How to Structure Municipally Owned Ports in Norway: IKS vs. Limited Company (AS)

The EFTA Surveillance Authority (ESA) has questioned whether the IKS model gives municipally owned ports competitive advantages not available to private operators — including more favourable borrowing terms, implicit guarantees and immunity from bankruptcy. The Norwegian Government has identified the port sector as one of four areas where organisational rules may need to be amended to ensure compliance with EEA law. At the same time, owner municipalities have increasingly expressed a desire to receive dividends or other distributions from their port companies.

This development is not unique to Norway. In Sweden, the government has recently proposed that municipalities operating commercial port activities should do so through a limited company. In Finland, all major ports are already organised as limited companies.

Against this backdrop, this article examines the key similarities and differences between the IKS and AS structures, focusing on selected practical and legal issues.

Dividends From Port Companies

Many port operations generate substantial revenues and significant profits. This can make it attractive for owner municipalities to draw dividends from their port companies in order to fund other municipal services.

The question of whether a port company may pay dividends is governed first by the Norwegian Harbours and Fairways Act. These rules apply regardless of legal form.

Until the current Harbours and Fairways Act entered into force in 2020, the default rule was that port capital could only be used for port purposes. Any exemption required state consent. Under the current Act, municipalities may receive dividends and other distributions from port operations provided the port retains sufficient funds for its operation, maintenance and certain categories of investment, cf. Section 32 of the Act. The same provision requires that any withdrawal of surplus or other distribution may only be decided by the company’s ownership body — the representative council (representantskapet) in an IKS and the general meeting in an AS — following a proposal from the port board. This means, for example, that the municipal council cannot decide to pay dividends from the port without first involving the ownership body and the board of the port company.

In addition to the Harbours and Fairways Act, dividend questions are governed by the company law rules applicable to each legal form — respectively Section 29 of the IKS Act and Sections 8-1 and 8-2 of the Companies Act. Because Section 32 of the Harbours and Fairways Act sets stricter requirements than the company law provisions, there is in practice little or no difference in dividend access depending on whether the port is organised as an IKS or an AS. Municipalities have generally been cautious about drawing dividends from IKS-organised ports, and a conversion from IKS to AS can be expected to raise dividend expectations among owner municipalities.

Key Takeaways:

Municipally owned ports in Norway have traditionally been organised as inter-municipal companies (IKS) or municipal enterprises.
ESA scrutiny, EEA compliance requirements and municipal demand for dividends are driving a shift toward the limited company (AS) structure.
The choice of legal form affects financing capacity, public transparency obligations and tax exposure.
For ports with significant commercial activity, the AS structure generally provides greater flexibility and a cleaner commercial profile.

Financing Port Operations and Investments

Norwegian ports face significant investment needs in the years ahead — related to climate adaptation, electrification and possible requirements arising from the current security environment. The choice of legal structure can directly affect the port’s ability to finance such investments.

A central difference between the IKS and AS structures concerns borrowing capacity and terms. Under Section 22 of the IKS Act, an IKS may only take out loans if this is provided for in the company agreement, which must also specify a ceiling on total borrowing. If the port wishes to borrow above that ceiling, the company agreement must be amended — a process that typically requires approval from all owner municipalities and involves corresponding political procedures.

Several port companies find that this borrowing ceiling restricts their capacity for financial growth. Many ports hold substantial property assets that could serve as collateral for loans, but the ceiling prevents the company from using them. As a result, many IKS-organised ports operate with significantly lower leverage than the underlying asset base would otherwise permit.

These constraints cannot simply be resolved by placing borrowing in subsidiaries. An IKS is prohibited from providing guarantees or pledging its own assets as security for other legal entities — including wholly owned subsidiaries — under Section 22(6) of the IKS Act.

These limitations are among the reasons some ports are considering conversion from IKS to AS. A limited company is not subject to the same restrictions. AS-organised port companies therefore typically have greater flexibility in both borrowing capacity and collateral arrangements. Property assets can be used as security to the extent the company considers appropriate, potentially unlocking financing for investments that would otherwise not be feasible.

