships are required to register with the Companies Registry, and the protection offered partners by using the "DA" form does not become effective as against the creditors of the partnership until so registered. The registration fee is NOK 2120 (approx. USD 270).

The general partnership as such is not liable for income tax. Taxes are levied proportionately on each individual partner. There are no statutory restrictions on the payment of "dividends" from the partnership to its partners.

If the partnership is created to perform a function of limited duration or scope it is often labelled a "joint venture" by the partners. This does not have any bearing upon its legal status, as the requirements of the Companies Act 1985 apply to all commercial activities performed on behalf of two or more individuals/legal entities in the sense that such individuals/entities have unlimited liability for the obligations incurred during such activities. Likewise, if one or more of the participants have limited liability, while at least one participant has unlimited liability, the relationship will be governed by the Companies Act 1985 as a limited partnership.

3. Limited partnership ("Kommandittselskap", abbreviated "KS")

A limited partnership must consist of one or more general partners and of one or more limited partners. Both the general and the limited partners may be either legal entities or individuals. The general partners have unlimited liability, whereas the limited partner's liability is limited to an amount fixed by the partnership agreement. As least 40% of such fixed amount must be paid in by the limited partners within two years of the limited partnership being set up. The payment of "dividends" from the partnership to its partners is restricted by a requirement that such 40% should remain with the partnership at all times after having been paid in by the partners.

In most cases there is only one general partner, being a private limited company with the minimum permitted share capital (see section XII below). At least one general partner must have an ownership share of at least 10% of the limited partnership.

With some modifications, a limited partnership is subject to the same rules which are applied to general partnerships, including the rules on registration and taxation. The registration fee is NOK 4770 (approx. USD 610).

a. General remarks
Foreign investors may acquire a Norwegian business by the purchase of assets or shares. Alternatively, an investment may take the form of a merger. Shares may of course be acquired through transfer of existing shares or through the subscription of newly issued shares in case of an increase in the share capital of the issuing company.

This section will focus on the acquisition of Norwegian limited companies or their assets. As to restrictions on foreign investors, please refer to section IX, sub-section 2.

b. Relevant statutory provisions
Acquisitions of shares or assets are mainly governed by the parties' own agreement and general contractual principles, supplemented by the Sale of Goods Act 1988 to the extent that the agreement is not exhaustive. The Sale of Goods Act 1988 has implemented the United Nations Convention on Contracts for the International Sale of Goods. Some degree of protection for investors is provided by the Securities Trading Act 1997 as far as the sale or issuance of shares or other securities is concerned.

In case of the acquisition of assets one should note that as far as employees are concerned, the position will generally, under Norwegian law, be that the relationship between employees and the acquiror will be treated as if the acquiror had purchased the shares of the company acting as the original employer. This implies that the purchaser takes over all the vendor's rights and obligations towards any employees of the transferred undertaking, no matter what the parties have agreed between themselves. Furthermore, it should be noted that an acquisition per se provides insufficient ground for dismissing any employee. However, in the event of dismissal being "reasonably justified" on economic, technical or organisational grounds, such dismissal will not be deemed to fall within the scope of the rules of compensation for unfair dismissal. The "reasonably justified" qualification is construed narrowly by the courts.

Any purchase of shares should be notified to the company having issued such shares, within one month of the purchase. The company will then take note of the transfer of ownership of the shares in its Share Registration Book. Only when such registration has taken place will the acquiror be able to exercise all rights endowed with the newly acquired shares. For companies registered in the Central Securities Register, notification to the Register substitutes the above procedure. This applies i.a. to all companies listed on the Oslo Stock Exchange.

Pursuant to the Limited Companies Acts 1997 a limited company is prohibited from providing loans for the purpose of the borrower (or another person acting in concert with him) acquiring shares in such company. Furthermore, such company cannot provide security in connection with such share acquisition. The same restrictions apply in respect of the acquisition of shares in any parent or subsidiary in question. Financial support of this nature is unlawful irrespective of whether it is extended prior to, during, or subsequent to the acquisition.

