Investigation under the Companies Act

The scope of private investigations has increased significantly in recent years. One form of private investigation is the one regulated by the Companies Act. Shareholder investigations and shareholder agreements can risk becoming the subject of media attention.

The consequences of an investigation can be significant for both the company and the people involved if the investigation attracts public interest. The Norwegian Companies Act's provisions on investigations are therefore a relevant topic today.

A natural linguistic understanding of the term investigation indicates that we are talking about a form of enquiry. It is also natural to understand this investigation as the result of an unclear event, or series of events that require clarification. An investigation is often referred to as an extraordinary form of enquiry that should only be used in special cases.

In cases where the majority shareholders in a company operate in a way that suggests suspicions in the management of the company, the minority shareholders can request an investigation under the Companies Act. The Companies Act contains provisions that authorise minority shareholders to demand such an extraordinary investigation.

The investigation institute under company law is special because the provisions of the Companies Act on investigation contain coercive elements that take effect between private parties. The Companies Act authorises a minority shareholder to ask the public authorities for help to initiate a coercive intervention in the company's internal affairs.

Section 5-17 of the Companies Act authorises the general meeting, as the company's supreme authority, to decide on an investigation by majority vote. In cases where the majority shareholders vote against a proposal to investigate the company, the minority shareholders still have an opportunity to prevail under section 5-25 et seq. of the Norwegian Companies Act. These business law provisions act as a safety valve for the minority in extraordinary cases.

In order for a request for investigation to be granted, both the formal and substantive conditions set out in the Act must be met. Firstly, there is a requirement that the person proposing the investigation is a ”shareholder”. This follows from section 5-25 of the Companies Act. Furthermore, the same provision states that the proposal may be submitted at an ordinary general meeting, or at an extraordinary general meeting.

It is the district court that decides whether or not to initiate an investigation. In order for a petition for investigation to be submitted to the district court, it is a condition that the proposal is supported by at least one tenth of the share capital represented at the general meeting.

The last of the formal conditions relates to the content of the investigation mandate. In other words, the matters that can be investigated. Section 5-25 states that a shareholder may submit a proposal to investigate ”the company's formation, management or specified aspects of the management or accounts”.

It is only when the formal conditions are in place that the court can consider the substantive objectivity requirement set out in section 5-26 of the Companies Act. According to the provision, the district court must accept a request for an investigation pursuant to section 5-25, second paragraph, if the court finds that it has ”factual grounds”. And what does the condition of ”reasonable grounds” entail? The content of the objective requirement has been developed through case law, and can in particular be read from the judgement included in Rt. 2006 s.664.