The trade-off is that loans must be raised in the commercial banking market, at terms that often cannot match those available through Kommunalbanken to an IKS. Municipalities have unlimited liability for the obligations of an IKS (Section 3 of the IKS Act), and an IKS cannot go bankrupt (Section 23 of the IKS Act). In practice, this means many IKS-organised ports can borrow from Kommunalbanken at margins more favourable than those offered by commercial banks. A conversion from IKS to AS will therefore generally result in higher interest costs compared to Kommunalbanken rates, at least during the transition period.

Public Access and Meeting Transparency

A practical question for many ports is whether the company is subject to the Freedom of Information Act (offentleglova). Many municipally owned ports conduct extensive commercial activity — in areas such as cargo handling, property leasing, offshore services, cruise operations and fisheries — yet regularly face access requests, or find that authorities conclude, following complaints from the press, that the company is covered by the Act. If the Act applies, it covers the entire business — not only the part that exercises public authority. The question arises regardless of whether the port is organised as an IKS or an AS. For IKS companies, the rules on meeting transparency (møteoffentlighet) also apply where the Freedom of Information Act applies.

As a starting point, the Freedom of Information Act applies to municipally owned companies, cf. Section 2(1)(c) and (d). However, there is an exception for entities that primarily conduct commercial activity in direct competition with private operators and on the same terms. Whether the exception applies depends on a specific overall assessment. Relevant factors include the share of total turnover, profit, number of employees, the value of operating assets and the market value attributable to the part of the business exposed to competition.

In practice, many ports find this assessment challenging, partly because it involves discretion and partly because the competitive position of a port can change over time. Authorities have also not always applied the assessment consistently.

Although the assessment should in principle be the same regardless of legal form, it will in practice typically be easier to conclude that an AS-organised port is not covered by the Freedom of Information Act than it would be for an IKS.

As noted, an IKS cannot go bankrupt. This gives certain competitive advantages not available to private operators, including in relation to borrowing terms. In an interpretive statement dated 4 July 2025, the Ministry of Local Government and Regional Development stated:

“In the Ministry’s view, it will not necessarily be the case that an IKS, by virtue of the prohibition on bankruptcy, will be able to obtain better borrowing terms or other more favourable agreements than its competitors. This must be assessed concretely for the business in question. That the advantage of being unable to go bankrupt does not always result in more favourable terms than competitors is also the position taken in the Hjelmeng Committee’s report, which states (at p. 59) that the benefit of bankruptcy immunity will not necessarily pass through to the market-facing activity if the market operator principle is observed.”

The Ministry thus confirmed that the prohibition on bankruptcy does not automatically mean that an IKS is subject to the Freedom of Information Act — a specific assessment is required. In practice, however, bankruptcy immunity may lead authorities to presume that the port does not conduct commercial activity on the same terms as private operators, placing the burden on the port to demonstrate that it does not benefit concretely from this status. For AS-organised ports, the starting point for that assessment is likely to be more neutral.

A further point is that a port’s public authority functions cannot be transferred to an AS. On a conversion from IKS to AS, those functions would therefore typically remain in or be transferred to an IKS. This would give the AS a cleaner commercial profile, making it easier to satisfy the commercial activity exception in Section 2 of the Freedom of Information Act.

Tax Considerations for Norwegian Port Companies

The tax treatment of IKS-organised port companies is a separate and live issue. In a principal statement dated 27 October 2022, the Norwegian Tax Directorate concluded that port IKS entities are as a general rule fully subject to tax under the standard rules of the Tax Act. In the Tax Directorate’s view, port operations constitute taxable income under Section 5-1 of the Tax Act, and such companies are not generally covered by the exemption for non-profit activities under Section 2-32 — which provides that entities “not formed for profit purposes” are exempt from wealth and income tax.

Port companies organised as IKS entities have largely assumed that they are either fully tax-exempt, or at least covered by the Section 2-32 exemption.

