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Disputation: Share Classes – the ability to regulate the shareholders' rights and obligations in share classes

Master of Laws Erlend Eriksen Gjein will be defending the thesis Share Classes – the ability to regulate the shareholders' rights and obligations in share classes for the degree of Ph.D.

Originale title: Aksjeklasser: Adgangen til å regulere aksjeeiers rettigheter og forpliktelser i aksjeklasser

The disputation will be held in Norwegian.

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Erlend Eriksen Gjein

Photo: UiO

Trial lecture - time and place

Adjudication committee

  • Professor Tarjei Bekkedal, University of Oslo (leader)
  • Supreme Court Justice, Jan Schans Christensen, Supreme Court
    of Denmark

  • Professor Hanne Søndergaard Birkmose, Aarhus BSS, Department of Law

Chair of defence

Vice dean Alf Petter Høgberg

Supervisors

  • Professor Mads Andenæs
  • Professor Margrethe B. Christoffersen

Summary

Introduction

The use of different share classes in a company allows the shareholders to unevenly distribute rights and obligations between the shares. Regulations concerning share classes must be incorporated in the company's articles of association. The use of different share classes constitutes a breach of the principle of equality that applies in Norwegian company law.

Main findings

What is the purpose of different share classes?

Share classes may be used to unevenly distribute organizational rights, financial rights, or distribution rights between different classes of shares. The thesis shows that (i) the shareholders' motives for using different share classes may vary considerably; and (ii) the possibility to separate different rights between shares in different classes results in considerable and lasting changes on the Norwegian (Public and Private) Limited Liability Companies Acts' default mechanisms, including the organization of the company and the relationship between the shareholders. Because of this, the Norwegian company acts and other regulations contain restrictions on which changes that can be made in the shares' rights and obligations.

What reasons can be identified for and against legislation allowing companies to use different share classes?

The main reasons behind allowing companies to have the option to use different share classes are contractual freedom and flexibility to organize the company the way the shareholders see fit. The main reasons for restrictions are connected to the protection of the minority shareholders, financial development of the company, or governance in the company. If a company seeks to establish different share classes it must be reflected in the company's articles of association. This is an absolute requirement. This requirement, in combination with the special majority voting rules connected to establishing or changing share classes, are the most important mechanisms in ensuring protection of the minority shareholders. Other restrictions can be found in the Limited Liability Companies Acts, the Securities Trading Act, and internal regulation on the Oslo Stock Exchange.

Are current regulations regarding share classes sufficient?

The effects on the shares and the shareholders, as well as the different purposes behind the different models, are far more complex and extensive than what the legislator has discussed in the preparatory works for the different company acts. The various reasons and legal effects have, to a great extent, not been the subject of assessment from regulators, and are not reflected in current regulation. The conclusion is not, however, that the current legislation is inadequate. The identified reasons that could warrant more extensive restrictions on the use of share classes are not of the nature that can justify further restrictions.
 

 

Published Nov. 5, 2019 2:27 PM - Last modified Feb. 7, 2020 2:05 PM