Apr 8, 2025
International Corporate Law – Company Statute, NUF, and SE Companies in Norwegian Law
In an increasingly globalized economy, it is becoming more common for companies to have branches across borders. This can happen when a company is incorporated in one country but operates in another, the administration is located abroad, or board members reside in different countries. In such cases, the question arises as to which country's corporate law should regulate the company's legal relationships – a question that must be resolved through international private law and can have far-reaching legal and practical consequences.
This article will provide an overview of the corporate statute in Norwegian law and highlight two important company forms with an international character: Norwegian branch of foreign company (NUF) and the European company (SE company).
Corporate Statute: Which country's law regulates the company?
What is the Corporate Statute?
In international private law, the term "corporate statute" refers to the country's law that regulates a company's legal relationships. When a company has connections to multiple countries, it must be determined which country's corporate law applies to the company's internal and external affairs.
Two Competing Theories
In international private law, there have traditionally been two competing theories on which country's law should regulate a company's legal relationships:
The Incorporation Theory (Foundation Theory): The company is regulated by the law of the country where it is incorporated and registered.
The Real Seat Theory: The company is regulated by the law of the country from which it is actually managed – where the headquarters of the business is located.
The choice between these theories has practical significance when a company is incorporated in one country but managed from another. For instance, a company incorporated in Cyprus but managed from Norway would be subject to Cypriot corporate law according to the Incorporation Theory, but Norwegian corporate law according to the Real Seat Theory.
The Development in Norwegian Law
In Norwegian law, there is no Supreme Court decision that clearly resolves the question of which country's law constitutes the corporate statute. Legal theory has been divided on whether the Incorporation Theory or the Real Seat Theory represents the current law.
However, the trend is clearly moving toward the Incorporation Theory (the law of the country of incorporation) being considered the corporate statute in Norwegian law. This aligns with an international trend where more countries are adopting the Incorporation Theory, including Sweden, Finland, England, Ireland, the Netherlands, and Denmark.
The European Court of Justice's Case Law and EEA Consequences
The case law of the European Court of Justice has been crucial in the development of this area, particularly through three central decisions:
The Centros Case (C-212/97): The European Court of Justice ruled that the right of establishment ensures that a company incorporated in an EU country can establish branches in other member states, regardless of where the company's business activity actually takes place. The ruling implies that a company can be incorporated in a country with favorable corporate legislation and subsequently conduct all its business in another country through a branch.
The Überseering Case (C-208/00): The European Court of Justice found that the Real Seat Theory was incompatible with the freedom of establishment when it resulted in a company being denied recognition as a separate legal entity in another member state.
The Inspire Art Case (C-167/01): The European Court of Justice invalidated Dutch legislation that imposed special requirements on foreign companies exclusively operating in the Netherlands ("pseudo-foreign companies").
Together, these cases have made it challenging to uphold the Real Seat Theory within the EU/EEA area. As an EEA member, Norway is obliged to comply with the EU's rules on the freedom of establishment, which in practice means that Norwegian authorities must recognize companies legally incorporated in other EU/EEA states, even if they operate exclusively in Norway.
What is Included in the Corporate Statute?
The corporate statute primarily covers issues regarding the company's "internal life," including:
Share subscription
Distribution of dividends
Change of ownership
Capital increase and capital decrease
Merger and demerger
Dissolution of the company
In principle, it also covers certain issues regarding the company's relations with the outside world, such as claims for damages against the company and its board members, as well as authorization exceeding authority.
For issues concerning whether the company has entered a contract, interpretation of the contract, or breach, however, the contract statute applies. Here, emphasis is placed on which country's law the contractual relationship is most closely connected to according to a concrete assessment (the "Irma-Mignon" formula).
Norwegian Branch of Foreign Company (NUF)
What is an NUF?
An NUF (Norwegian Branch of Foreign Company) is a branch in Norway of a company incorporated abroad. Legally, an NUF is not a separate company, but a division of the foreign company that operates in Norway.
The NUF form became particularly popular in Norway in the 2000s, primarily as a result of the European Court of Justice's ruling in the Centros case. The ruling meant that Norwegian authorities had to recognize that Norwegian businesses could operate in Norway through branches of companies incorporated in other EU/EEA countries, typically the United Kingdom.
Legal Status
An NUF is not a Norwegian limited liability company subject to Norwegian company law but a Norwegian branch of a foreign company subject to the company law of the country of incorporation. In terms of property law, such a branch is not an independent legal entity – the legal entity is the foreign company, and the branch is a part of it.
