Standard of liability

General standard

What is the standard for determining whether a board member or executive may be held liable to shareholders in connection with an M&A transaction?

There are no specific standards in connection with M&A transactions. Since M&A transactions are business decisions, the normal standard applies. Thus, as a starting point, the claimant must show that a damage has occurred, that the director caused the damage in the performance of his or hers duties for the company and that the director has been negligent. It must also be shown that the director has breached the Swedish Companies Act, the annual accounts or the articles of association.

Type of transaction

Does the standard vary depending on the type of transaction at issue?

No, there are no specific standards.

Type of consideration

Does the standard vary depending on the type of consideration being paid to the seller’s shareholders?

No, there are no specific standards.

Potential conflicts of interest

Does the standard vary if one or more directors or officers have potential conflicts of interest in connection with an M&A transaction?

The standard does not vary. However, the wide margin of discretion to the management and board of directors to make business-related decisions on behalf of the company often depend on, inter alia, the fact that the manager’s decision is based exclusively on the interests of the company. Thus, it is more likely that the management or board of directors, or both, will be regarded as having acted negligently in connection with an M&A transaction if there is a conflict of interest.

Controlling shareholders

Does the standard vary if a controlling shareholder is a party to the transaction or is receiving consideration in connection with the transaction that is not shared rateably with all shareholders?

The standard does not vary. However, if a board member agrees on terms with the controlling shareholder that are not shared ratably with all shareholders, or if the board member grants benefits only to a controlling shareholder, the board member can usually be held liable. There might also be implications relating to tax (ie, hidden distribution of profits).