Private placements and equal treatment of shareholders

Requirement for equal treatment of shareholders

Issuers are required to treat shareholders on a non-discriminatory basis and not subject them to discriminatory treatment that is not objectively based. This is clearly stated in the Norwegian Limited Companies Acts, the Securities Trading Act and the stock exchange regulations.

Large volume of private placements in Norway 

Private placements have long been the predominant way of implementing capital increases in the Norwegian market. In recent years, such placements have accounted for more than 90 per cent of the total issue volume of companies listed on trading venues operated by Oslo Børs. Pursuant to the Norwegian Limited Liability Companies Acts, private placements may be used if special circumstances so require. The use of private placements entails that the issuer addresses its offer to subscribe for new shares to specific shareholders or others. Private placements thus represent a departure from the general rule on rights issues directed to all shareholders and entail that the ownership of existing shareholders is diluted.

Investment firms that assist issuers in carrying out share issues are obliged to provide the issuer with balanced information and advice related to the choice of issue. This must be documented. The content and form of the advice will depend on the time at which the investment firm is involved and on the agreement entered into with the issuer.

Finanstilsynet's thematic review and material findings

Finanstilsynet has carried out reviews of Oslo Børs and the largest investment firms. Finanstilsynet has also looked into how some issuers handle inside information in connection with the implementation of private placements. The review of Oslo Børs is expected to be completed in early 2024. The review of the investment firms has encompassed the information and advice provided to issuers on the equal treatment requirement in connection with share issues and the firms' so-called market soundings prior to the placing of the shares. 

Finanstilsynet has summarised its material findings and assessments in a separate report (in Norwegian only). The key findings are:

• The issuer very often appears to have planned to structure the capital raising as a private placement, and the investment firms appear to not comment on or challenge the issuer’s assessments and rationale. Finanstilsynet has pointed out that investment firms must inform and advise issuers of their obligation to treat shareholders equally. 
• Finanstilsynet has emphasised the importance of complying with the rules on market soundings in order to avoid that approaches to potential investors could constitute unlawful disclosure of inside information. Investors who are approached may also risk involuntarily ending up in an insider position which, among other things, could entail a prohibition of trading. 
• Major deficiencies have been found in some investment firms' documentation of electronic communication with issuers.
• Significant errors have been found in some investment firms’ keeping of insider lists.  However, Finanstilsynet has taken note of the investment firms' assessments of when inside information is disclosed in each issue process. 
• Significant errors have been found in many issuers’ keeping of insider lists. 
• In one case, Finanstilsynet has identified a significant discrepancy between the issuer's and the investment firms' assessments of the time at which inside information was disclosed.