Board of directors
In small companies, organising the leadership of the company may be very simple. Often it is sufficient that the company has a board of directors (later referred to as the board). The board may even have only one member, possibly one of the shareholders.
Note that if the board has one or two members, the Act requires that a substitute is appointed.
In general, the enterprise may itself decide on the number of members on the board. However, if the share capital is 3 million NOK or more, at least three members on the board are required. The actual or minimum number of members must be indicated by the Company Articles.
The board is elected by the company’s General Assembly. The General Assembly decides on electing/appointing substitutes to the board members, however, at least one substitute is required if the board only has one or two members.
If the company has more than 30 employees, the Act grants certain provisions for the employees to elect board members. These provisions are not discussed here.
If more than one member on the board, a chairman is elected. Unless decided by the General Assembly, the board itself elects the chairman. The General Assembly decides on the fee to the members of the board.
At least half the number of board members must either have permanent residence in Norway or live in and be the subjects of EEA states. Exemption may be granted by the Ministry of Trade and Industry.
The members of the board are normally appointed for two years. The Company Articles may decide longer or shorter service times, but four years are the maximum. The service time ordinarily starts at the time of appointment, and lasts until the conclusion of the General Assembly in the last year of service.
Note that the General Assembly has the right to terminate the service time of a board member before the ordinary period is expired.
The board has the actual leadership of the company, not only the business part, but also the overall operations and conduct of the company.
According to the Limited Companies Act, the board has the responsibility to ensure that the company is adequately organized. In addition, the board must see to that necessary plans and budgets are worked out.
The board is required to stay informed about the financial situation of the company, and it must see to that the operations, the accounting and the management of the assets are properly monitored. In addition, the board is required to monitor the company’s management and the general operations.
If more than 200 employees in the enterprise, the general rule is that the enterprise has what is known as the Enterprise Assembly (Bedriftsforsamling).
When the share capital is less than 3 million NOK, the Act does not prescribe a managing director.
If one is appointed or not, has to be decided based on the interests of the company, i.e. a suitable and sound organisation adapted to the operations. Managing director is the Private Limited Companies Act’s term for the person in charge of the day-to-day operations of the company.
Different terms may be used, e.g. in Norwegian “administrerende direktør”, “forretningsfører” etc. The Act applies whatever title is given to the manager.
The managing director is normally employed by the company. If the manager is a board member or not, is entirely up to the company.
The manager must be a resident of Norway, or be a subject and resident of one of the EEA member countries.
The manager has the responsibility for the day-to-day operations of the company.
If the company has not employed a manager, the board has the same responsibility. What tasks and duties that are considered part of this responsibility must be decided for each company individually, taking into account the size of the company and its line of operations. Matters that are considered unusual or of great importance to the company, should normally be decided by the board.
Still, if the manager finds that the situation cannot await the board’s decision without grave consequences for the company, he/she is entitled to act immediately. In some cases, the manager is authorized by the board to act on its behalf.
It is the manager’s duty to make sure the company’s books are kept according to the legislation and regulations, and that the assets are managed in a satisfactory manner.
The Manager is subordinate to the board, and the board may issue general directions on how the manager shall handle a particular situation.
At least every three months, the manager must inform the board about the operations of the company, the current financial situation and the results in economic terms.
The manager cannot participate in the preparation and decision making of cases where he/she is disqualified due to partiality. The rules of partiality are the same for the members of the board as they are for the manager.