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Country report - the Norwegian bankruptcy system

This Country Report was prepared by the Norwegian Advisory Council on Bankruptcy for the IAIR Conference in 2010.


In 2009 there was an increase in the number of bankruptcies, amounting to 1387, while the number of compulsory liquidations increased by 330. In total, this constitutes an increase by approximately 36 per cent compared to 2008. The increase from 2007 to 2009 amounts to more than 66 per cent. In the first half-year of 2010, there has been a decrease by 13 per cent in the number of bankruptcies and compulsory liquidations. 

Recent developments 

  • In 2004 a new statutory lien was induced by the Norwegian Parliament, in order to provide for a more thorough administration of bankruptcy estates. The statutory lien is limited to 5 per cent of the value of all the debtor’s pledged assets, and the bankruptcy estate may only make use of the lien to pay for necessary expenses in connection to the bankruptcy proceedings. 
  • The Brønnøysund Register Centre’s “Bankrupt Estate Website” is the result of an ongoing project between the Register and the Norwegian Advisory Council on Bankruptcy. The website is a tool for the trustee administering a bankruptcy estate. It enables the trustee to submit information to the Register of Bankruptcies, find information from the Brønnøysund Register Centre and inform creditors and other stakeholders about the bankruptcy proceedings. The aim is to further develop the electronic interaction between the participants in bankruptcy proceedings, in order to achieve more efficient proceedings. 

General information

The main Norwegian insolvency legislation comprises of two acts: the Debt Reorganization and Bankruptcy Act from 1984 and the Creditors Recovery Act from 1984. Both acts apply both for companies and individuals. 

The Bankruptcy Act regulates the administration of the insolvency cases. The first part of the Act regulates voluntary and compulsory debt settlement proceedings. The second part of the Act regulates bankruptcy proceedings. The Creditors Recovery Act regulates debt recovery, sets out relevant deadlines, and determines which of the debtor’s assets the creditors have access to as well as the priority between the claims of the creditors. 

All District Courts in Norway handle bankruptcy proceedings, with exception for Oslo, where there is a specialized Court that handles all bankruptcy proceedings. 

The Norwegian insolvency legislation does not contain a requirement for the trustees appointed by the court to administer the bankruptcy proceedings to have a special trustee license.  

The Norwegian Advisory Council on Bankruptcy is appointed by the Norwegian Ministry of Justice and consists today of 7 representatives from the courts, lawyers, accountants, the Confederation of Norwegian Enterprise, the administrative authority and the public prosecutor. The Ministry of Justice is secretariat for the Council. The Norwegian Advisory Council on Bankruptcy is strictly advisory but gives recommendations on the need for changes in the Norwegian bankruptcy system, and in the practice thereof. The Council is set to further and encourage the harmonization of insolvency practice in the country at large. The Council also works to improve the coordination of the efforts made by various public authorities related to bankruptcy petitions and proceedings.

Insolvency procedures

Private non-judicially administered reorganization is not regulated by law. A debtor and his creditors are free to make any kind of arrangements they choose. Judicial reorganization is neither regulated by law, as the Bankruptcy Act regulates the settlement of debt, not the reorganization or restructuring of the debtor’s business. 

Only the debtor himself may apply to the court for debt settlement. The court will open debt settlement proceedings if it concludes that the conditions for debt settlement proceedings are met. The main condition is that the debtor is illiquid, i.e. unable to satisfy his debt as it falls due unless this condition is temporary. Upon commencement of debt settlement proceedings, the court will appoint a debt negotiations committee, usually led by a lawyer, to assist the debtor during the proceedings and ensure the common interests of the creditors. From the debtor’s point of view, the purpose of the proceedings is to negotiate with the creditors in order to achieve either voluntary or compulsory composition. A debt settlement proceeding may result in completed debt settlement, composition or – usually – the commencement of bankruptcy proceedings. In addition to the situation where debt settlement proceedings have been unsuccessful, bankruptcy proceedings may be opened by a court decision upon petition, either from the debtor or from a creditor. A creditor that petitions for the commencement of bankruptcy proceedings, must at the same time guarantee for expenses related to the proceedings (in 2010 limited to NOK 43 000,-). This does not however apply to the debtor himself or the debtor’s employees.    

The general requirement for bankruptcy proceedings to be commenced is that the debtor is insolvent. The term “insolvent” consists of two conditions, which both have to be fulfilled. Firstly, the debtor has to be illiquid, see definition in the paragraph above. Secondly, the debtor has to be insufficient, i.e. his debt exceeds his assets.

Upon commencement of bankruptcy proceedings, the court will appoint a trustee (usually a lawyer) and assess the need for a creditor committee. After the court has issued a bankruptcy order, the court mainly has a passive role during the proceedings, but supervises and sanctions the decisions made by the trustee. The court also administers the creditor hearing. It is the trustee who carries out and administers the practical part of the bankruptcy proceedings. Once the court has issued a bankruptcy order, a notice thereof will be published on the website of the Register of Bankruptcies www.brreg.no and in a local paper. The trustee will inform all known creditors of the bankruptcy proceedings and invite them to file their claims together with an overview of their securities. 

When the bankruptcy order is issued, all the debtor’s assets of which the creditors pursuant to the Creditor’s Recovery Act have access to, are confiscated and converted into monetary amounts by the bankruptcy estate. The means will be distributed amongst the creditors in accordance with the provisions of the Creditors Recovery Act and the Debt Reorganization and Bankruptcy Act. Norway still has a system where certain claims are considered preferential (in addition to the claims that enjoy statutory lien, and secured creditors) and thus will rank before other claims. The most important ones, in ranked priority, are claims originating from the bankruptcy proceedings, certain wage related claims as well as unsettled income tax and VAT. Unsecured creditors will receive dividends on a strictly mathematical parity basis. 

The trustee issues a report on the bankruptcy proceedings, where he i.a. gives an account for the debtor’s business conduct and the assumed reason for the bankruptcy. Furthermore, the trustee will assess whether there is reason to believe that the debtor has committed any legal offences (and if so, give the police notice of this) and if there is reason to believe that the conditions for disqualification period are fulfilled. It is for the court to impose a disqualification period on the debtor. The trustees report will be presented before the court, and distributed to the creditors. 

The bankruptcy proceedings are either concluded when the debtor’s means have been distributed, or discontinued due to insufficient means in the estate to carry out further proceedings. Generally, two thirds of the bankruptcy proceedings are discontinued because of the latter. 

A personal debtor in bankruptcy is still liable for all the debt that is not settled by the disbursed dividend upon the closure of bankruptcy proceedings. If the debtor is a company with limited liability, the company will be erased from the Norwegian Register of Business Enterprises upon the closure of bankruptcy proceedings. Thus, the company ceases to exist and has no liability for the pre-existing debt. 


Bankruptcies and compulsory liquidations 2006 - 2009

Comment: Compulsory liquidation proceedings are opened when a company has submitted notification of dissolution but has not submitted notification of final striking from the Register of Business Enterprises, or when a business enterprise after several reminders from the Register has not submitted notification of members of the board and directors, chairman of the board, general manager and auditor. A business enterprise can also undergo compulsory dissolution if it fails to submit annual accounts. (Brreg)

Bankruptcies and compulsory liquidation according to business 2009

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