Venture Capital 2024 Comparisons

Notable venture capital-related transactions during the past 12 months include the following.

• In 2023, Kahoot! ASA was acquired by Goldman Sachs Asset Management and a group of other investors in a NOK18 billion take-private transaction. Kahoot! was founded in 2012 by Morten Versvik, Johan Brand and Jamie Brooker who, in a joint project with the Norwegian University of Science and Technology (NTNU), teamed up with Professor Alf Inge Wang. Kahoot! received its first seed investment from North Zone in 2015 and raised several of billions of NOKs from SoftBank in 2020, before it was listed on the Oslo Børs main list in 2021.
• Kongsberg Digital ASA, previously 100% by Kongsberg Gruppen ASA, raised close to NOK1 billion from Shell Ventures and Idékapital to further scale the business.
• The Norwegian online grocery retailer, Oda Group, announced a merger with its Swedish counterpart, Mathem, becoming a new Nordic market leader in e-commerce of groceries with home delivery. In connection with the merger, Oda raised NOK600 million from existing shareholders and employees.
• IX Technologies raised NOK244 million in early 2023 from OpenAI, and, less than one year later, an additional NOK1 billion from, inter alia, Sandwater, EQT and Samsung.

In 2022 and 2023, the Norwegian venture capital market was impacted by global economic challenges such as geopolitical uncertainty, inflation and rising interest rates, leading to a decrease in fundraising and more stringent investment conditions. The easy access to capital seen during the pandemic shifted to a landscape of lower valuations and more demanding investors. High interest rates and the depreciation of the Norwegian krone have shortened the financial runway for some companies, necessitating bridge financing, but have also made Norwegian investments more attractive to foreign investors.

Despite a downturn in investments and financing rounds in 2023, which is expected to persist into the first half of 2024, Norway’s venture capital market has grown significantly over the past five years, with a notable increase in VC investments that placed it among the top ten European countries in 2023.

Private equity (PE) funds are increasingly participating in growth equity, which is the space between venture capital and private equity, focusing on minority investments in scaling companies. This shift has led to more competitive negotiations for companies, as PE funds typically require a solid business plan and clear exit strategies, which may not always align with the interests of other shareholders. The entry of PE funds into the market has intensified competition among investors for a limited number of established and upscaling companies. This trend is seen as positive for companies in need of financing during their critical growth phases.

According to the Norwegian Venture Capital Association, IT, life sciences, chemicals and materials and cleantech were the dominant industries by amounts invested in the venture and seed phase in 2022, with IT the clear leader, also driven by the emergence of various forms of artificial intelligence and related technologies. While the number of VC deals have decreased since 2022, the writers have observed that IT and technology companies have attracted the most VC capital in Norway during the past 12 months by far. Venture capital investment activity within retail/consumer services and life sciences has also been seen.

Domestic venture funds are typically structured as tax-opaque limited liability companies (aksjeselskap) or as tax-transparent partnerships (indre selskap).

The investment manager is typically structured as a separate limited liability company, acting as the alternative investment fund manager in compliance with the Norwegian Act on the Management of Alternative Investment Funds (the “AIFM Act”), implementing the EU’s Alternative Investment Fund Managers Directive (AIFMD).

When it comes to foreign structures, it has traditionally been common to choose offshore jurisdictions such as Guernsey, Jersey, and the Cayman Islands. However, there has been an industry shift towards onshore EU/EEA jurisdictions like Luxembourg.

Fund Governance

In Norway, tax-opaque limited liability and tax-transparent partnership structures, despite a few legal distinctions, largely conform with respect to governance and decision-making processes. Fund operations are principally, within the bounds of mandatory law, delegated to the investment manager and regulated by either a shareholders’ agreement and investment management agreement or a limited partnership agreement. The terms of fund agreements generally adhere to European best practices for venture capital funds, including the Invest Europe’s principles and model limited partnership agreements.

Equity incentivisation of the investment team is a common feature of venture capital funds in Norway, and plays an important role in aligning the interests of the investment team with those of the investors. Typically, the investment team, via a distinct limited liability company, will commit an amount equal to 1–2% of the total commitments to the fund, and the fund’s equity is usually divided into preference shares and ordinary shares. The preference shares generally have a priority to a repayment of paid-in capital plus a preferred return. With respect to the carried interest model, most Norwegian venture funds opt for a European waterfall (whole-of-fund model), as opposed to an American waterfall (deal-by-deal model). Norwegian venture funds typically incorporate a claw-back provision in the fund documents to facilitate the repayment of any excess carried interest. Furthermore, the investment team will generally agree to reduce its rights to any accrued or future carried interest if the investment manager is removed for cause. Linear vesting of carried interest may also be included in the fund documents.

