Unlock the New Gender Balance Rules for Boards in Norway: What You Need to Know

Introduction

Effective from 1 January 2024, Norway has introduced new gender balance regulations for corporate boards, extending beyond public companies to include private limited liability companies, co-operatives, partnerships, and foundations.

These regulations aim to promote gender equality and ensure a fair representation of both genders within corporate governance structures, fostering greater diversity and inclusion.The regulations are established under the Norwegian Private Limited Liability Companies Act (Companies Act, Nw.: Aksjeloven), Section 6-11 a, which outlines the specific requirements for gender composition.

The new rules will affect approximately 8,000 companies in 2024, with the number expected to rise to 20,000 by 2028. Compliance must be achieved within one month after the first annual general meeting following the relevant fiscal year when the applicable thresholds are met.

Who Must Comply?

The gender balance requirements apply to entities that meet one of the following criteria at the balance sheet date:

• Total operating and financial revenues exceeding NOK 50 million, which includes income from regular operations (e.g., sales, services) and financial gains (e.g., dividends, interest income).
• More than 30 employees, calculated based on employment percentages, where employees working 50% or more are counted as full-time, and those working less are counted proportionally.

Entities subject to these regulations include:

• Private limited liability companies (AS)
• Co-operatives and housing associations with over 500 members/shareholders
• General partnerships where legal entities are participants
• Commercial foundations

Gender Composition Requirements

The composition of the board of directors must meet the following gender balance criteria based on board size:

• 3-4 board members: Maximum of 2 members of the same gender
• 5-6 board members: Maximum of 3 members of the same gender
• 7 board members: Maximum of 4 members of the same gender
• 8 board members: Maximum of 5 members of the same gender
• 9 or more board members: No more than 60% can be of the same gender

These rules also apply to deputy board members, while board observers are exempt.

Employee Representation Requirements

If a company has at least three board members elected by employees, they cannot all belong to the same gender unless over 80% of the workforce consists of a single gender. In companies with more than 200 employees, stricter gender balance rules apply, ensuring representation aligns with broader diversity goals.

Implementation Timeline

The government has adopted a phased approach to allow businesses sufficient time to comply with the regulations. Companies must meet gender balance requirements according to the following timeline:

• 31 December 2024: Companies with total revenues exceeding NOK 100 million
• 30 June 2025: Companies with more than 50 employees
• 30 June 2026: Companies with more than 30 employees
• 30 June 2027: Companies with total revenues exceeding NOK 70 million
• 30 June 2028: Companies with total revenues exceeding NOK 50 million

Compliance is required within one month after the first subsequent ordinary general meeting, where annual accounts are approved.

Consequences of Non-Compliance

Non-compliance with the gender balance requirements may lead to severe consequences, including:

• Invalid Board Decisions: A non-compliant board lacks the legal authority to make decisions, represent the company externally, or enter into agreements. Any agreements made by an improperly composed board could be challenged in court.
• Registration Rejection: The Norwegian Register of Business Enterprises will refuse filings of non-compliant boards, effectively halting legal operations.
• Compulsory Dissolution: Failure to comply could result in a court-ordered liquidation of the company, with no possibility of exemption or extensions.

Strategic Considerations for Companies

Businesses should take proactive steps to comply with the new regulations by:

• Reviewing their current board composition to identify necessary changes.
• Updating governance documents, such as articles of association and shareholder agreements, to reflect the new requirements.
• Planning recruitment strategies to ensure qualified candidates are available to meet the gender balance obligations.
• Engaging with legal and HR professionals to navigate compliance complexities.

Practical Implications

Companies should consider that entities with one or two board members are exempt from the requirements. This could lead to a trend of businesses reducing their board size to avoid compliance obligations. However, reducing the number of board members could impact governance effectiveness and decision-making capabilities.

Why it matters?

The introduction of these gender balance requirements represents a significant shift in corporate governance in Norway. Companies must act diligently to ensure compliance and leverage the opportunity to promote diversity and enhance board effectiveness. Planning ahead will be key to ensuring a smooth transition and avoiding potential legal and operational risks.

For those looking to ensure compliance and leverage these changes fully, Klea’s expertise across 100+ jurisdictions can help you manage corporate obligations seamlessly, keeping your focus on growth and operational success.