Norskregistrert utenlandsk foretak
Encyclopedia
Norskregistrert utenlandsk filial or NUF is a Norwegian term meaning Norwegian Registered Foreign Company. NUF are basically Norwegian branches of foreign companies. In this regard, one has to separate between companies that are Norwegian in a fiscal
sense and Norwegian companies in a company law meaning. The formal legal basis for registration is The Business Enterprise Registration Act of 1985 with later amendments, ss 3-8.
certificate of incorporation
is issued by the Norwegian Register of Business Enterprises
, showing the Norwegian board of directors
(if any), any power of procuration
, position or attorney, and similar basic information. However, the NUF remains a branch and not a legal entity separate from the foreign company. It is de facto
the foreign company itself, operating in Norway
under a separate company number.
A NUF may register and operate under any company name, subject to the same guidelines for company name approval as a regular Norwegian company. However, if the name of the Norwegian branch differs from the foreign company, it may not use any terms that describe the form of company (such as "Ltd
", "S.A.
", "AS
", "AB
" etc). Hence a foreign company called Roundtable Ltd may be Roundtable Ltd in Norway, or Roundtable or Somethingdifferent but not Somethingdifferent Ltd.
Any type of company from any independent country recognized by Norway, may register a branch in Norway. In practice, though, the dominant type of companies setting up NUFs during the last few years, has been British
private limited companies.
/ EEA
. In 1999, the EU court in a preliminary ruling established that this freedom of establishment gives any EU / EEC citizen the right to set up his company in the jurisdiction of his choice, regardless of where the company is actually going to operate or where he himself is physically or fiscally a resident. Denmark
had refused such registrations, based on the grounds that the establishment of a foreign entity was without any reality and merely an attempt to avoid the national rules on the provision for and the paying-up of minimum share capital
. Denmark lost the case, and the EU court not only stressed that a citizen had the right to start and operate his business in any jurisdiction within the EU, and to freely open any branch of the same company in any country, but also directly commented that it was fully acceptable to use this structure to attempt to avoid national company law requirements, such as the requirement for a minimum paid up share capital.
"In addition, it is clear from paragraph 16 of Segers that the fact that a company does not conduct any business in the Member State in which it has its registered office and pursues its activities only in the Member State where its branch is established is not sufficient to prove the existence of abuse or fraudulent conduct which would entitle the latter Member State to deny that company the benefit of the provisions of Community law relating to the right of establishment."
(quote from section 28 of the decision)
Following the Centros case, Europe has seen a massive increase in so-called cross-border-incorporations. Many observers now feel that Europe is moving rapidly in the direction of company law situation in the US, where it is fairly common to incorporate a company in a different state than where the actual business operations are intended to be conducted.
This development has been impelled by a handful of company formation service providers, which have dedicated massive resources on promoting European cross-border-incorporations. In Germany
GoAhead Ltd has a high market share, and the number of UK ltd companies with German branches has attracted substantial media attention (see link to article in the Daily Telegraph below). In Norway, the development of cross-border-incorporations has been headed by mainly the Law Firm of Varjag (Supreme Court advocate Austlid) and Panlegis Group (formerly the Law Firm of Claes Zangenberg). Both had been selected by the Norwegian Ministry of Finance
to comment on the development of the Norwegian company law and the status and future of the NUFs in Norway (see links to their respective consultation papers below).
Norway, along with Germany and the Netherlands, have been among the EU states where cross-border-incorporations have become most common. The main reasons are most likely that these jurisdictions all have a fairly complicated company laws with strict requirements to annual audits and a minimum paid up share capital. I Norway, the NUF companies avoid both the requirement to file an annual audit (and to maintain at any time an official company auditor), and the requirement to pay up a minimum share capital of NOK
100,000.
There has been some political debate in Norway, with some politicians expressing concerns about the amount of NUFs incorporated, and in 2005 the government requested the Norwegian Tax Administration and the Ministry of Finance to consider the possible causes and consequences. The Ministry of Finance, prior to the consultation round, made it very clear that Norway neither legally could, nor intended to attempt to, prohibit the registration of NUFs, and that the review made by the ministry would mainly focus on the legal framework that currently enable NUFs to operate with significant benefits compared to Norwegian limited companies.
During the consultation round, surprisingly few of the bodies invited to give their opinions, expressed any deep concerns over the increasing number of NUFs, the union of auditors representing a rather expected exception. As a consequence, the ministry decided to maintain the current legal situation, and rather conduct a full review of the burdens imposed on Norwegian limited companies.
