Structures and applicable law

Types of transaction

How may publicly listed businesses combine?

This chapter focuses on Swedish companies whose shares are admitted to trading on a regulated market in Sweden. These companies may combine by way of a takeover bid (ie, a public offer from the offeror company to acquire, typically, all the shares of the target company from the target shareholders) or a statutory merger. In general, takeover bids occur more frequently than statutory mergers.

With respect to takeover bids, the consideration normally consists of cash or shares in the offeror company or a combination thereof. Takeover bids can be voluntary or mandatory. This chapter focuses on voluntary offers.

A statutory merger most often takes place between a transferee company and a transferor company (or several transferor companies) merging into one company, thus entailing that the shareholders of the transferor company become shareholders of the transferee company (absorption), although a merger could also be structured as two or more transferor companies forming a new transferee company. The Swedish Companies Act (the Companies Act) also sets out special rules regarding absorptions of wholly owned subsidiaries and cross-border mergers. This chapter focuses on absorptions between two Swedish limited liability companies (that are not part of the same group of companies) whose shares are admitted to trading on a regulated market in Sweden. In a statutory merger, the receiving entity gives own shares and sometimes cash as a merger consideration, in which case more than 50 per cent of the value of the consideration must consist of shares.

Statutes and regulations

What are the main laws and regulations governing business combinations and acquisitions of publicly listed companies?

The main laws governing takeover bids and statutory mergers are the Companies Act and the Swedish Stock Market (Takeover Bids) Act (the Takeovers Act). In addition, the Swedish Takeover rules for Nasdaq Stockholm and Nordic Growth Market NGM (the Takeover Rules) set forth rules that must be complied with in the event of a takeover bid or a merger (or merger-like process). Moreover, the Swedish Financial Instruments Trading Act, the EU Prospectus Regulation and the Swedish EU Prospectus Regulation (Supplemental Provisions) Act, as well as the Swedish Market Abuse Penalties Act, the EU Market Abuse Regulation and the Swedish EU Market Abuse Regulation (Supplemental Provisions) Act, are also applicable (in relevant parts) in a takeover bid or a statutory merger.

The Swedish Securities Council (the Council) is one of the key regulatory authorities with regard to public deals. The Council is a private body made up of representatives of various organisations with the main purpose of ensuring compliance with good practice on the Swedish securities market. Under the Takeover Rules, the Council has been given the power to issue statements and rulings on points of interpretation and grant dispensation from compliance with the rules and, further, it is authorised to issue statements and rulings on matters arising under the Takeovers Act. In addition to the Council, key regulatory authorities include the Swedish Financial Supervisory Authority (SFSA) and the Swedish Corporate Governance Board.

Cross-border transactions

How are cross-border transactions structured? Do specific laws and regulations apply to cross-border transactions?

A takeover bid from a non-Swedish entity regarding a target company whose shares are admitted to trading on a regulated market in Sweden is often submitted through a newly formed Swedish limited liability company. There are, in general, no specific laws and regulations that apply to cross-border takeovers, although, depending on the industry, certain limitations as to ownership (and management) may apply (eg, in relation to certain military equipment manufacturers). In this regard, Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the Union will apply from October 2020 and there is an ongoing government inquiry regarding how a Swedish system for the screening may be designed.

It is possible under Swedish law for a Swedish limited liability company to participate in a merger with a comparable legal entity domiciled in another European Economic Area state. There are specific rules that apply to this type of cross-border merger.  

Sector-specific rules

Are companies in specific industries subject to additional regulations and statutes?

Yes. For example, entities such as banks, securities companies and insurance companies that are under supervision by the SFSA are subject to rules regarding ownership and management assessment. Certain limitations as to ownership and management may also apply to companies in other sectors. With respect to statutory mergers, certain sector-specific rules do apply – for example, authorisation by the SFSA to implement a merger plan is needed in connection with a merger involving a bank or an insurance company.

Transaction agreements

Are transaction agreements typically concluded when publicly listed companies are acquired? What law typically governs the agreements?