Generally, domestic venture funds are classified as alternative investment funds (AIFs) pursuant to the AIFM Act. AIFs must be managed by an external alternative investment fund manager (AIFM) or be managed internally, in practice by its board. The AIFM Act applies to all AIFMs. In the case of internally managed AIFs, the fund itself is considered the AIFM. The Norwegian definition of an AIF implements the definition in the EU AIFMD, meaning that AIFs are collective investment undertakings that are not UCITS and which raise capital from a number of investors for the purpose of investing the fund’s capital pursuant to a defined investment strategy for the benefit of said investors.

All AIFMs must notify the Norwegian regulator (NFSA) before marketing an AIF to professional investors, and obtain a separate marketing authorisation before marketing an AIF to non-professional investors. As a principal rule, only AIFMs with authorisation, as opposed to AIFMs that are only registered (commonly referred to as “sub-threshold” AIFMs) may market AIFs to non-professional investors.

An exemption to this main rule applies to AIFMs of “EuVECA” funds, which is increasingly common in the Norwegian market. This is an EU/EEA-wide label available to both authorised and registered AIFMs which manage AIFs that are qualifying venture capital funds as defined in the EU Regulation on European venture capital funds. Obtaining registration as an EuVECA manager and the accompanying right to use the designation “EuVECA” in the marketing of qualifying funds, allow for the marketing of the fund to non-professional investors meeting certain criteria and the passporting of the marketing authorisation across the EU/EEA.

The Norwegian Venture Space

Heading into the end of the first quarter of 2024, the Norwegian venture landscape is navigating a complex environment influenced by geopolitical tensions and macroeconomic challenges. Conflicts such as the war in Ukraine and the Israel–Hamas conflict, along with financial market stresses underscored by the trend towards higher financing costs due to inflation, makes for a complex yet dynamic scenario.

Despite these pressures, the Norwegian venture sector continues to attract investments. This resilience is partly driven by an industry commitment to innovation and a growing emphasis on sustainable and socially responsible investments. However, the venture market is exhibiting a more cautious approach to venture investing and a shifting risk appetite among investors, prioritising stability.

The level of due diligence conducted by VC fund investors varies a lot, mostly depending on the stage of the target company. In early stage VC investments (seed to Series A/B), the VC funds have a strong focus on the commercial/financial due diligence, while the legal due diligence is normally limited to the following topics:

• cap table and dilutive instruments;
• employment agreement for founders and key employees, including incentive programmes;
• ownership to technology;
• material agreements; and
• disputes.

For investments in later stage companies (series B/C and later) and in growth companies, the due diligence is normally more detailed and generally in line with what one would typically see in a PE buy-out due diligence.

Over the last year, raising financing for growth companies has become increasingly difficult and generally it has become more time-consuming to complete a financing round. In addition to bringing the valuation down, the potential new anchor investors have tougher requirements in terms of stronger downside protection, while also wanting a larger share of the upside than their stake would imply if things go well. New investors are also seeking anti-dilution rights, as well as a greater influence in the companies to protect their investments. These factors are often difficult for founders and existing shareholders to accept, resulting in more extensive negotiations, complex structures and drafting rounds. Potential new investors also spend more time on due diligence compared to a few years ago and actively use findings to push the valuations.

New investors normally have separate counsel. Among existing investors and founders, whether they have joint or separate counsel varies, depending on how aligned theirs interests are in the new round.

The trend observed over the last year is that new financings rarely take place in line with the contemplated mechanics of the shareholders’ agreement in place. This means that the existing shareholders need to agree to amend the shareholders’ agreement in order to complete the new financing round. Quite often, the shareholders’ agreement contemplates that it can be amended if shareholders representing 90% of the equity agree, but, in lieu of such regulation, unanimity amongst the parties to the shareholders’ agreement is required. This also impacts the timeline.