It is, however, the nature of the activity — not the legal form — that determines whether a company is fully taxable or subject only to limited tax liability under Section 2-32. This requires a specific overall assessment in which all activities carried out by the company are relevant. The Supreme Court has confirmed that activities carried out by subsidiaries must also be taken into account.

In its 2022 statement, the Tax Directorate identified relevant factors as including the company’s statutory purpose, its actual activities and how the business is organised. Factors such as the competitive environment, access to dividends and treatment of surplus may also be relevant. The Tax Directorate held that it was insufficient for a business to have a public interest or community benefit character in order to fall outside the general tax liability.

It should also be noted that even where a company is covered by the Section 2-32 exemption, income from “economic activity — including the leasing of real property” remains taxable. In 2025, tax authorities initiated an audit of a number of municipally owned port companies, presumably in part to assess this issue. That audit was not concluded when this article was published.

The same factors apply if a port currently organised as an IKS converts to an AS. It would, however, be difficult for an AS to argue that it remains subject only to the limited tax liability under Section 2-32.

In light of the Tax Directorate’s 2022 position and the ongoing audit, it is likely that municipally owned port companies with predominantly commercial activity will face full tax liability going forward — regardless of whether they remain as IKS entities or convert to AS. Tax considerations should therefore no longer be a decisive argument in favour of retaining the IKS structure.

IKS vs. AS for Norwegian Port Companies

The table below summarises the key differences between the two structures across the areas examined.

Topic	IKS	AS (Limited Company)
Dividends	Permitted under Section 32 of the Harbours and Fairways Act; municipalities generally cautious in practice	Permitted on the same legal terms; conversion may increase dividend expectations
Financing	Access to Kommunalbanken at favourable rates; borrowing ceiling and prohibition on pledging assets as security for others	Commercial borrowing at market rates; full flexibility to use assets as collateral
Freedom of Information Act	Bankruptcy immunity complicates the commercial activity exception; meeting transparency rules also apply	Cleaner commercial profile; more neutral starting point for the assessment
Tax	Nature of activity — not legal form — is decisive; full tax liability increasingly likely for commercial ports	Difficult to argue for limited tax liability under Section 2-32

Dividends

In practice there is little difference between the two structures, as Section 32 of the Harbours and Fairways Act sets the effective limits regardless of legal form. The dividend question does not in itself provide a basis for recommending one form over the other, although owner municipalities should be aware that a conversion to AS may generate stronger dividend expectations.

Financing

An IKS will as a general rule obtain more favourable interest terms through Kommunalbanken. However, it is subject to borrowing and collateral restrictions. For port companies with significant investment needs and substantial property assets, the AS structure appears more appropriate — the increased flexibility in borrowing and the ability to use the company’s assets as collateral outweigh the advantage of lower interest rates.

Public access

Compliance with the Freedom of Information Act can be resource-intensive for companies with extensive commercial operations, even though the Act contains exceptions for commercially sensitive information. The assessment is in principle the same regardless of legal form, but in practice it will likely be easier to conclude that an AS-organised port is not covered. From a business perspective, there are therefore some advantages associated with the AS structure. The meeting transparency rules also apply only to IKS entities.

Tax

It is the nature of the activity, not the legal form, that determines tax liability. Port companies with predominantly commercial operations organised as IKS entities should in any case expect full tax liability going forward. Tax considerations should no longer be a central argument for retaining the IKS structure.

Overall assessment

Municipally owned port companies that conduct substantial activity in competition with other operators will generally be better served by organising as a limited company. The AS structure provides greater financial flexibility, a cleaner commercial profile that makes it easier to manage access requests, and an organisational form that is less likely to raise questions about competition-distorting advantages contrary to EEA law. The traditional advantages of the IKS structure — more favourable borrowing terms and potential tax benefits — are becoming less significant. For municipally owned port companies with more limited commercial activity and a stronger public administration character, the IKS structure may nonetheless remain appropriate.

This article was first published in Havnemagasinet. The authors are lawyers at Hjort law firm. The article does not constitute legal advice. For advice on your specific situation, please contact Hjort.