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Insolvency procedures

What are the main insolvency procedures applicable to companies in your jurisdiction?

  • Bankruptcy (“konkurs”)
  • Public business reorganisation (“foretagsrekonstruktion”)
  • Private reorganisation
  • Liquidation

Bankruptcy – If a company is unable to pay its debts on a more than temporary basis it is considered insolvent and the company or a creditor can file for bankruptcy. If the company is declared bankrupt by the court a trustee in bankruptcy is appointed to realise the company’s assets and distribute the proceeds to its creditors.

Public business reorganisation – A company that is financially distressed can apply to the court for a business reorganisation. The court appoints an administrator. The directors and the administrator prepare a restructuring plan which can include rescheduling and waiver of debts. The plan can either be approved out of court unanimously by the company’s creditors. Alternatively it can be approved by the court and a majority in number and 75% majority by value of the creditors (if less than 50% of the company’s debts will be repaid under the plan). If more than 50% of the company’s debts will be repaid, only a 60% majority by value is required.

Private reorganisation – An informal reorganisation out of court can be used to compromise a company’s debts. The reorganisation only binds those creditors who are parties to it.

Liquidation – A solvent liquidation can be commenced by a resolution of the company’s shareholders. A liquidator is appointed to realise the assets of the company, pay its creditors in full and distribute the surplus distributed to its shareholders. A company can also be put into liquidation by the Swedish Companies Registration Office (“Bolagsverket”) or by an order of the court if the company has not complied with its reporting obligations or its remaining equity is less than half of its share capital.

Can a company obtain a moratorium whilst it prepares a restructuring plan?

Yes, on commencement of a public business reorganisation. Execution and collection of debts cease and the company cannot be declared bankrupt.

To what extent do the directors of the company remain in control of its affairs during any of the above procedures?

Bankruptcy – the directors’ powers cease and the trustee in bankruptcy assumes control of the company.

Public business reorganisation – the directors remain in day to day control subject to the supervision of the administrator. The directors require the approval of the administrator to:

  • repay or grant security in respect of debts that predate the reorganisation
  • enter into new commitments
  • transfer, pledge or grant any rights in respect of property of material significance to the company’s business

Private business reorganisation – the directors remain in full control of the company’s affairs.

Liquidation – the directors’ powers cease and the liquidator assumes control of the company.

Timeline to commence liquidation
How quickly can a creditor generally commence the liquidation of an insolvent company, assuming an undisputed claim and no opposition from the company?

Two to six months.

Overseas proceedings
Do your courts recognise insolvency proceedings commenced in the courts of another jurisdiction?

Yes - insolvency proceedings commenced in the courts of other EU members states will be automatically recognised under the EC insolvency regulation.

Under the Nordic bankruptcy convention insolvency proceedings commenced in Denmark, Finland, Iceland and Norway are also automatically recognised in Sweden.

Sweden does not recognise foreign insolvencies commenced before the courts of countries not members of the EU or the Nordic bankruptcy convention.

Position of creditors

Forms of security
What are the main forms of security over movable and immovable property?

Security is taken over:

  • real estate by mortgage
  • tangible property and the assets of a trading company by pledge or floating charge
  • most intangible property (bank accounts, shares, bonds, patents, trademarks and receivable) by pledge
  • contractual rights by security assignment

Preferential status
Which classes of creditor are given preferential status? Are any classes subordinated?

Secured debts have specific preferential status and are paid in priority to all other debts.

The following classes of debt have general preferential status and rank ahead of ordinary unsecured debts in the following order:

  • the costs of petitioning for the insolvency proceeding
  • the fees and expenses of the insolvency proceeding
  • debts incurred under contracts entered into during the insolvency proceeding
  • costs of statutory audit and book keeping during the six months prior to the commencement of insolvency proceedings
  • wages and pensions

Treatment of foreign creditors
Are foreign creditors treated equally to domestic creditors?


Termination of contract by reason of insolvency
Are contract terms permitting termination of the contract by reason of insolvency valid?

Yes, however, depending on the circumstances the insolvent estate can request to enter into the contract instead of the company and continue to fulfil the company’s obligations, as long as it provides adequate security for its performance.

Retention of title
Are retention of title clauses effective?

Yes, providing:

  • the clause is in writing
  • the clause was entered into on or before purchase/acquisition of the goods
  • the goods can be identified

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Setting aside transactions

Transaction avoidance provisions
What are the main transaction avoidance provisions, and who can challenge transactions?

The following transactions made prior to the commencement of an insolvency proceeding that result in an unfair advantage for one or more creditors can be challenged by the insolvent estate, the administrator of a public business reorganisation or a creditor:

  • unjustifiable transactions entered into in the five years prior to the commencement insolvency (ten years where the counterparty is connected to the company)
  • gifts made and excessive salary paid in the six months prior to the commencement of insolvency
  • in the three months prior to the commencement of insolvency (two years where the counterparty is connected to the company):
    • repayments of debt before the due date
    • repayments of debt other than in cash or cash equivalents
    • repayments of debts causing a significant deterioration in the company’s financial position
    • grants of security for pre-existing indebtedness
    • preferences arising through foreclosure

Position of directors

Risks for directors
What are the risks facing the directors of an insolvent company?

Directors can be held civilly liable for damages if they deliberately or negligently cause loss or damage to the company, its shareholders or creditors.

Company directors can become personally liable for the company’s debts if the equity falls below half of the company’s share capital and the directors fail to take certain required action. 

Directors can also become personally liable for outstanding taxes if the company’s failure to pay the taxes is a result of the directors’ gross negligence.

Directors can be held criminally liable for defrauding creditors and imprisoned for two to six years.