Business Advisory and Company Law

LOCAL Attorneys have extensive experience in providing legal services to businesses and individuals in the fields of corporate law, leveraging the extensive knowledge and experience of the firm’s lawyers.

Services in the field of corporate law, along with comprehensive business advisory services, have been the cornerstone of the firm’s operations from the beginning.

Our strong network and years of experience in various corporate law matters, along with our vast knowledge in related fields, such as tax consulting, financing, and contract law, benefit companies and organizations across diverse industries.

Among the assignments we undertake:

Buying and selling companies - Due diligence

There are many things to consider when acquiring or selling companies. From the preparation of initial heads of terms, financing, due diligence, to the drafting of share purchase agreement, and related documents, such as covenants, loan agreements, and shareholders’ agreements. Decisions on acquisition or sale shall be executed by the board of directors, or in some cases by the CEO.

Special consideration shall be made to tax consequences resulting from the sale or acquisition of shares in companies. Such transactions often involve major interests, therefore seeking professional tax advice cannot be overestimated.

The experts of LOCAL attorneys have extensive knowledge and experience in the field of corporate law, company financing, tax law and contract law, as well as in other legal areas that relate to the sale and acquisition of companies.
LOCAL attorneys provide comprehensive legal advice on all issues related to the purchase and sale of companies to ensure the best interests of our customers in every respect.

Our attorneys have been involved in large sale and acquisition of companies where we have assisted our clients with negotiations and all documentation for closing a transaction. We also carry out legal due diligence. Our assistance regarding the sale and acquisition of companies includes:

preparation of heads of terms
review and selection of financing options and communication with financing entities
conducting legal due diligence
negotiations and documentation
drafting and completing share purchase agreement
drafting and completing a shareholder agreement
notifications to government entities, as required

Establishment of a company, choice of company form

When establishing a company for business purposes, it is essential to choose a corporate structure suited to the nature and scope of the intended operations. Owner liability, taxation, and payout rights vary among the different company types. Equally important is ensuring the correct formation of the company at the outset, avoiding unresolved issues that may prove difficult to rectify later.

Our extensive experience and expertise in corporate and tax law benefit individuals, businesses, and other entities planning to establish a company for business operations or seeking advice in this area.

We provide advice on all legal matters related to the establishment of a company and on the most beneficial corporate structure, including document preparation, tax implications of different company forms, owner liability, and shareholder agreements.

Below is an overview of the main types of limited liability companies in Iceland:
(note that other company structures are available, please contact LOCAL attorneys for further information)

Private Limited Companies

Private limited companies in Iceland (einkahlutafélög or ehf.) are governed by the Private Limited Companies Act No. 138/1994.

In a private limited company, there shall be at least one shareholder, which can be either individuals or legal entities.

Private limited liability companies are companies with so-called limited liability, which means that the shareholders’ liability is limited to their contributed capital. The shareholders of a private limited company therefore do not bear direct, undivided and unlimited liability by law for its obligations, as in the case of partnerships and cooperatives.

There is no limit on the share capital or the number of shareholders in private limited companies. However, the minimum share capital (share capital) is ISK. 500,000, all of which must be paid to the company before its registration with the Directorate of Internal Revenue’s Registers of Enterprises. Registration must be accompanied by confirmation from the company’s elected auditor or inspector that they have verified that the initial capital has been paid in accordance with the information in the initial documents. It is permitted to pay share capital with valuables other than money, which must have a financial value. In such cases a lawyer or accountant shall issue a statement on the value of the contribution, i.e. the delivered items, and that the true value has been delivered.

Shares are not issued in private limited companies, but the company’s board of directors keeps the official share register and ensures that it contains the correct information at all times. the correct entry of a shareholder’s name into the share register is a prerequisite for that shareholder to be able to exercise his rights as a shareholder.

It is mandatory to appoint a board of directors in private limited companies, which shall at least consist of one board member and an alternate member, if there are four or fewer shareholders. It is not mandatory to designate a director in a private limited company.

Income tax on private limited companies is 21%. Withdrawals from owners in private limited companies are generally carried out in the form of dividends, which are subject to stricter rules than, for example, in cooperatives and partnerships, in addition to which they bear a 22% capital income tax. In addition, rules apply to loans and guarantees of a private limited company to its shareholders.

Private limited companies are registered with the Directorate of Internal Revenue’s Registers of Enterprises. The appropriate founding documents shall be submitted along with confirmation of the payment of a registration fee of ISK. 140,500.

Public Limited Companies

Public limited companies are governed by law no. 2/1995 on public limited companies.

In a public limited company, there shall be at least three shareholders, which can be either individuals or legal entities.

