As of 1 January 2024, new rules on gender balance on boards of directors have entered into force. These requirements are being phased in and gradually apply to more types of businesses operating in Norway, including foreign companies conducting business activities here.
The rules cover several organizational forms, such as limited companies, general partnerships, certain foundations, cooperatives, and housing associations. All entities falling within the scope of the law must ensure compliance.
In this blog, we take a closer look at what the rules mean for limited companies, and the potential consequences of failing to meet the requirements set out in Section 6-11a of the Norwegian Companies Act.
Which limited liability companies must have a balanced gender composition on the board?
The requirement for gender balance on the board of directors does not apply to all Norwegian limited liability companies, but it does have a relatively broad scope. If your company meets one of the following two conditions, the requirement for gender balance in the board composition applies:
- Operating income and financial income exceeding NOK 100 million on the balance sheet date
- 50 or more employees
Please note that employees in a position where they work 50% or more are counted as one employee, while less than 50% is only counted as half an employee.
The introduction of the gender balance requirement has taken place in five stages, and we have now reached the second stage. When the fifth stage is introduced by June 30, 2028, the gender balance requirement will apply to limited companies that have more than 30 employees or have operating and financial income exceeding NOK 50 million.
The above conditions shall be assessed at company level, and not at group level. For larger groups where several companies in the group chain meet the conditions, there must be gender balance in all the relevant companies down the chain.
How should the gender composition of the board be balanced?
The Companies Act sets a maximum number of board members of the same gender, which will vary depending on the number of board members, as shown in the table below. When assessing the gender balance, the legal gender of each board member must be used.
It is important to note that the balance in the composition of the board applies to board members and deputy members separately. For companies that have employee representatives on the board, these must also meet the balance requirements, but the requirements here are somewhat different depending on the gender balance among the employees.
Please note that there is no gender balance requirement for limited companies with only one or two board members, regardless of the size of the company.
| Number of board members | Maximum number of members of the same gender |
| 3-4 | 2 |
| 5-6 | 3 |
| 7 | 4 |
| 8 | 5 |
| 9 or more | 60% of board members |
Consequences of gender imbalance in board
If the company is covered by the requirement for gender representation on the board, but still does not have the correct balance, the board is not legally composed and thus invalidly elected.
An invalidly elected board of directors has no right to represent the company and cannot enter into agreements or perform other legal acts on behalf of the company. If the company is subject to gender composition requirements but has an imbalance, all decisions should be postponed until the board is legally composed again.
A company that is subject to the gender balance requirements but exceeds the maximum number of board members of the same gender, will also be denied registration of notifications in the Norwegian Register of Business Enterprises, such as Coordinated Register Notifications.
In the worst-case scenario, a company with an illegal board composition may be compulsorily dissolved by the district court by order. However, prior to any compulsory dissolution, the company will be given the opportunity to rectify the deficiency in the form of notifications from the Register of Business Enterprises. It will therefore only be exceptionally occurred that a company is compulsorily dissolved because of an imbalance in gender composition, as these are conditions that are relatively easy to rectify.
Also read: Board responsibilities in a limited company (AS)—av overview
What happens if a board member resigns?
If a board member resigns from his or her position, and this leads to gender imbalance, the board is not automatically invalid. Nor is it necessary to hold an extraordinary general meeting to correct the gender distribution, but this must be in place after the next annual general meeting.
If you have any questions regarding the requirements for gender composition on the board, or other matters relating to the practical work of the board, please contact us at Magnus Legal. We often assist our clients in the ongoing work of the board and can prepare the necessary and statutory documentation.
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