Act on the Incorporation of MCI as a Limited Liability Company

Act no. 150/2006

Article 1

Municipality Credit Iceland ohf. is a statutory limited liability company owned by the municipalities in Iceland. The company operates pursuant to the Companies Act and as a credit undertaking pursuant to the Act on Financial Undertakings.

Article 2

Shares in Municipality Credit Iceland ohf. can only be owned by Icelandic municipalities and their wholly owned organisations and undertakings.

Article 3

The object of Municipality Credit Iceland ohf. is to secure for the municipalities and their undertakings and organisations loan capital on favourable terms; its lending is restricted to projects of general economic interest.

The object and tasks of the Company shall be further detailed in its articles of association.

Article 4

This Act shall enter into force immediately. Act No. 136/2004 on Municipality Credit Iceland shall be repealed when Municipality Credit Iceland ohf. commences operation pursuant to Transitional Provision I.

Article 5

On the entry into force of this Act, the following amendments to other acts will take effect:

  1. The words “Municipality Credit Iceland” in Article 2 of the Act on the Tax Liability of Credit Undertakings No. 65/1982, as amended, shall be followed by the abbreviation: ohf.
  2. The words “Municipality Credit Iceland”, where they occur in Paragraph 3 of Article 73 of the Local Government Act No. 45/1998, as amended, shall be followed by the abbreviation: ohf.
  3. The words “Municipality Credit Iceland” in Paragraph 3 of Article 2 of the Act on Withholding Tax on Capital Gains No. 94/1996, as amended, shall be followed by the abbreviation: ohf.
  4. The words “Municipality Credit Iceland” in Paragraph 5 of Article 71 of the Income Tax Act No. 90/2003, as amended, shall be followed by the abbreviation: ohf.
  5. The words “Municipality Credit Iceland” in Paragraph 2 of Article 3 of the Emergency Relief Fund Act No. 146/1995 shall be followed by the abbreviation: ohf.

Transitional Provisions


The limited liability Company Municipality Credit Iceland ohf. shall be established at an initial shareholders' meeting to be held no later than 31 March 2007. At the initial shareholders' meeting a draft memorandum of association, initial balance sheet and articles of association shall be submitted and a board of directors elected for the company. Municipality Credit Iceland ohf. shall, as of the issue of its operating licence, take over all the assets, rights, liabilities and obligations of Municipality Credit Iceland, and the initial balance sheet shall be based on 1 January 2007.

The Board of Directors of Municipality Credit Iceland shall undertake the preparations for the establishment of the limited liability company on behalf of its owners as well as the taking over of the operation of Municipality Credit Iceland. All the cost of the establishment of the limited liability company shall be paid by Municipality Credit Iceland.

The Annual General Meeting of Municipality Credit Iceland for 2006 may decide to write down the equity of MCI by up to ISK 3 billion, provided that MCI continues to comply with the conditions of statutory law regarding the equity ratio of financial undertakings, notwithstanding the write-down, and retains sufficient cash to meet its obligations.

Call notices to Municipality Credit Iceland's creditors shall not be issued. The place of payment of debt instruments in the possession of Municipality Credit Iceland will be Municipality Credit Iceland ohf. Municipality Credit Iceland shall publish two notices to this effect in the Official Gazette.


On the takeover by Municipality Credit Iceland ohf. of Municipality Credit Iceland, the shares in the Company shall be divided as follows:

[Name and proposed ownership of 79 Icelandic municipalities]

Shares in the Company issued in connection with its establishment shall be exempt from stamp duty.


No trading may be conducted in shares in the Company until 1 January 2009. However, municipalities are permitted to transfer their shares to an organisation or undertaking which is fully owned by the municipality.


In the event that a municipality is in default of payment on the correct due date of the principal and interest of loans taken from Municipality Credit Iceland prior to 1 January 2005, the Minister for Social Affairs may pay the amount in default out of the allocation due to the municipality in question from the Local Authorities' Equalisation Fund to the extent that the allocation will cover the payment. The same applies to any payments which Municipality Credit Iceland may have made in respect of guarantees undertaken by Municipality Credit Iceland pursuant to Article 10 of Act No. 35/1966 on the Local Authorities' Loan Fund in force at that time.

Approved by the Althing on 8 December 2006.