The Norwegian Code of Practice for Corporate Governance - Statoil

is required to call a general meeting within a reasonable time in order toreport the company’s financial condition and the measures proposed torectify the situation. The requirement that a company should maintainits equity capital at a level appropriate to its objectives, strategy and riskprofile also implies that if a company retains capital which is surplus tothese requirements, it must justify why it is not distributing the surplus toshareholders through dividend payments or a capital reduction.The Public Companies Act requires that a mandate granted to the boardof directors to increase a company’s share capital must specify whetherthe mandate extends to an increase in capital for contributions other thancash, or a resolution on a merger and whether the pre-emption rights ofshareholders are to be waived. The Code of Practice goes further thanthe Act by specifying that such mandates should be limited to a definedpurpose, such as the acquisition of companies within a specific sector ora similar definition of purpose. Specifying the purpose of each mandatemakes it possible for shareholders to vote separately on the mandate foreach purpose. Share option programs for employees should always beapproved by means of a specific board mandate, cf. Section 12.The Public Companies Act permits a mandate to the board of directors to bevalid for up to two years. However, companies should not take advantage ofsuch an extended period (except where the company is already committedto honouring options). The company’s situation and its shareholders’ viewsmay change over the course of a year. For this reason, it is recommendedthat shareholders be given the opportunity to consider any board mandatesat each annual general meeting. A mandate to the board of directors for thecompany to acquire its own shares should be dealt with in the same way asa mandate to increase the company’s share capital.17 CORPORATE GOVERNANCE