Key takeaways: In a merger or demerger, the share register must be updated with exchanged shares, consideration shares and any new nominal value, while the ownership history from the original company must remain traceable. This is essential for tax continuity, valid general meetings and a correct shareholder register return.
When two companies combine, or one company is split in two, it is easy to think of mergers and demergers as purely legal and tax exercises. In practice, it is the share register – and later the shareholder register return to the Norwegian Tax Administration – that must document the entire change: who owns what, when it happened, and where the shareholdings actually came from. With strict reporting requirements, it is important that the share register handles these events correctly – not only on the transaction date, but in the years that follow.
Mergers and demergers: the basics
In a merger, one or more companies transfer all of their assets, rights and obligations to an acquiring company, usually in return for the shareholders of the transferring company receiving shares in the acquiring company as consideration. A demerger works the opposite way: a company transfers parts of its business to one or more other companies, either with the original company continuing without those parts (demerger by capital reduction or redemption) or ceasing to exist altogether (demerger by dissolution).
Both processes are governed by the Norwegian Private Limited Liability Companies Act (Chapter 13 on mergers and Chapter 14 on demergers) and broadly follow the same course. Mergers and demergers are notified to the Register of Business Enterprises (Foretaksregisteret) through the Coordinated Register Notification in Altinn. The merger or demerger takes effect when it is registered in the Register of Business Enterprises, and from that point the share register must reflect the new ownership structure. The merger plan must state the terms for entry in the share register (section 13-6 first paragraph no. 4), and the same applies to the demerger plan (section 14-4).
Why the history matters – not just today’s ownership
There are at least three good reasons why the history must be carried forward, not just a snapshot:
Tax continuity
Continuity is the very precondition for carrying out a merger or demerger without immediate taxation on realisation. The shareholders’ cost basis and acquisition date for the original shares are carried over to the consideration shares, allocated according to the exchange ratio. The tax exemption, however, applies only to consideration in the form of shares (or an increase in the nominal value of shares already held). The Act allows shareholders to receive additional consideration, for example in cash, of up to 20 per cent of the total consideration (sections 13-2 and 14-2). This additional consideration is treated as a realisation and may trigger capital gains tax for the shareholder, and the cost basis of the shares must be reduced accordingly.
The share register and the basis for the shareholder register return must therefore show the number of consideration shares, the exchange ratio and any additional consideration for each shareholder. The companies are responsible for reporting the merger or demerger correctly in the shareholder register return, and the information must match for both the transferring and the acquiring company. If there is an error at one of them, or if the date, exchange ratio or other details do not match, the reporting fails for all the companies involved. Without an overview of consideration shares, exchange ratios and additional consideration, it becomes difficult for both the companies and the shareholders to reconstruct the information on the day the Tax Administration asks.
Valid corporate procedures
An accurate share register is a precondition for valid corporate decision-making. The share register determines who must be invited to, and who is entitled to vote at, the general meeting after the merger or demerger has taken effect. Under section 4-2 of the Act, a new shareholder may, as a rule, not exercise shareholder rights until the acquisition has been entered in the share register. In the worst case, a share register that is not up to date may provide grounds for challenging the validity of subsequent general meeting resolutions.
Future due diligence and new transactions
Due diligence is easier when the ownership history is continuous. In a later sale, a capital increase or a new round of mergers or demergers, buyers, investors and auditors will expect to trace ownership back in time – often to an original organisation number that may since have been deleted from the Register of Business Enterprises and the Central Coordinating Register for Legal Entities.
How the history gets lost in practice
Manual, paper- or Excel-based share registers in particular create problems in mergers and demergers. The changes often take place in several companies at once, frequently with a short deadline between registration and the next general meeting, and it is easy to update shareholdings without preserving the link to the original entries. Once the organisation number of the transferring company has been deleted and no longer appears in public registers, the history can quickly end up buried in an accounting archive. Under section 4-7 third paragraph of the Act, the company must keep information about former shareholders for at least ten years. In mergers and demergers, the acquiring company must also keep the corporate records of the transferring company for at least ten years (section 13-17 third paragraph, cf. section 14-8). But it is not enough for the information to sit in an archive – it should be readily available when the auditor, a buyer or the Tax Administration asks for it.
A digital ownership register solves the problem at the source
This is why more and more companies are moving to digital share register solutions instead of keeping the register manually. A digital platform records each event as a time-stamped transaction in the ownership history, not merely as an updated list. This is in line with the Act, which allows the share register to be kept electronically (section 4-5 first paragraph) and requires the date of each entry to be stated (section 4-7 first paragraph). Such events may include mergers, demergers, redemptions, capital increases or share exchanges. You can then always see who owned what, when, and why the shareholding changed – even years after the original company has been wound up.
New register of shareholders at Brønnøysund
The need for a digital share register is likely to grow. In its proposed national budget for 2027, the Norwegian government has allocated NOK 100 million to a new register of shareholders at the Brønnøysund Register Centre, which is to be updated continuously in line with companies’ digital share registers. Over time, the annual shareholder register return may be discontinued. Companies that already keep a digital share register with full history will be better prepared for this transition.
Digital share register from Equro
For companies carrying out a merger or demerger, with several simultaneous ownership changes and requirements for documented continuity, this is exactly where a digital share register from Equro adds value. Mergers, demergers and other corporate actions are reflected directly in the share register without manual follow-up work, and every change is logged with a time stamp. The register is updated in line with the registration in the Register of Business Enterprises, the history is traceable, and reporting to the Tax Administration can be drawn directly from the same data that underlies the transaction. Equro is one of the largest providers of shareholder register returns in Norway and files several thousand returns every year. For banks, asset managers and investment companies that administer many companies and investors, Equro’s Totalis platform brings the share register, corporate actions, KYC/AML and investor reporting together in one solution – with full traceability throughout the transaction. Contact us to find the right share register solution for your company, or book a demo.