Investors normally invest in start-ups and growth companies by acquiring preference shares, as opposed to common shares. The Norwegian Companies Act allows for separate share classes with different rights if regulated in the company’s articles of association. Preference shares generally have rights that are more advantageous than common shares, such as liquidation, anti-dilution and distribution preferences. Venture capitalists and larger investors will accordingly typically demand preference shares, but it is also not in any way uncommon that investments take place in common shares.

In Norway, a VC or growth investment is normally done on the basis of:

• a term sheet (optional);
• an investment agreement; and
• a shareholders’ agreement.

In order to complete the financing round, a number of corporate documents are also required:

• minutes from meeting of the board of directors in which the share capital increase is proposed to the general meeting;
• notice of and minutes from a general meeting in which the share capital increase is resolved; and
• updated articles of association.

It can be noted that the articles of association in Norwegian companies are normally kept very short, with the majority of regulations, except for share capital, number of shares and any share classes with related rights (eg liquidation and distribution preferences and voting rights), being set forth in the shareholders’ agreement by and between the company, the founders, investors and any other existing shareholders. There is no established standard for investment documents or shareholders’ agreements. However, major early stage investors and venture capitalists are generally keenly aware of market practice, which ensures fairly similar terms in various investment agreements.

Certain incubators provide templates and resources of varying quality that are often used by start-ups, notably shareholders’ agreements and SLIP agreements (see below), ensuring similar documentation in many venture deals. Some major early stage investors also use their own standardised templates for investment agreements, as well as shareholders’ agreements for their portfolio companies.

In very early rounds, the investment is often done on the basis of a so-called SLIP (Start-ups Lead Investment Paper, developed by incubator StartupLab), similar to the SAFE instrument which is commonly used in the US. The concept of the SLIP is that the investor invests in the company against a right to subscribe for shares at minimum (nominal) cost in a future share capital increase. The right to subscribe for shares is normally triggered by the following circumstances:

• an equity financing round of a predetermined amount;
• a corporate transaction of a predetermined size, typically an acquisition or a merger of the company; or
• at the investor’s discretion, if so agreed.

The key financial terms are typically a discount and a valuation cap, meaning the highest applicable amount used to calculate the number of shares allotted to the investor. Entering into and executing SLIP agreements is generally less time-consuming than a priced round. Another key benefit is that the company is not valued at a price per share upon execution. This avoids the issue of correct valuation of early stage companies and allows for incentivising core teams with shares acquired at low value. Further, the SLIP is not a loan, so no interest is paid on the initial amount and there is no maturity date at which the investor can claim repayment.

VC investors will often require strong downside protection mechanisms, where the following concepts are most common.

• Liquidation preference/exit preference – mechanisms ensuring that the VC investor at least get their investment amount back (either with or without a multiple) before any of the common shares receive any exit or liquidation proceeds are common. It varies as to whether the VC investor also has the right to participate pro rata in any remaining proceeds along with the common shareholders (a so-called participating liquidation preference).
• Further, anti-dilution rightsare commonly seen, in the event that the company issues new shares at a lower price than the VC investors paid. The anti-dilution is facilitated by way of the company issuing a number of additional shares (at nominal value) that are necessary to ensure that the average subscription price of the initial invested shares and the new shares are equal to subscription price in the down round. The anti-dilution mechanism can take into account the number of shares issued in the down round, meaning that a small down round would trigger the issuance of fewer anti-dilution shares than a large down-round (a so-called volume weighted average anti-dilution right) or be a so-called full ratchet anti-dilution right where the size of the down round is disregarded.
• Pre-emption rights and subscription rights – pursuant to the Norwegian Companies Act, existing shareholders have a pre-emptive right to subscribe for new shares issued by the company. The general meeting may, however, through a qualified majority of two thirds of the votes cast and share capital present at the general meeting decide to deviate from the pre-emptive rights of existing shareholders. The right for existing shareholders to subscribe for new shares is therefore normally also regulated in the shareholders’ agreement.

In addition to exercising influence through their ownership rights (voting at the general meeting), a VC investor would normally secure the following rights to influence the management and the affairs of the venture in a shareholders’ agreement.

• Board representation– Investors may have the right to appoint one or more representatives to the company’s board of directors. This allows them to have a say in strategic decision-making and key governance matters.
• Consent rights (reserved matters) – Investors may have the right to provide consent or approval for certain significant decisions, such as any changes to the articles of association, the issuance of new shares or other financial instruments, changes to the capital structure, changes to the business activities, undertaking of debt, the entering into of mergers and demergers, agreements relating to acquisitions and disposals, payment of dividends, the entering into large contracts, any substantial investments, or the hiring of key executives.
• Information rights – Investors usually have the right to access certain information about the company’s operations, financials, and performance.