As is the case in other comparable jurisdictions, public offers to buy shares in listed companies are subject to certain information disclosure obligations. The information disclosure requirements will be met by the issuance of a prospectus, which will have to be approved by the Oslo Stock Exchange.

In respect of listed companies, the Securities Trading Act 1997 requires shareholders to notify the company and the Stock Exchange immediately upon having acquired shares which, together with their previous shareholdings and those of certain related parties, represent the equivalent of, or more than, 10, 20, 33 , 50, 67 or 90% of the share capital or votes in the company. A corresponding notification requirement is imposed on a seller falling below such thresholds by disposing of shares.

In case of acquisition of shares representing more that 40% of the votes in a listed company, the Securities Trading Act 1997 imposes a mandatory requirement on the acquirer to make a public offer for the remaining shares. Voluntary public offers in respect of listed companies are regulated by the Stock Exchange Regulations laid down pursuant to the Stock Exchange Act 1988.

Norwegian competition law may affect both share-based and asset-based acquisitions, as well as mergers. Under the Competition Act 1993 the Competition Surveillance Authority may intervene if it finds that such a transaction will result in, or reinforce, a substantial reduction of competition, if such an outcome is deemed to be detrimental to the public interest. The CSA may in such cases demand that the transaction is reversed or, alternatively, lay down conditions intended to counter the restriction of competition resulting from the transaction.

c. Transfer taxes and duties
No stamp duty or other transfer tax is payable upon the sale of shares in Norwegian limited companies. In respect of asset sales including the transfer of real estate or leaseholds, a stamp duty of 2.5% of the market value of the real estate in question - or the aggregate rent for the first 20 years - is levied on the buyer. Asset-based acquisitions are also subject to certain registration taxes in respect of the transfer of ownership of motor vehicles and aircraft. Mergers are usually tax effective, as normally no tax consequences will arise for the companies or their shareholders. In respect of other relevant tax considerations, reference is made to section XIV below.

This section will deal with the private limited company ("privat aksjeselskap", abbreviated "AS") as well as the public limited company ("allment aksjeselskap" abbreviated "ASA"), as the two types of Norwegian company endowed with limited liability. Such companies are governed by, respectively, the Private Limited Companies Act 1997 and the Public Limited Companies Act 1997. Limited companies must keep accounts in accordance with the general terms of the Accounts Act 1998 as supplemented by specific provisions of the Limited Companies Acts 1997.

When a company is promoted but not yet registered with the Company Register, the persons who deal on behalf of the non-registered company will assume unlimited liability for the company's obligations in case registration does not take place. This risk can be avoided by acquiring a "shelf company" instead of setting up a new company.

Only one promoter is required to form a limited company. The promoter(s) must sign a Memorandum of Association, including draft Articles of Association. At least half of the promoters have to be resident in Norway and must have lived in Norway for the last two years. The requirement as to residence in Norway does not apply to nationals of European Economic Area countries who are resident in such a country.

The minimum share capital is NOK 100,000 in respect of private limited companies and NOK 1 million in respect of public limited companies, of which the entire amount must be paid into the company prior to registration. No taxes are levied on the contribution of capital to Norwegian limited companies.

The Limited Companies Acts 1997 requires that certain issues are dealt with by the Articles of Association of the company, for example: the company name, the objects of the company, the amount of share capital, the number of board members and the issues to be dealt with by the annual general meeting of the company.

The company must have a board of directors composed of not less that three members. However, if the share capital of a limited company is less than NOK 3,000,000, the board may consist of only one or two directors. In the latter case it is required that at least one deputy member of the board is appointed as well.

The company's employees may be entitled to elect one representative to the board of directors provided that the company has employed an average of at least 30 persons over the preceding three year period. If the company has employed an average of at least 50 persons over such three year period, such representation may be increased to one third of the members of the board of directors, with a minimum representation of two members. If the three year average exceeds 200 persons, the employee representation is further strengthened.