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
sense and Norwegian companies in a company law meaning. The formal legal basis for registration is The Business Enterprise Registration Act of 1985 with later amendments, ss 3-8.
The process of incorporation
When a NUF is registered, the branch itself is given a nine-digit Norwegian company number, in a similar manner as a regular Norwegian company – and a pseudoPseudo
The prefix pseudo- is used to mark something as false, fraudulent, or pretending to be something it is not.-See also:*Falsehood*Pseudorealism*Deception*Mimicry*Pseudo.com*Pseudo: Blood of Our Own...
certificate of incorporation
Certificate of incorporation
A certificate of incorporation is a legal document relating to the formation of a company or corporation. It is a license to form a corporation issued by state government. Its precise meaning depends upon the legal system in which it is used, but the two primary meanings are:* In the U.S.A...
is issued by the Norwegian Register of Business Enterprises
Brønnøysund Register Centre
Brønnøysund Register Centre is a Norwegian government agency that is responsible for the management of numerous public registers for Norway...
, showing the Norwegian board of directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
(if any), any power of procuration
Procuration
Procuration is the action of taking care of, hence management, stewardship, agency. The word is applied to the authority or power delegated to a procurator, or agent, as well as to the exercise of such authority expressed frequently by procuration , or shortly per pro., or simply p.p.A common...
, position or attorney, and similar basic information. However, the NUF remains a branch and not a legal entity separate from the foreign company. It is de facto
De facto
De facto is a Latin expression that means "concerning fact." In law, it often means "in practice but not necessarily ordained by law" or "in practice or actuality, but not officially established." It is commonly used in contrast to de jure when referring to matters of law, governance, or...
the foreign company itself, operating in Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
under a separate company number.
A NUF may register and operate under any company name, subject to the same guidelines for company name approval as a regular Norwegian company. However, if the name of the Norwegian branch differs from the foreign company, it may not use any terms that describe the form of company (such as "Ltd
Limited company
A limited company is a company in which the liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee. And the former of these, a limited company limited by shares, may be...
", "S.A.
S.A. (corporation)
S.A. designates a particular type of corporation in various countries, mostly those employing the civil law. It originated in Spain during the 16th century. Depending on language, the abbreviation stands for various phrases meaning anonymous society, anonymous company, anonymous partnership, or...
", "AS
Aksjeselskap
Aksjeselskap is the Norwegian term for a stock-based company. It is usually abbreviated AS or A/S, especially when used in company names. An AS is always a limited company, i.e. the owners cannot be held liable for any debt beyond the stock capital...
", "AB
Aktiebolag
Aktiebolag is the Swedish term for "limited company" or "corporation". When used in company names, it is abbreviated "AB" or "Ab"...
" etc). Hence a foreign company called Roundtable Ltd may be Roundtable Ltd in Norway, or Roundtable or Somethingdifferent but not Somethingdifferent Ltd.
Any type of company from any independent country recognized by Norway, may register a branch in Norway. In practice, though, the dominant type of companies setting up NUFs during the last few years, has been British
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
private limited companies.
The duties of the board of directors in an NUF
In most cases, the NUF and the foreign legal entity will share the same board of directors. However, if one or more persons are only directors in Norway, the duties and responsibility of these directors are not currently regulated by law.Bankruptcy or involuntary liquidation of NUF
A NUF is not a separate legal entity and as such cannot be declared or itself declare bankruptcy. However, bankruptcy may be declared in the foreign main entity. If the main entity has its actual place of management in Norway, it may be declared bankrupt there.The development of NUFs
The number of NUFs increased phenomenally since the millennium. The main reason is first and foremost not actual foreign companies setting up branches in Norway, but Norwegian residents setting up inactive companies abroad and then forming a Norwegian branch of the same company. This construction was made possible by the freedom of establishment within the EUEuropean Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
/ EEA
European Economic Area
The European Economic Area was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association and the European Community, later the European Union . Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal...
. In 1999, the EU court in a preliminary ruling established that this freedom of establishment gives any EU / EEC citizen the right to set up his company in the jurisdiction of his choice, regardless of where the company is actually going to operate or where he himself is physically or fiscally a resident. Denmark
Denmark
Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...
had refused such registrations, based on the grounds that the establishment of a foreign entity was without any reality and merely an attempt to avoid the national rules on the provision for and the paying-up of minimum share capital
Share capital
Share capital or issued capital or capital stock refers to the portion of a company's equity that has been obtained by trading stock to a shareholder for cash or an equivalent item of capital value...
