Board Procedure in Norwegian Companies

The board is the supreme governing body of a Norwegian limited liability company and is responsible for managing the company. In order to manage the company as effectively as possible, the board’s decision-making process must follow certain rules. These rules are set out in the Norwegian Limited Liability Companies Act (aksjeloven). We take a closer look at them in this article.

How the Board Handles Matters

The starting point is that the board must deal with matters at a meeting, cf. Section 6-19(1) of the Limited Liability Companies Act. This can, however, be departed from if the chair of the board finds that the matter can be presented in writing or dealt with in another way, cf. Section 6-19(1). Therefore, it is the chair of the board who decides which form of proceeding to use. However, this discretion can be restricted through the articles of association or through a board resolution. For example, it can be restricted by requiring that certain types of matters must be dealt with at a meeting.

However, the chair of the board cannot freely choose how matters are handled. There is a requirement that the decision-making process be sound and reassuring (“betryggende”), cf. Section 6-19(1). This applies regardless of how the matter is processed. The law assumes that dealing with a matter at a meeting will always satisfy this requirement.

What constitutes a sound decision-making process will depend on a specific assessment in each case. Consideration must be given to the board members’ need to discuss the matter among themselves. This applies both as regards the basis for the decision and the content of the resolution.

If a matter is dealt with without a meeting, the requirement for a sound process means that stricter demands are placed on the case documentation. In addition, an opportunity for an exchange of views must be provided. Alternatively, it must be clear that such an exchange is not of importance.

For matters of significant importance to the company’s operations — for example, matters concerning the company’s organization — this will affect the requirements for the decision-making process.

Other Requirements Concerning the Decision-Making Process

The chair of the board has a duty to ensure that, as far as possible, the board members can participate in a joint consideration of the matters being dealt with, cf. Section 6-19(2) of the Limited Liability Companies Act.

If matters are not dealt with at a meeting, this means that the process should be organized in such a way that board members are given the opportunity to present their views on the matter to the other board members. Their views should be made known to the others before a decision is made. This is not, however, an absolute requirement, and the nature of a particular matter may mean that communication is not necessary.

What the process cannot do, however, is result in certain board members being excluded from the decision-making process or being denied the opportunity to present their views. In that case, the process would no longer be considered sound.

The chair’s duty to ensure that board members can participate is also linked to the requirement for the number of board members needed for the board to have quorum. The board cannot make a decision on matters under consideration if fewer than half of the board’s members are present, cf. Section 6-24 of the Limited Liability Companies Act. Stricter requirements may, however, follow from the articles of association.

Each board member or the managing director can demand that a matter be dealt with at a meeting, cf. Section 6-19(2) of the Limited Liability Companies Act. There is no deadline for when this can be demanded. A meeting can therefore be requested partway through the process. However, it is the chair of the board who decides the form of the meeting — typically whether it should be held physically or digitally. If more than half of the board’s members request a physical or digital meeting, the chair must comply with this.

Management of the Board’s Decision-Making Process

Board proceedings are led by the chair of the board. If neither the chair nor the deputy chair attends the meeting, the board elects a chairperson for that meeting, cf. Section 6-19(3) of the Limited Liability Companies Act. As chairperson of the meeting, this person must lead the exchange of views and any votes that take place. They must also ensure that minutes are recorded, cf. Section 6-29 of the Limited Liability Companies Act.

The Role of the Managing Director in the Board’s Decision-Making Process

The managing director has both the right and the duty to participate in the board’s consideration of matters, and to express an opinion on them, cf. Section 6-19(4) of the Limited Liability Companies Act. The managing director must therefore be notified of the proceedings, cf. Section 6-22 of the Limited Liability Companies Act. The board does, however, have the right to exclude the managing director from the consideration of an individual matter. The board cannot, however, exclude the managing director from board proceedings generally.

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