If a Norwegian limited company is the parent of a group of companies, all the employees of Norwegian companies in the group may be cumulated when calculating whether the above thresholds have been exceeded, and all such employees may be granted the right to vote in the elections for representatives to the board of the parent company.

All limited companies, with the exception of those with a share capital of less than NOK 3,000,000, must have a managing director. The managing director is legally responsible for the day-to-day management of the company and may in this respect always act on behalf of the company.

The managing director and at least half the members of the board of directors must be Norwegian residents and they must have lived in Norway for the last two years. The requirement as to two years residence does not apply to nationals of European Economic Area countries who are resident in such a country. Exemptions from this requirement may be granted and such exemptions are in practice granted liberally either in respect of the requirement regarding the composition of the board of directors or in respect of the requirement regarding the managing director, but not generally from both requirements.

One or more auditors must be elected to audit the company's accounts in accordance with the Auditing Act 1964.

Companies are required to hold ordinary general meetings every year not later that six months after the end of the financial year. Otherwise, extraordinary general meetings must be held whenever required by the board of directors, by the auditor or by shareholders representing at lease 10% of the share capital of the company. If explicitly provided for in the Articles of Association, general meetings may be held outside Norway.

A limited company may have only one shareholder, and it is not necessary to issue more than one share. Shares must be issued in the name of a specific person or legal entity.

Generally, shares of public limited companies , while certain types of restrictions as to transferability, which types are specified in detail by the Private Limited Companies Act 1997, apply to the shares of most private limited companies. Such restrictions relate to transfers being subject to the reasonable consent of the board of directors and to transfers being subject to a right of first refusal.

Basically, all shares rank equally in respect of their rights, including voting rights. However, the Articles of Association may provide for more that one class of shares. The difference in the rights attached to the shares usually refer to the entitlement to dividends, the rights to assets upon liquidation and/or the voting rights in the company. It is possible to have non-voting share classes. However, certain decisions of the general meeting may only be made by a qualified majority both of the votes cast and of the capital represented at the general meeting.

A limited company may not acquire more than 10% of its own shares except in case of acquisition of another business entity by merger or otherwise, in which case the excess number of shares must be sold or cancelled within two years. There is a corresponding restriction on the ability of a limited company to accept its own shares as security, as well as the ability of a subsidiary to acquire shares in its parent company or to accept such shares as security. Such restriction is also applicable to foreign subsidiaries of Norwegian parent companies and in the case of Norwegian subsidiaries of a foreign parent company.

The registration fee for limited companies amounts to NOK 4770 (ca. USD 610).

With effect from 1 July 1990, most exchange control regulations in Norway were abolished.

There is no longer any licensing requirement for currency transactions, but only an obligation to report currency payments in excess of NOK 25,000 to the Norwegian Central Bank ("Norges Bank") unless payment is made through a Norwegian bank authorised to make currency payments. In the latter case, such bank will be required to report the payment. The reporting requirements are maintained primarily for statistical and tax supervision purposes.

No foreign currency restriction apply to the repatriation of capital invested in Norway, to the purchase of foreign exchange, to the repatriation of earnings made in Norway, or in respect of payments in local currency to employees, suppliers, etc.

a. General
Insolvency mostly - but not necessarily - leads to the cessation of business. Dissolution proceedings may also entail criminal charges and pecuniary liabilities for partners or directors and officers of limited companies. If the equity of a company is at any time less than what would appear to be required on the basis of its current exposure and/or such equity is at any time deemed to constitute less than 50% of its registered share capital, the board of directors is required to take immediate action to address the situation. Such circumstances may imply a call for recapitalization, reorganisation under insolvency legislation or dissolution. There is no duty for the foreign shareholder to recapitalize the company, but the directors may become exposed to criminal prosecution and financial liability should it subsequently be deemed negligent to have continued operations without appropriate correctional action.

A Norwegian business entity can be dissolved by voluntary liquidation in accordance with regulations in the appropriate legislation, the Limited Companies Act 1997 or the Companies Act 1985, or by compulsory liquidation in accordance with the insolvency legislation. Norwegian insolvency legislation is contained in the Bankruptcy Act 1984, which sets out the various procedures to be followed, and the Recovery Act 1984 containing provisions regulating priority of claims and revocation of certain pre-liquidation transactions.

The Bankruptcy Act 1984 provides for three different procedures: Suspension of Payments, Compulsory Composition Arrangements, and Bankruptcy.

b. Suspension of Payments
The debtor company may obtain a limited moratorium by filing a petition with the local Probate Court asking for the courts protection during a negotiating period of three months, a period which may be extended at the discretion of the court in exceptional cases. The opening of such period of debt negotiations will not be made public, but no creditors may enforce their claims against the debtor during this period, be it individually or collectively - save the concerted plea for bankruptcy by at least three creditors, which aggregate claims must represent at least 40 % of all known claims.

The court will appoint one or more supervisors to assist the debtor in restructuring its business. The supervisors will notify all known creditors of debt negotiations having been instigated. Given the task as assistant, the supervisor - in contrast to the liquidator in bankruptcy - may not dispose of the assets of the debtor. His approval, however, is required for all significant transactions of the company.

Subject to the approval of the supervisors, the debtor's proposal for restructuring his business will be submitted to all known creditors for approval. Such proposal may include (i) suspension of payments, (ii) partial write down of debt, (iii) full or partial liquidation of the company without relief for uncovered debts, (iv) full or partial liquidation of the company with relief for uncovered debts, or (v) a combination of any remedy (i) - (iv).

If all creditors approve the proposal, this forms a voluntary composition arrangement which is notified to the Probate Court, and the proceedings end. If, however, the proposal meets with opposition, the company may apply for compulsory composition arrangements provided its proposal received support by at least 40 % of the creditors which aggregate claims must represent 40 % or more of all known unsecured debt. Failing such support, the court may open bankruptcy proceedings which will then take effect ordinarily from the day the debtor filed for suspension of payments.

c. Compulsory Composition Arrangement
Compulsory Composition Arrangements may comprise (i) suspension of payments, (ii) partial write down of debt, (iii) full or partial liquidation of the company with relief for uncovered debts subject to a minimum coverage, or (vi) a combination of any remedy (i) - (iii).

Compulsory Composition proceedings will be opened by the local Probate Court following a petition from the debtor or the supervisor(s) provided the proposal receives support as described in the preceding paragraph. The opening of proceedings is published in the Norwegian Gazette. All claims originating prior to the opening of proceedings must be notified to the supervisors.

The supervisors may reject claims and seek revocation of transactions under the Recovery Act 1984.

A compulsory composition arrangement must yield a minimum payment of 25 % to each creditor. A proposal requires the approval of 60 % of the voting creditors - representing at least 60 % of the aggregate unsecured debt - if a minimum settlement of 50 % is offered. If the proposal is for less than 50 % settlement, a 75 % majority is required. The decision will be binding on all creditors save certain public claims and claims secured by mortgage/lien.

d. Bankruptcy
Bankruptcy proceedings are opened following a petition to the local Probate Court from a creditor or the debtor itself. In both cases it must be demonstrated to the courts satisfaction that the debtor is insolvent, i.e. the company is displaying continuing inability to pay debts as they fall due, while at the same time liabilities exceed assets. The court shall request a deposit to secure court fees and basic costs related to the proceedings. The usual size of the deposit is NOK 20,000 (ca. USD 2500).

The decision to open bankruptcy proceedings is published in the Norwegian Gazette at the same time naming the court appointed liquidator to be approved by the creditors. The liquidator is assisted by a creditors' committee. Proceedings generally follow internationally recognised standards with assessment and ranking of claims, testing and revocation of transactions made within a certain period prior to opening of bankruptcy proceedings or suspension of payments, continued operation of the company at the risk of creditors and/or disposal of assets.

The liquidator with the assistance of the creditors' committee will issue a report outlining the result of investigations made as to the previous management of the company and the cause of insolvency as well as the management of the estate. Frequently this report is submitted to the public prosecutor for further investigations and filing of criminal charges.