The type of representations and warranties commonly observed in a financing round in a Norwegian start-up or growth company relate to:

• legal status and corporate power;
• no conflict;
• the issued shares/equity instruments;
• financial statements and sometimes also management accounts;
• position since the accounts date;
• real property and other assets;
• IPR and IT;
• GDPR;
• material agreements;
• related party transactions;
• employees and pension;
• insurance;
• tax;
• compliance;
• no insolvency;
• litigation; and
• disclosed information.

Normally, the more mature the company is, the more extensive the representations and warranties. It can be noted that, similarly as with M&A transactions, the representation and warranty catalogue is somewhat less extensive/comprehensive than typically is seen in, for instance, the US.

In terms of recourse in case of breaches of any representation or warranty, a key point to note is that a Norwegian limited company (AS), as a matter of law, may not indemnify investors in connection with a share capital increase. Any loss for breach of warranties or otherwise therefore needs to be compensated at shareholder level. Normally this is done through the issuance of compensation shares in the event of a loss, as existing shareholders would not normally be willing to offer any cash compensation to new investors in the event of a breach of warranties by the company. In some cases, the VC investor will require to be issued a number of warrants equal to the maximum number of compensation shares, as the issuance of new shares will require the resolution by the general meeting (with a two-thirds majority requirement). In most cases, however, the shareholders will, in the shareholders’ agreement, undertake to vote for the necessary resolutions in order to issue the compensation shares. A loss can be defined in different ways, but a common approach is to look at the value reduction of all the shares in the company and multiply it by the investor’s ownership share.

The Norwegian government offers several programmes to incentivise equity financings in growth companies.

• Innovation Norway offers certain grants, start-up loans, innovation loans and guarantees to support Norwegian growth companies. The government has also backed several seed funds through Innovation Norway aimed at providing financing to growth companies.
• The Research Council of Norway provides a tax deduction scheme (SkatteFUNN), which reduces the costs related to research and development.
• Export Finance Norway provides governmental loans and guarantees for investments in Norway that contribute to exports or to other transactions that generate value within Norway.

Additionally, Norway has signed a contribution agreement with InvestEU for green, digital, small and medium-sized companies financing, which covers financial products and projects under the three InvestEU policy windows:

• sustainable infrastructure;
• research, innovation and digitalisation; and
• small and medium-sized businesses.

Moreover, the Norwegian government invests in numerous growth companies and venture funds, directly or indirectly, in Norway and internationally, through the state-owned investment companies Investinor, Argentum, Nysnø and Norfund as well as through regionally based seed funds.

Norwegian Tax Treatment of Investments in Portfolio Companies

General

The Norwegian tax treatment of equity investments in a growth/start-up company does not differ from the general tax treatment of other non-listed companies in Norway. In principle, ordinary income of the fund is taxable for the fund at a rate of 22%.

Norwegian portfolio companies

As Norwegian growth/start-up companies are typically established as limited liability companies, equity investments in such companies generally qualify under the Norwegian participation exemption. As a result, capital gains on such shares are tax-exempt. Dividends distributed from such companies are taxed at an effective rate of 0.66%.

Portfolio companies within the EU/EEA

Equity investments in growth/start-up companies within the EU/EEA are covered by the Norwegian participation exemption, provided that:

• the EU/EEA entity is a qualifying object under the Norwegian participation (ie, an entity that generally corresponds to a Norwegian limited liability company);
• the respective EU/EEA jurisdiction is not considered a low-tax jurisdiction; and/or
• the EU/EEA entity is genuinely established and carries on genuine economic activities within the relevant EU/EEA jurisdiction.

Portfolio companies outside the EU/EEA

Equity investments in growth/start-up companies outside the EU/EEA are covered by the Norwegian participation exemption, provided that:

• the foreign entity is a qualifying object under the Norwegian participation exemption;
• the fund has consistently owned at least 10% of the share capital and controlled at least 10% of the voting rights at the general meeting for a period of two years; and
• the foreign entity is not resident in a low-tax jurisdiction.

The Norwegian government has implemented several material initiatives to increase the level of equity financing of Norwegian growth companies (see 4.1 Subsidy Programmes for a high-level overview).