Public limited liability companies are companies with so-called limited liability, which means that the shareholders’ liability is limited to their contributed capital. The shareholders of a public limited company therefore do not bear direct, undivided and unlimited liability by law for its obligations, as in the case of partnerships and cooperatives.

There is no limit on the share capital or the number of shareholders in public limited companies. However, the minimum share capital (share capital) is ISK. 4,000,000, all of which must be paid to the company before its registration with the Directorate of Internal Revenue’s Registers of Enterprises. Registration must be accompanied by confirmation from the company’s elected auditor or inspector that they have verified that the initial capital has been paid in accordance with the information in the initial documents. It is permitted to pay share capital with valuables other than money, which must have a financial value. In such cases a lawyer or accountant shall issue a statement on the value of the contribution, i.e. the delivered items, and that the true value has been delivered.

Public limited companies must have at least two shareholders, and the share capital shall be a minimum of ISK. 4,000,000, which can be divided into at least two shares. Unlike private limited companies, shares in public limited companies are issued. It is also permitted to register shares in public limited companies through electronic share registration.

Income tax on public limited companies is 21%. Withdrawals from owners in limited companies generally take place in the form of dividends, which are subject to stricter rules than, for example, in cooperatives and partnerships, in addition to which they bear a 22% capital income tax. In addition, rules apply to the granting of loans and guarantees by a limited company to its shareholders.

Guidance on Good Corporate Governance

By adopting proper corporate governance, companies not only ensure compliance with the law and the company’s articles of association, but could also increase the potential value of the company.

LOCAL attorneys are experts in corporate governance, and have conducted lectures in that field for many years.
LOCAL attorneys are also accredited auditors of corporate governance by the Icelandic Chamber of Commerce and the Research Center of Corporate Governance, and provide independent evaluations on corporate governance. Companies that pass the evaluation process receive the recognition “Exemplary company in corporate governance”.

We advice boards of companies and institutions regarding corporate governance, including on the roles and responsibilities of directors, creation and review of operating rules, governance statements, codes of conduct and composition of board of directors. We also provide advice and training on the interaction between different management units of companies, i.e. executive board, board of directors and shareholders’ meetings and their internal powers, decision-making within a company, etc.

LOCAL attorneys have years of experience in chairing and recording meetings of board of directors and shareholder, including annual shareholder meetings. We handle all document preparation in connection with such meetings, from mandatory meeting notices to meeting minutes, and provide comprehensive advice on the subject.

Mergers and Acquisitions

Mergers and acquisitions of companies can be complicated, and it is imperative that such work is handled properly, whether it is documentation or notifications to relevant public bodies.

It can become necessary to obtain authorisations from various public authorities to complete the proposed mergers or acquisition. It can also be advisable to carry out legal and/or financial due diligence in anticipation of large-scale merger or acquisition. Furthermore, tax consequences, that may result from mergers or acquisitions, need to be scrutinized and considered.

LOCAL attorneys have extensive experience and knowledge related to mergers, acquisitions and sales of companies. The firm also has extensive experience in drawing up financing agreements, giving the firm a unique position in advising on transactions of this type.

Our services in the field of mergers and acquisitions include the following:

preparation of merger and acquisitions documents and related services
notifications to regulators and obtaining permits
conducting legal due diligence
drafting financing agreements
assistance with securing financing and communication with financial institutions.

Our high-quality work, knowledge and experience when it comes to mergers and acquisitions, has proven to be instrumental for a successful outcome for the firm’s clients.

General Advocacy and Advice

The corporate legal environment is often complex. Depending on the legal form of companies, their activities are governed by different sets of laws, containing provisions on the rights and obligations of the respective company, its managers, shareholders and other stakeholders. For example, provisions relating to the protection of minority shareholders, such as the right to exercise voting rights at shareholder meetings and present proposals at such meetings. Further provisions apply to reduction and increase of share capital, on the sale of shares and on pre-emptive rights, which are applied at shareholder’s meetings.

Apart from the legal framework, a company’s articles of association and, in some cases, shareholder agreements, often dictate additional rules which can affect the legal status of a company, its managers, shareholders and other stakeholders. Therefore, it is necessary to interpret the applicable legal framework in the light of a company’s articles of association and, if applicable, the respective shareholder’s agreement.

LOCAL attorneys provide extensive advice in the field to corporate law and provide guidance to companies, managers and shareholders. Our experts have extensive knowledge and experience in all aspects of corporate law, to the benefit of our clients. We provide general advocacy for companies and shareholders and provide advice on their rights, obligations and possible remedies in case of disputes.

Our services in the field of corporate law include the following: