The primary purpose of Spiro Medical AS was to further develop and commercialise a product designed for the diagnosis and treatment of various sleep disorders. In a private share capital increase conducted in 2014, several investors subscribed for shares in the company. However, the completion and commercial launch of Spiro’s product were delayed, and bankruptcy proceedings were opened in 2017.
The question before the Supreme Court was whether the company’s board members were liable in damages for losses that the investors claimed to have suffered as a result of incorrect or misleading information provided in connection with the share issue.
The Supreme Court found that the information provided by the board members regarding factual matters was, for the most part, accurate. However, the board had failed to ensure that the product underwent sufficient testing. This failure was attributable to an error of judgment. Nevertheless, the Court concluded that the board members could not be blamed to a sufficient degree to justify liability. The Court held that the investors themselves had to bear the risk that their expectations regarding the future development of the company were not realised. The investors were professional investors and were aware that the development of the product involved significant technical risks.
The Supreme Court emphasised that factual information included in the information provided to investors must be accurate. However, for board members to incur liability for inaccurate information, the matter in question must, when assessed in the context of all information provided, be of material significance to the evaluation of the company. The threshold for imposing liability based on statements or assumptions concerning future developments is high. Professional investors are expected to review and assess the information they receive, and the threshold for imposing liability is therefore higher than it would be where the investor is a consumer.
The judgment provides guidance on the legal standard governing directors’ liability in connection with share capital increases.
Source: Supreme Court
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Atle Melø
amelo@melo.no
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