Very early-phase rounds are typically carried out using the SLIP or simple convertible debt agreements with fairly standardised terms.
The SLIP is a Norwegian simplified version of the more known SAFE instrument. Using the SLIP, the investor purchases against cash payment (the investment amount) a right/option to subscribe for shares at statutory face value (typically very low compared to market value) in connection with a later event (exit or qualified equity offering). The number of shares is calculated based on the market valuation of the company in the later conversion event, adjusted for any agreed discounts and/or valuation caps. Representations and warranties are very rarely provided in SLIPs. SLIPS convert into common shares or alternatively the share class issued in the qualified equity offering.
Key investment terms for direct share issues vary greatly across investment stages, but also from deal to deal on similar stages. In more mature rounds, terms are increasingly influenced by international VC market practice.
The majority of early-stage financing in Norwegian companies is done by issuance of common shares to investors without down-round anti-dilution rights. Protective pricing mechanisms such as liquidation preference and down-round anti-dilution clauses are however becoming increasingly common, and more common in later stages than earlier (presumably influenced by more frequent international investor participation in later stage rounds). Broad based weighted average is the most common anti-dilution formula, and 1x non-participating the most common liquidation preference.
The most common key terms in shareholders’ agreements are vesting and leaver provisions for founders and key employees, board representation rights, information rights, establishment of a virtual employee share incentive pool, transfer restrictions and exit provisions such as drag-along and/or tag-along rights. Reserved matters and veto catalogues for lead investors are increasingly common.
Investment agreements are commonly used from mid- to late seed stage and beyond. These typically regulate the financing process and contain representations and warranties similar to those seen in comparable jurisdictions, sometimes also with special indemnifications for specific risks disclosed in the due diligence.
A notable limitation under Norwegian law is that an AS cannot legally agree to monetary liability for warranty breaches related to a share issue (the technical explanation is that paid-in share capital must be “surrendered unconditionally”). Various measures may be taken to compensate for this peculiarity, including compensation shares provided to investors essentially free of cost, and sometimes investors also require a limited monetary indemnification statement from founders.