The founders’/key employees’ long-term commitment is normally procured by the following.

• Vesting agreements – Particularly in early stage VC, where the founders are the majority owners of the company, it quite common that VC investors require the founders’ shares to be subject to a vesting schedule. Under a typical vesting schedule, the founder will need to sell shares back to the company or other shareholders if they leave the company prior to full vesting. The terms of the sale (including the price) will often depend on the circumstances around a founder leaving, ie, typically a “good leaver/bad leaver” mechanism. The purpose of the vesting schedule is not only to secure long-term commitment but also to ensure that there is no “dead equity” in the company (equity held by persons no longer affiliated with the company) which could make subsequent financing rounds more difficult.
• Shareholder agreements – Shareholder agreements can include provisions that require founders and key employees to commit to the company for a certain period through, for instance, a lock-up period for their shares.
• Employee stock ownership plans (ESOPs) – VC companies often have an ESOPs in place, allowing both founders and key employees to increase their ownership in the company. Such programmes can be option programmes or share purchase programmes. Vesting of options is often time-based, but can also be linked to the achievement of agreed KPIs.
• Private equity style MIP-programmes – Some VC investors prefer a private equity style MIP programme for the companies in which they invest. Such programmes are mostly appropriate for growth companies and not early stage companies.

The instruments/securities used for the purpose of incentivising founders/employees range from co-investments with or without vesting schedules and share option programmes to more complex structures providing substantial gearing to management’s investment and a different return profile, with the latter mostly used in growth companies.

Share options are less tax efficient than other forms of equity-based incentivisation and will normally be most relevant for management incentives in publicly listed companies and early phase VCs.

Reference is made to 5.1 General regarding terms relating to such instruments.

Incentivisation of Management

Management of the portfolio companies is generally expected to co-invest alongside the fund. The extent of management’s investment typically varies based on their seniority and existing equity holdings that can be rolled. Investments by management are usually structured through a preference and ordinary shares structure. At the fund level, the investment team’s investments are typically equity-based and subject to certain limitations as outlined in the AIFM Act (see 2.2 Fund Economics).

Capital gains and dividends for management are principally fully taxable as capital income at an effective rate of 37.84% less a risk-free return. However, if management invests through a personal holding vehicle, capital gains and dividends are principally exempt (0.66% tax on dividends). In comparison, employment income is taxed at a marginal rate of 47.4% and subject to national insurance contributions of 14.1%. An additional surcharge of 5% will apply for any employment income exceeding NOK850,000.

Normally, the key terms and structure (including size) of an employee incentive programme is one of the key terms that are negotiated with VC investors in a financing round. Such key terms are then set out in the investment agreement and/or shareholders’ agreement, and in most cases left to the (new) board of directors to implement following completion of the financing round. Rarely is the employee incentive programme observed as having any impact on the VC investment process as such.

In Norway, the shareholders’ rights in relation to a sale, IPO or other liquidity event, as well as transfer restrictions and exit triggers, are typically governed by the company’s shareholders’ agreement. The exit-related provisions typically set out the exit triggers, how the exit process shall be completed and how the proceeds shall be distributed among the shareholders. Exit triggers are events or conditions that trigger a potential sale or IPO. Common exit triggers include reaching a certain valuation, achieving specific financial milestones, or a specified time period. The definition of exit triggers can vary depending on the specific circumstances and negotiations between shareholders.

In terms of transfer restrictions, the provisions commonly seen in VC companies are as follows.

• Lock-up– Lock-up provisions ensure that shareholders (or certain shareholders) do not sell shares for a certain period of time.
• Right of first refusal (ROFR)/right of first offer (ROFO)– ROFR provisions give existing shareholders the right to purchase shares that another shareholder intends to sell before those shares can be sold to a third party. If a shareholder receives an offer from a third party to purchase their shares, they must first offer those shares to the existing shareholders at the same price and terms. The existing shareholders then have the option to accept or decline the offer. If they decline, the shareholder is free to sell the shares to the third party on the same terms. Generally, it can be difficult to achieve an offer from a third party on a stake that is subject to a ROFR, so investors often prefer a ROFO instead, where the shareholder wishing to sell would need to offer the shares to other existing shareholders before the shares can be offered to a third party. If the selling shareholder rejects an offer from other existing shareholders, it can only sell to a third party at a higher price.
• Drag-along rights– Drag-along rights allow a majority shareholder or a group of shareholders to force minority shareholders to sell their shares in the event of a sale or liquidity event (typically an IPO). This provision ensures that all shareholders can participate in the transaction and prevents minority shareholders from blocking a potential exit.
• Tag-along rights– Tag-along rights protect minority shareholders by allowing them to join in a sale or liquidity event initiated by a majority shareholder. This provision ensures that minority shareholders have the opportunity to sell their shares on the same terms as the majority shareholders.

