Markets
Iceland: convertible pricing on an EEA, not an EU, rulebook
Iceland permits the instrument in principle and settles almost nothing about it in practice. As an EEA state it applies the company-law floor in Directive (EU) 2017/1132: no issue below nominal value, pre-emption on convertible bonds, a five-year authorisation limit. The operative text is the Icelandic Act on Public Limited Companies No 2/1995, which we could not read, so this page states no Icelandic article number.
Key takeaways
- The floor that does apply. Article 47 of Directive (EU) 2017/1132 forbids issuing a share below nominal value. It is the one pricing constraint here we can state with confidence.
- One vote covers the whole convertible. Article 72(6) applies pre-emption to the issue of securities convertible into shares, but expressly not to their conversion.
- EEA is not EU, and the prospectus threshold shows it. The 30% follow-on exemption came from Regulation (EU) 2024/2809 from 4 December 2024. As at August 2026 the EFTA Secretariat records it as under scrutiny, so do not carry 30% across.
- One regulator, and one dormant capital-flow rule. Fjármálaeftirlitið merged into the Central Bank of Iceland under Act No 92/2019. The special reserve requirement on foreign currency inflows has stood at zero since March 2019, but was not repealed.
What this page does not say, and why
Every other page in this directory names the statute and the article that decides the question. This one names the statute and stops. The governing text is the Act on Public Limited Companies No 2/1995, which applies to an Icelandic hlutafélag (hf.), the form every Nasdaq Iceland issuer takes; above it sit the Nasdaq Iceland Rules for Issuers of Financial Instruments. Neither was available to us, so no Icelandic article number, majority threshold, authorised-capital ceiling or pricing rule appears below. A half-remembered article number is worse than an absent one, because it reads as researched.
The EEA floor, and what it settles on its own
Iceland is a party to the EEA Agreement, which is why the Second Company Law Directive regime, recast as Directive (EU) 2017/1132, reaches Reykjavik at all. It is a floor, not an answer: Icelandic law is free to be stricter.
| Rule | Position in an EU member state | What an Icelandic issuer can rely on |
|---|---|---|
| Below-par issue prohibited (Article 47) | In force | Applies as a floor; Icelandic wording not read |
| Pre-emption on a cash increase (Article 72) | In force | Applies as a floor; Icelandic majority not read |
| Pre-emption not applied on conversion (Article 72(6)) | In force | Applies as a floor; one vote covers the instrument |
| Authorised capital, five years, renewable (Article 68) | In force | Applies as a floor; Icelandic ceiling not read |
| Prospectus exemption, conversion shares, 30% of the class | Applies from 4 December 2024 | Do not assume; recorded as under scrutiny |
| Framework position only. Act No 2/1995 and the Nasdaq Iceland Rules for Issuers govern above it. | ||
Where EEA and EU come apart
EU law does not become EEA law when it is published, but when the EEA Joint Committee incorporates it into the EEA Agreement and the EFTA states take it into national law. That can lag by years.
The live example is the follow-on prospectus exemption. In an EU member state, admitting shares that result from the conversion of other securities is exempt from a prospectus where they represent less than 30% of the class already admitted over 12 months, raised from 20% by Regulation (EU) 2024/2809 from 4 December 2024. That figure appears on the Poland, Italy, Spain, Portugal and Greece pages because those are EU states, and is deliberately absent here. Work from the threshold in force in Iceland. The same caution applies to Norway.
No precedent to price against
Nasdaq Iceland, the exchange Icelanders call Kauphöllin, runs a Main Market of fewer than thirty companies alongside a small First North segment. No Icelandic issuer was found that has done a convertible with a market-referenced conversion price, or run a committed equity facility. In a market that size an issuer here negotiates a first, not a fifteenth: no filed terms to price against, and no exchange practice on admitting conversion shares in tranches. For the same question where there is a record, see convertible notes for listed issuers and equity facilities.
This verdict is provisional, and it is not a finding about Icelandic law. The constrained tier here records an unread statute, not an identified Icelandic rule: every constraint named on this page is an EU-level floor that applies equally to markets this directory tiers permissive. Read it as unscreened rather than as restricted.
General information, not legal advice. This page states no provision of Icelandic law, because Act No 2/1995 could not be read. The European instruments described are a floor only. Take advice from qualified Icelandic counsel, and confirm the prospectus and capital-flow positions at signing.
The capital-flow question, and why it is a condition rather than a bar
Iceland is the only market in this part of the directory whose recent history includes comprehensive capital controls. They were imposed in 2008 and largely lifted in March 2017. A separate instrument, the special reserve requirement on new foreign currency inflows introduced in 2016, has had its ratio set at zero since March 2019, but the rules were not repealed, and a ratio at zero is a policy setting rather than an abolition. For an outside subscriber that bears on getting proceeds out, not on issuing shares. Iceland also maintains sector limits on foreign ownership, which we did not verify.
What would change the answer for Iceland
Three things, in order. Reading Act No 2/1995: its pre-emption provision, its authorised-capital ceiling and clock, and whether it says anything about how an issue price may be determined. Confirming which prospectus threshold is in force here. And one Icelandic precedent to price against. Until then a Reykjavik board should treat this as an unmapped route rather than a closed one, and an investor should price the absence of precedent. Issuers with a US register should read Rule 144 and restricted securities separately. Tell us where the stock trades.
Primary sources
- Directive (EU) 2017/1132, Articles 47, 68 and 72
- Prospectus Regulation, consolidated to 4 December 2024
- EFTA Secretariat, EEA-Lex, Regulation (EU) 2024/2809
- Government of Iceland, Act No 2/1995 on Public Limited Companies
- Central Bank of Iceland, financial supervision
Financing Icelandic listed issuers: frequently asked questions
Can a company listed on Nasdaq Iceland issue a convertible with a market-referenced conversion price?
Nothing in the EEA company-law framework prohibits it, and as an EEA state Iceland applies that framework. What we cannot tell you is what the Act on Public Limited Companies No 2/1995 adds on top, because we could not read it. The structure is unmapped in Iceland rather than closed, and the first step is Icelandic counsel on the Act.
Why does this page not cite any Icelandic article number?
Because we could not open the statute. The Government of Iceland's English translation of Act No 2/1995 returned a payment error and the Althingi's consolidated Icelandic text returned a forbidden error. Publishing an article number we had not read would make the page look researched while being unverifiable, which on a securities-law page is worse.
Does the European 30 per cent follow-on prospectus exemption apply in Iceland?
Do not assume it does. That figure comes from Regulation (EU) 2024/2809, which applies in EU member states from 4 December 2024. Iceland is in the EEA and not the EU, so an EU regulation reaches it only once the EEA Joint Committee incorporates it and it is taken into Icelandic law. As at August 2026 the EFTA Secretariat records it as under scrutiny.
Are Iceland's capital controls still in force?
The comprehensive controls imposed in 2008 were largely lifted in March 2017. The special reserve requirement on new foreign currency inflows, introduced in 2016, has had its ratio set at zero since March 2019, but the rules themselves remain in place. For an outside investor that is a question about repatriating proceeds rather than about issuing shares.
If this is about a live situation
Iceland is constrained by what is unproven rather than by a rule anyone can name, so an issuer listed in Reykjavik starts with Icelandic counsel, not a term sheet. The eligibility page sets out what gets looked at first.