The bankruptcy proceedings are closed by the final distribution of dividends as approved by the court, and the company is stricken from the Company Register. It should be noted that private persons remain liable for the part of their debts that remain uncovered by dividends.

a. Registration prerequisites
All Norwegian branches of foreign legal entities must be registered with the Company Register. An application for registration with the Registry must be submitted before the branch commences any business activities in Norway. The application must be signed by the branch manager(s) as well as by the members of the board of directors of the branch office, if any. The application should be filed in Norwegian and the signatures should be confirmed by two witnesses or a lawyer. The application should give the following information:

1. Name, type of legal entity and head office address of the legal entity to which the branch office belongs ("the parent").

2. The names of the owner(s) of the parent and of the members of its board of directors as well as of the persons endowed with the power to sign on behalf of the parent (as well as their birth dates and home addresses).

3. If the parent is a limited company: its authorised share capital, as well as the degree to which it has been paid in.

4. The memorandum and articles of association of the parent.

5. The name and address of any registry in which the parent has been registered in its own jurisdiction, and the registration number.

6. Trading name and business address of the Norwegian branch.

7. Type of business activities to be performed by the Norwegian branch.

8. The name of the branch manager and of the members of the board of directors of the branch, if any (as well as their birth dates and addresses). According to the Trading Act 1980, all branches undertaking trading activities in Norway need to have a branch manager, while a separate board of directors of the branch is not mandatory. The branch manager as well as half the board of directors, if any, have to be resident in Norway and must have lived in Norway for the last two years. The requirement as to residence in Norway does not apply to Nationals of European Economic Area countries who are resident in such a country.

9. The extent to which any of the persons mentioned under g. will be endowed with the power to sign on behalf of the parent.

10. Provisions as to the dissolution of the parent.

Provisions as to the bankruptcy of the parent.

The application may need to be supplemented by other information that the Registry requires to confirm the correctness of the information specified under a. - k.

The branch is not required to have any specific minimum capital, as the parent operating through the branch is liable for the debts of the branch.

The fee for registration with the Company Register is NOK 4.040,- (approx. USD 590.-).

b. Administrative regulations
The branch manager(s) and the members of the board of directors of the branch, if any, have joint personal responsibility for obtaining the above registration in respect of the branch.

All Norwegian branches of foreign legal entities must keep accounts in accordance with the Accounts Act 1977, such accounts to be audited in accordance with the Auditing Act 1964. However, unlike limited companies, it is not necessary for the annual accounts to be filed with the Registry of Companies, implying that the accounts of branches do not have to be published.

c. Tax
Reference is made to section XVI below.

a. Introduction
In 1992, the Norwegian Parliament enacted a tax reform. The reform covers taxation of individuals as well as companies. The main object of the reform was to reduce the tax rates and at the same time widen the tax base. Thus, several of the pre 1992 incentives regarding different kinds of investment were repealed. Further, another object of the tax reform was to create neutrality in the tax system with respect to investment in different types of property, different ways of organising business and choice of legal entity.

Taxable income
Corporations and individuals resident in Norway are taxed on their global income. The tax liability extends to all kind of income which is derived from business activities, capital or personal services. Residents are also liable to tax on gains (and losses are deductible) on debentures, bonds and similar instruments, as well as on gains (and losses) due to changes in exchange currency rates of foreign currencies.

Non-residents are taxed on Norwegian source income. Norwegian source income subject to tax in Norway includes:

• income from business activities carried out in Norway or managed from Norway.
• income from real property or assets situated in Norway.
• dividend distributions from Norwegian companies.
• income from personal services provided in Norway.
• certain pensions or director's fees received from companies or other entities in Norway.
• income from business activities or personal services related to oil and gas activities on the Norwegian continental shelf.

An individual or company not resident in Norway for tax purposes is generally not taxable at all in Norway for gain from selling shares in Norwegian companies (and losses are not deductible). However, a tax liability in Norway may nevertheless arise if (1) the shares were effectively connected with a business carried out in Norway by the shareholder or (2) the shareholder has previously been resident in Norway for tax purposes, and the sale takes place within five years after the residency for tax purposes in Norway ceased. In the latter situation, the applicable tax treaty may, however, transfer the right to tax the gain to the state in which the seller is resident.