While IPOs can be a viable exit strategy for some start-ups, they are not as common in Norway compared to other countries like the United States. The prevalence of an IPO exit for start-ups in Norway has varied throughout the years based on the general sentiment and market conditions. In 2020–22, many early phase and growth companies were able to obtain high valuations simply based on expected future earnings, and many early phase and growth companies achieved successful IPO exits around that time due to high investor demand. A record high number of early phase companies were listed on Oslo Børs’ junior market, Euronext Growth Oslo. Euronext Growth Oslo is the most appropriate marketplace for less mature companies, with less strict listing requirements compared to the Oslo Børs’ main list. Many early phase and growth companies that listed in 2020–22 structured their offering by way of a capital raise through a private placement directed to a handful of institutional investors and high-net-worth individuals, followed by a listing. Some of the more mature growth companies were listed on Oslo Børs’ main list, following a more classic public offering on the basis of an offering prospectus.

Since 2022, very few early phase and growth companies have sought an IPO exit due to low investor demand. However, many early phase and growth companies have been able to achieve a decent valuation and secure investors in a private setting. A number of the growth companies that were listed in the period 2020–22 have since been taken private to allow the companies to focus on long-term growth and profitability and relieve them of the quarter-by-quarter scrutiny of the public markets.

The need for secondary market trading prior to an IPO in the Norwegian market is rarely observed. There are some companies that are traded “off the counter” through the broker desk in Norwegian investment banks. However, the volumes traded are normally limited, which means that it rarely represents an exit opportunity.

When a Norwegian company is offering equity securities, several legal provisions may come into play. The relevant laws and regulations include, but are not limited to, the following.

• The Norwegian Private Limited Liability Companies Act– This act governs, inter alia, the issuance of new shares and shareholders’ preferential rights. The shareholders’ agreement supplements the rules of the Norwegian Private Limited Liability Companies Act.
• The Norwegian Securities Trading Act and the EU Prospectus Regulation– These may come into play in large equity offerings. However, it is very rare that an equity offering in an early stage or growth company is structured in a way that would trigger the obligation to publish a prospectus. There is, for instance, an exemption from the obligation to publish a prospectus if the offer is made to fewer than 150 persons, and this will normally be the case.

A foreign investor that invests in a Norwegian company may be subject to an FDI filing obligation in accordance with the Norwegian Act on National Security (the “Security Act”). The application of the rules on ownership control, contained in Chapter 10 of the Security Act, presupposes that the undertaking has been brought within the scope of the Security Act by way of an administrative decision pursuant to Section 1-3.

A list of the companies subject to the Security Act has not been published and will not likely become available to the public for national security reasons.

When a company has been brought within the scope of application of the Security Act, the acquirer of a “qualified ownership interest” in that company must notify the acquisition to the relevant authority. As of now, a “qualified ownership interest” entails obtaining:

• one third of the company’s stock capital, interests or votes;
• a right to become the owner of one third of the stock capital or interests; or
• significant influence over the company by other means.

Legislative changes in what is defined as “qualified ownership interest” have been adopted but not yet entered into force (expected during 2024). These amendments entail lowering the threshold for triggering events (ie, definition of “qualified ownership interest”) with recurring filing obligations at several levels for the acquisition of direct or indirect holdings of 10%, or an increase to 20%, ⅓, 50%, ⅔ or 90% of the share capital, participating interests or votes in the company.

If the authorities conclude that the acquisition may cause a not insignificant risk for national security interests, the authorities may block the transaction or, if the acquisition is already closed, order the acquisition to be reversed.

Outside the scope of application of Chapter 10, Section 2-5 of the Security Act contains a general intervention clause that empowers the authorities to intervene against any planned or ongoing activities (including transactions) that may cause a “not insignificant risk” to national security. The government has once used this provision to block a transaction where the target was not brought within the scope of the Security Act.