Norway: A Restructuring/Insolvency Overview

Introduction

Norwegian restructuring and insolvency activities continue to be shaped by what has dominated the post-pandemic period:

• tighter financing conditions and refinancing risk;
• uneven sector performance; and
• a legal toolkit, through the relatively new Reconstruction Act (defined below), which is operationally demanding in execution, although this is improving.

The result is a market where traditional bankruptcies remain a central feature of the landscape.

Insolvency Legislation

Norwegian insolvency law is mainly regulated by the Norwegian Bankruptcy Act of 8 June 1984 No 58, the (temporary) Reconstruction Act of 7 May No 38, and the Creditors Recovery Act of 8 June 1984 No 59.

On 28 March 2025, the Ministry of Justice and Public Security presented a proposition for a permanent Reconstruction Act, which to some degree will build upon the existing legal framework included in the Bankruptcy Act part one, as well as introduce new mechanisms in Norwegian law retrieved from, for example, Directive (EU) 2019/1023 on restructuring and insolvency. It is anticipated that parliament will adopt the permanent Reconstruction Act in the first half of 2026.

Insolvency Driven by Cash Flow Issues

Norwegian bankruptcies are usually triggered by lack of liquidity. In 2025, this dynamic remained visible across sectors where working capital swings are sharp and collateral values are difficult, and sometimes impossible, to realise.

Two factors in Norway often make cash-flow problems worse:

• Contracting and project risk – Payment chains transmit distress rapidly when a principal delays payment or a project starts to make a loss. The Norwegian currency has also depreciated against other currencies, leading to increased costs for businesses that rely on imported goods or equipment which are typically priced in euros or dollars.
• VAT and tax timing effects – Periodic payments tend to accelerate liquidity pressure, as VAT and tax typically fall due four to six times a year. This often intensifies financial strain caused by late customer payments, since such delays generally do not entitle the business to defer the corresponding VAT payments. 

In addition, a third factor has emerged:

• Reduced access to capital – Rapid changes to the Norwegian tax regime over the past five years have led many investors to relocate to more favourable tax jurisdictions. As a result, capital and willingness to invest in Norwegian businesses have declined, making it harder for businesses to overcome liquidity crises.

Sector Patterns

During 2025, a total of 3,731 businesses went bankrupt. This is a decline of 6% compared to 2024, when there were approximately 4,000 bankruptcies.

In 2025, certain sectors were especially challenged:

Construction and building trades

The construction and building sector accounts for the largest number of bankruptcies, with 918 bankruptcies in 2025. This development is mainly caused by rising interest rates over the last couple of years. As a result, many projects priced in a low-rate environment became less viable. Combined with still-elevated input costs in parts of the period, this has squeezed margins and contributed to more financial distress among contractors and subcontractors.

It is expected that this sector will continue to be affected in 2026, with low orders and challenged liquidity, with many projects being postponed or downsized. This has also affected the real estate market, with fewer transactions being completed.

Retail and consumer services

It is also expected to be a tough year for businesses within retail and consumer services. This appears to be linked to the high level of indebtedness among Norwegian households. The rising interest rates have compelled many households to reduce discretionary spending, including restaurant visits and other non-essential consumption. At the same time, consumer credit in Norway is reaching record levels; as of December 2025, total interest-bearing consumer debt amounted to NOK140 billion.

More Active Stakeholders

A notable practical shift in recent years, continuing into 2026, is the intensity of creditor action. Where banks and institutional lenders once tended to extend and amend repeatedly, they now frequently require credible equity support, asset disposals (often through distressed M&A), tighter covenants and reporting obligations, and firm refinancing milestones. Trade creditors are also behaving more defensively by providing shorter credit terms, stricter retention of title practices where available, and earlier use of debt collection and enforcement measures.

This has led to more companies reaching insolvency proceedings with less runway, making the choice between bankruptcy and reconstruction time-critical, also with respect to possible directors’ liability. The last decade has shown an increase in the number of these cases related to bankruptcies, providing evidence that creditors are increasingly willing to hold boards of directors accountable for losses.

Reconstruction Proceedings

Norway's reconstruction regime was designed to provide an alternative to liquidation where the business is viable, but over-leveraged or experiencing cash flow issues. In broad terms, reconstruction is a court process that allows negotiations with creditors under a structured framework and enables a composition (debt settlement) and/or operational restructuring.

In practice, however, reconstruction is not a magic solution. It is a framework that still requires time and money, a viable business plan and support from creditors.

The key factor in determining whether a reconstruction will succeed is often access to liquidity throughout the process – essential suppliers, employees, legal/financial advisers, etc, must still be paid while negotiations are ongoing. If new funding is not available, which has been a common challenge in recent years, the process may turn into slow-motion liquidation, undermining the very value the framework is intended to preserve.

Out-of-Court Restructurings

In Norway, as in other countries, many restructurings occur outside formal insolvency proceedings. Such solutions are often preferred because they can be faster, less public, and more flexible. Although generally more successful, out-of-court restructurings are not shielded from bankruptcy, either. A recent example is the listed company DOF ASA, which underwent a substantial financial restructuring over several years, which finally ended with the company going into bankruptcy proceedings in February 2023.

In Norway, the pattern is similar in principle, but smaller in scale: where banks step back, private capital may step in – usually at a higher cost and with tighter control terms. However, access to such capital depends heavily on market conditions, and the aforementioned tax changes have in many ways reduced supply in the Norwegian market.

Outlook and Predictions for 2026

While overall bankruptcies across Norwegian businesses are forecast to remain broadly stable in 2026, real estate is projected to see a sharp increase, largely due to tax changes. Since 2020, a series of tax changes has tightened the taxation of secondary homes and rental properties, which has increased owners’ wealth tax burden and encouraged sales. This is described by experts as a key driver behind the sector topping the bankruptcy outlook, with data company Dun & Bradstreet Norway projecting that an estimated 606 real-estate companies will fail in 2026, an increase of 19% on 2025.

Across bankruptcies, reconstructions and restructurings in the Norwegian market, the clearest lesson is the importance to act early. One key takeaway from 2025 is that insolvency frameworks work best when they are supported by a healthy capital market. Legal tools can structure negotiations and protect value, but they cannot replace access to risk capital. Despite new and improved rules under the revised Reconstruction Act, which is expected to be adopted in 2026, ordinary bankruptcies are therefore likely to account for the vast majority of cases going forward.