Resident in Norway
A corporation is resident in Norway if it is domiciled or »belongs to» Norway. Generally this is interpreted to refer to the place of the corporations effective management, and in particular the place of the Board of Directors meetings. Thus, a foreign incorporated company may be regarded as resident of Norway if its management is in Norway. However, if a corporation is formed and registered in Norway, the tax authorities will take the position that such corporation is a Norwegian resident usually with little regard to the place of management. However, if the board meets and the management is performed outside of Norway, the Norwegian incorporated company may be deemed dissolved under the Companies Act, and thus treated as dissolved also for a tax purposes. The residency of the shareholders are of no importance.

Partnerships ("Ansvarlig selskap") and Limited Partnerships ("Kommandittselskap") are normally considered transparent entities for income tax purposes.

Individuals are resident in Norway if they permanently live in Norway or if they, on a temporarily basis, stay in Norway for at least six months. An individual becomes non-resident if (i) he permanently leaves the country (emigration), (ii) he - on a temporarily basis - has resided abroad for at least four years without interruptions or (iii) he resides in another country for at least one year and at the same time becomes a resident of that country for tax purpose, i.e. subject to tax on a regular basis in the country in which he is living.

Income tax rates
The regular income tax rate for individuals and corporations is 28 % (Municipal and county tax and tax equalisation fund) levied on net income. The same rate applies to capital gains, as capital gains are treated as ordinary income. All capital gains upon sale of shares are subject to tax and correspondingly, losses are deductible in ordinary income.

In addition, for individuals, a personal income tax or "top tax" is charged on salaries in excess of approx. USD 32,000 (single persons) or 37,000 (taxpayer with dependants) at a rate of 13.5%. This additional tax is based on gross income with minimal deductions. Due to the relatively low threshold, the tax applies to individuals with both moderate and high salaries. Along with the employee's social security contribution of 7,8 % (also based on gross income), the aggregate tax levied on income from personal services is 49.3 % (28 % regular income tax plus 13.5 % "top tax" plus 7.8 % social security contribution).

The personal income tax may also apply to income from corporations, as an Active Shareholder Tax. If a shareholder owns more than two-thirds of the company's shares or is entitled to more than two-thirds of the company's profits and actively participates in the company's business, the shareholder is subject to personal income tax of up to 52.3% (including social security contribution of 10.8 % and "top tax" of 13.5 %) on the company's profits (computed under special rules in order to determine the part of the company’s profits that are attributable to the mentioned personal services). This tax is imposed in addition to the regular 28% corporate tax on the company. The company reimburses the shareholder for the active shareholder tax, but may not take a deduction for the tax. The shareholder does not include the reimbursement in taxable income. This system implies that an active shareholder even if he does renounce a otherwise normal salary in order to repatriate the company's profits through dividends, will be taxed as if he received a higher salary.

The regular tax rates also apply to non-residents with Norwegian source income. There is a withholding system for dividend distributions, see below.

Deductions and losses
In the case of business profits, expenses connected to the business are deductible. Individuals may also take certain deductions which are not related to business activities, for example interest deductions.

Most assets are depreciable according to the declining balance method. Depreciation allowances varies and the maximum rates are as follows:

Losses in connection with business activities are deductible, also against other income. Losses from the disposition of shares in limited companies are always deductible, whether connected to business activities or not. Losses which are not connected to business activities are normally not deductible.

Deductible losses can be carried forward for a period of 10 years. When a substantial part of the shares of a company is sold or a company merges with another company, the company will at the basis maintain its right to carry forward accumulated losses. However, if the ownership of a company has been wholly or partly changed, either by a merger or other transaction, and it is likely that the transaction in substance is motivated by achieving tax benefits for the parties concerned, the company will loose its right to carry forward accumulated losses as well as losses for the year in which the transaction takes place. Furthermore, when a company is subject to the forgiveness of debts, losses allowed to carry forward are reduced by the amount of released debts. When the loss-generating business ceases, the carry forward of losses lapses. The losses may then (at the cessation of business) be carried back for a period of two years.