A takeover bid is directed towards the shareholders of the target company. To increase the chances of a successful takeover, the offeror will often seek irrevocable undertakings from key shareholders of the target company before making an offer. These irrevocable undertakings are usually discharged if there is a higher competing offer (the percentage increase may be specified), although they may also include a matching right for the offeror. The announcement of the offer and the offer document must contain information about the extent to which the offeror has received irrevocable undertakings from target shareholders.

A target company may normally not commit itself to any offer-related arrangements in relation to the offeror, with the exception of confidentiality commitments and undertakings not to solicit the offeror’s employees, customers and suppliers. Confidentiality agreements are ordinarily entered into between the offeror and the target company.

Any transaction agreements entered into are normally governed by Swedish law.

Filings and disclosure

Filings and fees

Which government or stock exchange filings are necessary in connection with a business combination or acquisition of a public company? Are there stamp taxes or other government fees in connection with completing these transactions?

With respect to takeover bids and statutory mergers, the offeror or transferee company must provide an undertaking to the exchange to comply with the Swedish Takeover rules for Nasdaq Stockholm and Nordic Growth Market NGM (the Takeover Rules) (as applicable) and to submit to the sanctions that may be imposed by the exchange for breaching these rules.

Further, an offeror must prepare an offer document and apply to the Swedish Financial Supervisory Authority (SFSA) for approval of the document. Similarly, in a statutory merger, the transferee company shall normally prepare a merger document/prospectus that, depending on the circumstances, will be scrutinised by the SFSA.

The Swedish Companies Act provides for a relatively detailed process regarding statutory mergers. A merger plan is to be prepared and submitted to the Swedish Companies Registration Office (SCRO) for registration. Upon submission of the merger plan (including appendices) to the SCRO, the SCRO will register the merger plan and, within two business days thereafter, issue a public notice of the registration in the Official Swedish Gazette. The general meetings at which the merger plan is to be approved may not be held earlier than one month following the public notice. Further, subsequent to the necessary general meeting approval of the merger plan, as a main rule, each company participating in the merger shall give written notice of the decision to its known creditors containing information regarding, inter alia, the creditors’ right to oppose implementation of the merger plan. The receiving entity shall then apply to the SCRO for authorisation to implement the merger plan. Although uncommon in practice, during the period that the SCRO is processing the application, the Swedish Tax Agency may in certain situations decide that an obstacle exists preventing the implementation of the merger plan, normally for a maximum period of 12 months. If the SCRO determines that no obstacle to the application for authorisation to implement the merger plan exists, it will convene a meeting of certain creditors of the companies and, inter alia, publish the notice to attend in the Official Swedish Gazette. The notice period in this regard is typically two months. If no creditor that has been summoned opposes within the prescribed time, the SCRO will grant the companies authorisation to implement the merger plan. If a creditor does oppose, the SCRO will instead refer the matter to the relevant district court. In this case, authorisation will be granted provided it is demonstrated that the opposing creditors have received payment in full or satisfactory security for their claims. The district court will reject the application if that is not the case. Upon authorisation, the board of directors of the receiving entity needs to, inter alia, notify the merger for registration. Upon registration, the legal consequences of the merger enter into force.

Depending on the nature of the transaction, other filings may also need to be made, such as filings relating to competition clearance, ownership and management assessment and authorisation from the SFSA to implement the merger plan.

There is no Swedish stamp duty or similar transfer tax levied in connection with a takeover or a statutory merger. However, certain government fees must be paid in connection with these transactions, for example relating to the SFSA’s scrutiny and approval of the offer document/merger document/prospectus and the different steps to be taken in relation to the SCRO in a merger.  

Information to be disclosed

What information needs to be made public in a business combination or an acquisition of a public company? Does this depend on what type of structure is used?

A takeover bid or statutory merger must be announced through a press release containing detailed information on the transaction, as set out in the Takeover Rules.

