Reduction of share capital
Last updated: 29 May 2024.
The general meeting can decide to reduce the share capital in a company. The amount of reduction can be distributed to the shareholders, the company’s own shares can be retired or be allocated to a fund. The amount can also be applied for coverage of loss that cannot be covered otherwise.
The board makes a proposal to the general meeting
As the first step in the process of reducing the share capital, the board has to make a proposal to the general meeting of a share capital reduction as well as propose necessary amendments to the articles of association. The board also has to make a proposal as to how the amount is going to be used and make a statement based on latest adopted annual accounts or interim balance sheet. The general meeting makes a decision based on the board’s proposal.
Registration in The Register of Business Enterprises
A share capital reduction is to be announced through the electronic bulletin for public announcements at the Brønnøysund Register Centre. If the reduction requires a notice to the creditors, a creditor deadline of six weeks applies.
Capital reduction requiring creditor notification must be reported to the Register of Business Enterprises in a two-step process. These two steps are decisions on capital reduction and implementation.
You must notify the Register of Business Enterprises about your decision to reduce the share capital within two months after the decision has been made at the general meeting, otherwise the decision will lapse.
A decision to reduce the share capital must at least state
- the amount of reduction for a larger amount if any distributions are going to be made to the shareholders beyond the reduction amount
- what the amount is to be used for
- whether the reduction is carried out by a redemption of shares or by a reduction in the nominal value of the shares
You must attach
- minutes from the general meeting showing the decision to reduce the share capital and amendments of the articles of association
The general meeting must adopt amendments in connection with the reduction of the share capital. That is because the share capital is always determined in the articles of association of the company.
When the decision has been reported to us, and the creditor deadline is passed, you can notify implementation of the share capital reduction.
You must report a capital reduction to the the Register of Business Enterprises within one year after the decision is made by the general meeting, otherwise the resolution will lapse.
You must attach
- updated articles of association
- a statement from the board that the relationship with the creditors has been clarified and that there is nothing to prevent the implementation
The share register must be updated with any new information about shareholdings.
Reduction of capital without creditor notification
If the entire amount of the reduction is to be used to cover losses that cannot be covered in any other way, the reduction can be carried out without creditor notification. You then report both decision and implementation in one step.
If the amount is used to cover losses and the reduction is implemented without creditor notification, the company cannot distribute dividends until three years have elapsed. If the company wants a creditor notification to be announced in these cases, this must be stated separately in the notification.
You must attach
- minutes from the general meeting showing the decision
- updated articles of association
The share register must be updated with any new information about shareholdings.
If the share capital simultaneously with the reduction is increased through subscription of new shares and the share capital still is at least as large as earlier, a creditor notice is not necessary. The same attachments required for capital increase, apply.