Compulsory transfer in a shareholder agreement: when must an employee shareholder sell?

On 23 October 2026 Gulating Court of Appeal gave a unanimous judgment on an employee shareholder’s obligation to sell his shares when his employment came to an end (LG-2025-207079). The managing director of a small Norwegian private limited company had been allotted 10 per cent of the shares at par value. The shareholder agreement required employee shareholders to dispose of all their shares on termination of employment at a price based on book equity. His holding company instead sought to sell to another shareholder at market value and relied on the statutory pre-emption rules in the Private Limited Liability Companies Act. The judgment clarifies the relationship between a shareholder agreement and the Act, the trigger for an agreed compulsory transfer and the reach of a book value price clause, although it is not known whether it is final.

What did Gulating Court of Appeal decide?

The Court of Appeal upheld the judgment of Sogn og Fjordane District Court of 31 October 2025. The holding company was ordered to transfer 300 shares to the two largest shareholders at NOK 785.64 per share, in accordance with a board resolution of 16 May 2025. The consideration for the whole holding was therefore approximately NOK 236,000. Witness evidence recorded in the judgment put the market value of the holding at approximately NOK 3.8 million. The holding company was also ordered to pay legal costs on appeal totalling NOK 703,634.

The court held that the statutory pre-emption rules did not apply, that the obligation to sell arose when the managing director actually left his post, and that the employee shareholder could not sell freely while still employed. The price clause based on book equity had not been set aside by subsequent practice, and no binding agreement for the sale to the other shareholder had been concluded.

Does the shareholder agreement take precedence over the Act?

The court held that an agreed compulsory transfer obligation takes precedence over the non-mandatory statutory pre-emption rules, even where the articles of association do not address the matter. Under Section 4-15(1) of the Companies Act shares may change hands freely unless otherwise provided by statute, the articles or an agreement between the shareholders. The statutory right of pre-emption in Section 4-15(3) and Section 4-19 applies unless the articles provide otherwise, and the appellant argued that only the articles could displace it. The court relied on the preparatory works, legal literature and HR-2023-1128-A para. 65, where the Supreme Court held that the statutory rule is non-mandatory and that wider pre-emption rights may freely be agreed between shareholders. It concluded that Sections 4-19 to 4-23 do not apply to agreed transfer restrictions and redemption rights, including an obligation to transfer shares on specified events. Consequently, neither the statutory rule on redemption at market value nor the time limit for requesting a court valuation under Section 4-23 applied.

The difference between the articles and a shareholder agreement lies in who is bound. The articles bind the company and every shareholder, including later acquirers, whereas a shareholder agreement binds only its parties as a matter of contract. In this case all shareholders and the company itself were parties, and the agreement required every shareholder to be a party. The court added that any sale agreement between two of the parties in breach of the shareholder agreement would bind only the parties to that sale and not the remaining shareholders.

When is a compulsory transfer triggered for an employee shareholder?

The obligation was triggered by actual departure and not by formal termination of the employment. The shareholder agreement used the expression ‘termination of the employment relationship’ without defining it, and the severance agreement distinguished between release from the duty to work from 23 April 2024 and formal termination on 30 September 2024. The court emphasised that the shares had been allotted by virtue of the position, as the share certificate also stated, and that the arrangement was a profit-sharing incentive for the person running the business. From his departure he had neither a duty nor a right to work and was free to take other employment, although he continued to receive salary, and the employment had therefore in practical terms ended.

The court also held that the employee shareholder could not sell to a buyer of his own choosing in the period up to formal termination. The agreement provided that the board would decide to whom the shares were to be transferred, and the price rule applied to ‘any sale’. The court further noted that the employee had not attempted to sell freely in 20 years and that the other shareholders had never understood the agreement in that way.

The agreement must be understood to mean that an employee shareholder is precluded from disposing of the shares while employed. (Court of Appeal’s reasoning, translated)

The severance agreement said nothing about the shares. The judgment shows that severance agreements with employee shareholders should deal with the shares expressly, including the date on which the obligation to sell arises and any departure from the shareholder agreement. The judgment did not address which conditions an employer may attach to the termination of the employment itself.

Can the price be set at book value?

An agreed price based on book equity is binding unless there are grounds for setting it aside. The shareholder agreement provided that the price on any sale was to be calculated from book equity according to the latest audited accounts, divided by the number of shares. The court required fairly clear evidence before an alleged deviating practice could set aside an unambiguous clause, particularly as the agreement required amendments to be in writing. A voluntary sale between all shareholders at market value and restructuring plans that were never implemented had no bearing on a compulsory transfer.

The limit set by Section 36 of the Contracts Act was not discussed in the judgment. Under Section 4-15(4) of the Companies Act, Section 36 of the Contracts Act applies correspondingly to transfer restrictions in the articles or in a shareholder agreement. Section 4-17(5) likewise provides that a provision in the articles on the redemption price may be adjusted under that rule. In our assessment a book value price clause will be difficult to set aside where the employee acquired the shares at par, received dividends on equal terms with the other shareholders and knew of the clause when acquiring the shares. The risk of adjustment is greater where the employee paid market price for the shares, or where the price treats an employee dismissed through no fault of their own as harshly as one who has breached their obligations.

What should the shareholder agreement and the articles provide?

Companies with employee shareholders should draft the compulsory transfer obligation so that it can be applied without doubt as to its meaning. The court stated that the scope for including transfer restrictions in the articles is limited to the forms regulated in Sections 4-19 to 4-23, and the Supreme Court has not decided whether a compulsory transfer on departure may be laid down in the articles. In our assessment the obligation should therefore be placed in the shareholder agreement, while the statutory requirement of company consent to acquisitions under Section 4-15(2) is retained and, where appropriate, specified in the articles under Section 4-16. The general rules on authority to sign are discussed in the article on who can bind the company, and further articles are collected on the contracts topic page.

1. Make the company and all shareholders parties to the shareholder agreement, and require new shareholders to accede before acquiring shares.
2. Define the triggering event precisely, for example as actual departure, release from the duty to work or expiry of the notice period.
3. Distinguish between the reasons for departure and set different prices, for example market value for a good leaver and book value for a bad leaver dismissed for cause or in material breach.
4. Specify the valuation date, the valuation method and an independent valuer in the event of disagreement.
5. State whether the employee shareholder may sell while employed, and who then has the right to buy.
6. Address the shares expressly in the severance agreement, with the date of the obligation to sell, the buyer and the price.

Questions and answers

Next legal review: 31 March 2027