. Denmark lost the case, and the EU court not only stressed that a citizen had the right to start and operate his business in any jurisdiction within the EU, and to freely open any branch of the same company in any country, but also directly commented that it was fully acceptable to use this structure to attempt to avoid national company law requirements, such as the requirement for a minimum paid up share capital.
"In addition, it is clear from paragraph 16 of Segers that the fact that a company does not conduct any business in the Member State in which it has its registered office and pursues its activities only in the Member State where its branch is established is not sufficient to prove the existence of abuse or fraudulent conduct which would entitle the latter Member State to deny that company the benefit of the provisions of Community law relating to the right of establishment."
(quote from section 28 of the decision)
Following the Centros case, Europe has seen a massive increase in so-called cross-border-incorporations. Many observers now feel that Europe is moving rapidly in the direction of company law situation in the US, where it is fairly common to incorporate a company in a different state than where the actual business operations are intended to be conducted.
This development has been impelled by a handful of company formation service providers, which have dedicated massive resources on promoting European cross-border-incorporations. In Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
GoAhead Ltd has a high market share, and the number of UK ltd companies with German branches has attracted substantial media attention (see link to article in the Daily Telegraph below). In Norway, the development of cross-border-incorporations has been headed by mainly the Law Firm of Varjag (Supreme Court advocate Austlid) and Panlegis Group (formerly the Law Firm of Claes Zangenberg). Both had been selected by the Norwegian Ministry of Finance
Norwegian Ministry of Finance
The Royal Norwegian Ministry of Finance is a Norwegian ministry established in 1814. The ministry is responsible for state finance, including the state budget, taxation and economic policy in Norway. It is led by Sigbjørn Johnsen...
to comment on the development of the Norwegian company law and the status and future of the NUFs in Norway (see links to their respective consultation papers below).
Norway, along with Germany and the Netherlands, have been among the EU states where cross-border-incorporations have become most common. The main reasons are most likely that these jurisdictions all have a fairly complicated company laws with strict requirements to annual audits and a minimum paid up share capital. I Norway, the NUF companies avoid both the requirement to file an annual audit (and to maintain at any time an official company auditor), and the requirement to pay up a minimum share capital of NOK
Norwegian krone
The krone is the currency of Norway and its dependent territories. The plural form is kroner . It is subdivided into 100 øre. The ISO 4217 code is NOK, although the common local abbreviation is kr. The name translates into English as "crown"...
100,000.
There has been some political debate in Norway, with some politicians expressing concerns about the amount of NUFs incorporated, and in 2005 the government requested the Norwegian Tax Administration and the Ministry of Finance to consider the possible causes and consequences. The Ministry of Finance, prior to the consultation round, made it very clear that Norway neither legally could, nor intended to attempt to, prohibit the registration of NUFs, and that the review made by the ministry would mainly focus on the legal framework that currently enable NUFs to operate with significant benefits compared to Norwegian limited companies.
During the consultation round, surprisingly few of the bodies invited to give their opinions, expressed any deep concerns over the increasing number of NUFs, the union of auditors representing a rather expected exception. As a consequence, the ministry decided to maintain the current legal situation, and rather conduct a full review of the burdens imposed on Norwegian limited companies.
The competitive ability of Norwegian AS (limited) companies
Norway was one of the last countries in Europe to drop the requirement for an annual edit for all national limited companies (AS and ASA) regardless of the size or turnover of the company. In 2011 this requirement was lifted for small limiteds, ie. companies with less than NOK 5,000,000 in turnover, fewer than 10 employees and a total value of assets less than NOK 20,000,000. Parent companies are still obliged to file annual accounts, regardless of size or activity. From 2012 the minimum share capital requirement will be relaxed. These two measures reduce the benefits of NUF's over small AS's.Literature
- Zangenberg, Claes: Håndbok i NUF, Stron Publishing, 2008, ISBN 978-82-92944-00-4 (cf TOC, This book is in Norwegian)
External links
- List of official consultation bodies as selected by the Norwegian Ministry of Finance
- Official consultation document from The Law Firm of Claes Zangenberg (Norwegian)
- Official consultation document from Supreme Court Attorney Auslid (Norwegian)
- Official consultation document The Law firm of Claes Zangenberg regarding formation agents and KYC requirements and with useful info on NUF (Norwegian)
- Daily Telegraph, article on the use of UK Ltd companies in Germany