SWEDEN Law and Practice Contributed by: Johannes Wårdman and Erik Frykenholt, CMS Wistrand
5.4 Legal Formation and Capital Requirements
6.2 Governance and Decision-Making The decision-making process in the JV entity would depend on the chosen structure of the JV. For purely contractual partnerships, the parties are able to freely tailor the partnership agreement to their needs. For example, if one partner wishes to have more influence due to a higher financial, or other, contribution to the JV, this can be agreed upon between the partners. For entity-based JVs, the decision-making body is the general meeting. It is possible for the partners to alter the decision-making process through the issu - ing of shares with differing voting rights, alterations in the articles of association or through individual shareholder agreements. The board of directors acts as the executive body, responsible for carrying out the decisions made by the general meeting as well as the day-to-day operations of the company, the latter of which is often delegated to a managing director appointed by the board. 6.3 Funding The typical way of funding a JV is mainly dependent on its size and capital need. Smaller JVs are usually funded directly with equity by the JV partners through shareholders’ contributions or through issuances of shares in the JV. If the size and capital need of the JV is more substan - tial, we usually see a mix of debt and equity. The credi - tors may be external or the funding may be provided by shareholder loans or conditional shareholders’ contributions. When established parties co-operate through a JV vehicle, there is usually a pre-agreed pol - icy for securing future financing. In general, once the venture is operational, the partners are not obliged to provide additional funding. Instead, they may accept dilution of their ownership or a reduction in influence if they choose not to contribute further. Subsequent financing is often obtained externally through debt arrangements with creditors or by issuing shares or other instruments to investors. The shareholders’ agreement governing the owner - ship of the JV usually includes a funding mechanism, such as preferential subscription rights, to incentivise funding. However, it also usually includes anti-dilution
Setting up a limited liability company under Swedish law is fairly uncomplicated. The partners to the JV will need to pay a sum of SEK25,000 in share capital and register the company with the SCRO and the Swedish Tax Agency. The most common and efficient way of setting up the JV company is by purchasing a dor - mant shelf company and allocating the shares in said company to the partners pro rata to their financial, or other, contribution. Contractual partnerships can be structured purely through a partnership agreement and require no capi - tal contribution. Regarding participation of foreign entities in the JV company, see 3.3 Sanctions, National Security and Foreign Investment Controls . 6. Core Terms of a JV Agreement 6.1 Drafting and Structure of the Agreement The main legal document for a purely contractual part - nership is the JV agreement. However, depending on the purpose and nature of the JV, this agreement can take many different forms. In its simplest form, it can be a manufacturing, research and development or construction agreement, etc. The main agreement is often supplemented by several supplemental agree - ments that further regulate the terms and conditions between the parties. There are no requirements as to the form of an agreement governing a partnership based on a contract; the principle of freedom of con - tract applies. For an entity-based partnership established through a limited liability company, the founders will need to file an instrument of incorporation and articles of associa - tion with the SCRO. Once the company is registered, the partners usually set out their obligations towards each other in a shareholders’ agreement. The share - holders’ agreement governs the ownership of shares and the partners’ rights and obligations. Typically, the shareholders’ agreement contains provisions relating to financing, corporate governance, protection against dilution, transfer restrictions, exit provisions, etc.
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