A new Act on Financial Undertakings and Financial Groups (Finansforetaksloven) was adopted in Norway on 10 April 2015 and entered into force on 1 January 2016. Pursuant to its transitional provisions, financial undertakings have one year to adapt to new statutory requirements.
The Act replaces and compiles former institutional legislation for amongst others banks and credit institutions, as well as payment and e-money undertakings. Financial undertakings will have to identify what adaptations they must perform in order to become compliant with the new requirements by reviewing the composition of the board, controlling bodies and control functions, updating bye-laws and revising internal routines. Recently issued statutory regulations define the Act's transitionary regime.
As stated in the Act, the governing body of a financial undertaking is the board, the general assembly, a general manager and the controlling bodies. As of 1 January 2017, the board shall consist of at least five members representing all-round competence. Permission to form a board consisting of fewer members may be sought from the Norwegian Financial Supervision Authority (the NOR FSA). Such approval, however, is usually reserved for small financial undertakings, including payment and e-money undertakings as well as minor pension funds.
A financial undertakings that is a subsidiary of a Norwegian financial group is required to appoint a board that consists of at least three members. Also, the chairman of the subsidiary may be an employee of the parent company. Note, however, that these exemptions do not apply to a Norwegian financial subsidiary of a foreign financial group. Also for these Norwegian financial undertaking of foreign financial group may apply for a dispensation from the NOR FSA, see above.
The general manager cannot be a board member. Board positions may only to a limited degree be held by employees in the undertaking or in the financial group as applicable. The chairman of the board and at least two thirds of the board shall not be employed in the undertaking or in any entity which forms part of the same financial group. It has not been clarified whether this prohibition also applies to working board members, however, not being employed in the undertaking. Alterations in the composition of the board shall be notified to the NOR FSA.
Employees' right to representation varies depending on the size and nature of the undertaking and, importantly, on whether there is a corporate assembly. In undertakings with 15 employees or more, employees may demand that one of them is to be appointed to the board. The same rule applies for all undertakings with corporate assemblies. Conversely, employees' right to representation is even greater if the undertaking in question has more than 50 employees but lacks a corporate assembly. In such cases, at least two board members must be employees, and employees may demand representation by as much as one third of the board. This means that in undertakings of a certain size, employees' right to representation has been extended in comparison to the situation under previous legislation. The extended right to representation will also apply to a financial subsidiary, as long as its employees are not represented on the board of the parent company.
The Act introduces a broader information duty to the NOR FSA, including a requirement to document the suitability assessment relating to the board members and the general manager as well as other key employees.
Another amendment is that the board is obliged to hold quarterly meetings with their auditor, unless otherwise is agreed in the board instruction. These meetings shall take place without the general manager being present, to ensure that the board is focused on uncovering any accounting omissions or fallacies.
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