This has several important consequences:
Property rights and obligations linked to the branch are attributed to the foreign company
An agreement entered into with the branch is effectively an agreement with the foreign company
The NUF does not have legal standing in court and cannot act as a plaintiff or defendant in a civil lawsuit (cf. Rt. 2008 s. 1730)
Lawsuits must be directed against the foreign parent company
Motivation for Establishing NUFs
The establishment of NUFs has been primarily motivated by the desire to avoid Norwegian corporate law rules, especially:
Requirements for minimum share capital (previously 100,000 NOK, now 30,000 NOK for AS)
Norwegian rules on company-financed share acquisitions
In practice, many Norwegian businesses opted to establish a "private limited company" (Ltd.) in the United Kingdom, which could be incorporated with a minimum capital of just 1 pound, and then operate in Norway through a branch of this company.
Legal Framework for NUF
The principles of freedom of establishment imply that Norwegian authorities must accept that NUFs are subject to the company law of the country of incorporation. However, this applies only to corporate law rules.
Norwegian authorities are free to apply other parts of Norwegian legislation to NUFs:
Tax: NUFs must pay taxes to Norway on par with Norwegian companies if they are "resident" here, i.e., managed from Norway (cf. the Tax Act § 2-2 first paragraph)
Accounting: NUFs are generally required to comply with Norwegian accounting rules, provided there is actual activity in Norway and tax liability here (cf. the Accounting Act § 1-2 first paragraph no. 13)
Audit: Small NUFs are exempt from audit requirements in the same way as small limited liability companies (cf. the Auditor Act § 2-1 second paragraph letter e)
Registration: Foreign companies operating a business in Norway through a branch must register in the Business Register (cf. the Business Register Act § 2-1 second paragraph)
NUF – A Company Form on the Way Out?
The NUF form has to a considerable extent been misused by unscrupulous businesses, and the regulations have been somewhat unclear. To counter this, Norwegian authorities have implemented simplifications in the companies act, including reducing the minimum requirement for share capital from 100,000 NOK to 30,000 NOK.
These changes have made the limited liability company form more attractive and reduced the need for the NUF form. Much indicates that the NUF is a company form on its way out of the Norwegian business landscape.
The SE Company (Societas Europaea)
What is an SE Company?
The SE company (Societas Europaea) is a European capital company with limited liability that has similarities to a public limited company. The company form is based on an EU Regulation (SE Regulation 2157/2001) from 8 October 2001, implemented in Norwegian law by the SE Act of 1 April 2005.
An SE company can only be used if business is conducted in at least two EU or EEA countries. The purpose of the company form is to provide EU and EEA citizens the opportunity to organize their cross-border business activities in a company form that is as uniform and similarly regulated as possible in all EU and EEA states.
Characteristics of the SE Company
The SE company has several characteristics that differentiate it from national company forms:
Mobility Option: An SE company can move its registered office from one EU/EEA state to another without having to dissolve and reincorporate. This means the company retains its legal personality and contractual relationships when moving.
Cross-Border Mergers: The SE form allows for cross-border mergers without having to dissolve the former company and establish a new one.
Capital Structure: The SE company must have a share capital of at least 120,000 euros. Norwegian SE companies can set their share capital in Norwegian kroner (which must at least correspond to 120,000 euros).
Relation between Registered Office and Headquarters: The SE company's statutes must specify in which state the company has its registered office, and the company's actual headquarters must be located where its registered office is.
Limited Spread
Despite its theoretical advantages, the SE company form has not gained significant spread. As of January 2021, there were just over 3358 registered SE companies in the EU/EEA, and only six in Norway.
Among the most well-known SE companies are Zalando SE, Allianz SE, BASF SE, Porsche Automobil Holding SE, and Alfred Berg SE.
Legal Regulation
The SE company, as a capital company, is an independent legal entity, where participants' liability is limited to their capital contribution. In many areas, the regulation refers to national legislation:
Rules on the maintenance of capital and capital increase and decrease follow national rules for public limited companies
The same applies to national rules on annual financial statements
The regulation does not contain rules on tax and bankruptcy, so national rules apply here
Practical Significance
The potential of the SE company primarily lies in the ability to move the company's registered office without dissolution and reincorporation, and in the ability to conduct cross-border mergers more straightforwardly than otherwise possible.
However, various national tax rules may, in practice, make it difficult to move a company's registered office, regardless of company form. This may be one reason the company form has not achieved the success many expected.
Conclusion
International corporate law raises complex legal questions, especially when companies operate across borders. In Norwegian law, there is a clear tendency to accept the Incorporation Theory, which means that a company is regulated by the law of the country where it is incorporated and registered.
The case law of the European Court of Justice, especially the decisions in the cases of Centros, Überseering, and Inspire Art, has been influential in the development of international corporate law in Europe. These decisions have led to the popularity of the NUF form in Norway, although this popularity is now declining after simplifications in Norwegian company law.
The SE company represents an attempt to create a more unified European company form but has not yet achieved the widespread adoption hoped for. However, the company form may have advantages for companies operating in multiple European countries and considering the possibility of moving headquarters across borders.
For Norwegian businesses considering establishing companies with international branches, it is essential to be aware of these issues and seek legal advice to find the most suitable company form and structure for their business.