Group contributions
If companies take part in the same group of companies for income tax purposes (more than 90 % ownership), contributions may take place from one company to another whereby taxable profits can be transferred from one company to another. Such contributions will also create an obligation to pay the amount, but not necessarily at the same time. The obligation may remain as a debt between the two companies. Contributions cannot be made from a Norwegian company to a company outside the Norwegian tax jurisdiction, but contributions can be made between two Norwegian companies if they are owned (more than 90 %) by same parent company, even though the parent company is not a Norwegian company.

Tax period
The calendar year is the mandatory tax year. On application, a corporate taxpayer may be granted a different accounting year if special reasons justify this. Normally, Norwegian subsidiaries of foreign parent companies have a different accounting year.

b. Dividend distributions

Dividend distributions to and from Norwegian residents
Dividend distributions are not deductible for the distributing company. The distributed amount is taxable income for the recipient. However, an imputation system is applicable.

If the distributing company is a Norwegian company subject to tax on its overall income under Norwegian Domestic Law, the recipient will include in its income, in addition to the distributed amount, a credit for taxes paid by the distributing company. This tax credit will then be allowed to the recipient with the net effect that the shareholder is not effectively taxed on dividend distributions. Example:

As a result of differences between financial accounting rules and tax rules, companies may distribute dividends from income that has not yet been taxed. To ensure that the distributing company pays tax on earnings that are distributed, a correction tax at a rate of 28% (the regular corporate tax rate) is imposed on distributions of profits that have not yet been taxed. Consequently, deferred tax is payable when dividends are distributed.

Cross border distributions
The imputation system does not apply for dividend distributions received from a non-resident company. However, under certain circumstances a foreign tax credit is applicable, see below.

Dividend distributions to non-residents from Norwegian companies are subject to withholding tax. The withholding tax is the final tax. The tax rate is 25 % under domestic law or the lower treaty rate, normally reduced by tax treaty to 15% and often to 5% if the foreign shareholder holds at least a certain part of the shares of the Norwegian company.

There is no branch level tax upon distributions from a permanent establishment.

Payments of interest and royalties
There is no withholding tax under domestic law on payment of interest and royalties.

Tax structuring of mergers and acquisitions
The tax aspects might be of vital importance in connection with a merger or acquisition. The tax position of both the seller and the acquirer will have to be examined carefully before the final purchase procedure is established. Purchases of assets, rather than purchases of shares will be subject to considerably different tax treatment for both the seller and the acquirer.

Asset acquisitions
Gains from selling assets are as a main rule taxable income for the seller. Losses are deductible. The buyer will obtain a new taxable basis (often subject to depreciation) to the extent that the purchase price deviates from book value.

When selling depreciable assets, taxation depends on which group (see 1.4 above) these assets belong to. When selling assets in group e) (ships), f) (aircraft), g) (hotels) or h) (office buildings) deduction may be postponed partly or in whole. At least 20% of the gain will be taxed every year. The same will normally apply to goodwill. Up to 20% of any losses from selling the same assets may be deducted every year.

When selling assets belonging to the other groups, the taxation of gain may also be postponed by using the declining balance method. The gain will be taxed through reduced depreciation for the actual group. If the balance becomes negative, an amount equal to at least the depreciation percentage rate of the balance shall be taxed every year.

To the extent that the book value of the asset is lower than the current market value it is as a main rule more favourable for the buyer to acquire assets than shares. Firstly, the book value of the tangible assets will be increased to the amount paid for the assets. Secondly, any payment of goodwill as part of the purchase price of the assets will be depreciable. If the book value is higher than the current market value it is as a main rule more favourable to acquire shares.

It is important to be aware that losses to be carried forward cannot be transferred when selling assets, as it can be when disposing of the shares.

Stock acquisitions</