Further, within four weeks of making the offer public through a press release (although in some cases, the Swedish Securities Council may grant an exemption from the four-week deadline if the offeror requests it), and before the commencement of the acceptance period, an offeror must prepare an offer document and apply to the SFSA for approval of the document. Following approval, the offeror must publish the offer document immediately in accordance with relevant parts of the EU Prospectus Regulation. The Swedish Financial Instruments Trading Act and the Takeover Rules include detailed requirements on the contents of the offer document. Additionally, if the offer consideration consists of equity securities issued or held by the offeror, the EU Prospectus Regulation will normally also need to be adhered to, pursuant to which, in connection with a takeover offer where the consideration consists of equity securities that are fungible with existing securities already admitted to trading on a regulated market, it will usually be sufficient to prepare a document containing information describing the transaction and its impact on the issuer instead of a prospectus. In practice, this information is normally included in the offer document and the document is often similar to a prospectus. Typically, the offeror may in such case, concurrent with the application for approval of the offer document, on a voluntary basis, request that the SFSA scrutinise whether the offer document contains the information required under the EU Prospectus Regulation. If that is not the case, the SFSA shall decide that a prospectus should be prepared.

Similarly, in a statutory merger, the transferee company must normally prepare and make available to the public a merger document/prospectus in accordance with the EU Prospectus Regulation and in line with guidance regarding the contents of the document in the Takeover Rules. If the equity securities of the acquiring entity have already been admitted to trading on a regulated market prior to the transaction, instead of a prospectus, a document containing information describing the transaction and its impact on the issuer may normally be prepared and made public. The companies involved in the merger may, in such case, on a voluntary basis, request that the SFSA scrutinise whether a certain document contains the information required under the EU Prospectus Regulation. If that is not the case, the SFSA shall decide that a prospectus should be prepared.   

Under certain circumstances, a supplement to the offer document/merger document/prospectus must be prepared and submitted to the SFSA for approval, and subsequently published.

Moreover, the offeror or transferee company may prepare an information brochure to supplement the relevant offer document/merger document/prospectus. The Takeover Rules include provisions concerning the contents of the information brochure.

The board of the target or transferor company shall announce its opinion regarding the offer or merger and the reasons for this opinion no later than two weeks prior to the expiry of the acceptance period or prior to the relevant general meeting in the case of a merger. Information to be included in this announcement can be found in the Takeover Rules. In certain situations, a valuation or fairness opinion shall be obtained and published.

With respect to takeover bids, as soon as possible after the expiry of the acceptance period, the offeror must issue an announcement regarding the outcome of the offer (guidance on the contents of the announcement can be found in the Takeover Rules).

With respect to mergers, a merger plan must be prepared and adopted by the general meeting of the transferor company, and typically also by the general meeting of the transferee company. Consequently, the merger plan (including appendices), notices to general meetings and other documentation pertaining thereto (eg, general meeting minutes) will be made public.

Depending on the specific transaction, certain other press releases will be issued – for example, if an offer is extended or upon authorisation to implement a merger plan.

Disclosure of substantial shareholdings

What are the disclosure requirements for owners of large shareholdings in a public company? Are the requirements affected if the company is a party to a business combination?

With respect to companies listed on a regulated market, there is a requirement to notify the SFSA and the issuer as soon as possible, but at the latest normally three trading days following the day on which the party with a duty to notify entered into an agreement regarding the acquisition or transfer of shares or any other change to the shareholding occurred, when the change in shareholding entails that the party’s holding (including, for example, shares held in treasury and shares held by subsidiaries) reaches or exceeds, or falls below, any of the following percentages of the issuer’s total shares or voting rights:

  • 5 per cent and every subsequent 5 per cent, up to and including 30 per cent;
  • 50 per cent;
  • 66 2/3 per cent; and
  • 90 per cent.

 

The disclosure requirement applies not only to shares, but also to depositary receipts entailing a right to vote for the shares that the depositary receipts relate to, financial instruments that entitle the holder to purchase already issued shares and financial instruments that have an economic effect similar to that of financial instruments that entitle the holder to purchase already issued shares. 

The SFSA will make the relevant information public.

Accordingly, in connection with a takeover or merger, major shareholding notifications must be made by different parties and in relation to different issuers depending on the transaction structure.

The notification requirements are not affected by a transaction but will apply as long as the relevant company is listed on a regulated market.

Law stated date

Correct on

Give the date on which the above content is accurate.

1 May 2020.