SWEDEN Law and Practice Contributed by: Johannes Wårdman and Erik Frykenholt, CMS Wistrand
6.7 Minority Protection and Control Rights In general, most resolutions subject to voting dur - ing a general meeting require a simple majority to be passed. However, for certain resolutions, the Compa - nies Act allows for several general and more specific mandatory minority protection provisions, mostly in the form of a requirement of a larger majority. As a point of departure, the Companies Act stipu - lates that all shares within the same class shall have equal rights. Hence, the general meeting is prohibited from passing a resolution that unduly disadvantages one shareholder to the benefit of another shareholder within the same class of shares. More specific mandatory minority protection pro - visions in the Companies Act become available depending on the ownership percentage of the minor - ity shareholder. A minority shareholder holding at least one-third of all available shares has a veto right against certain decisions and may stop resolutions pertaining to, inter alia, a change to the articles of association, issuance of instruments and rights, a decrease of the share capital or engaging in a merger or demerger of the company. Furthermore, a minority shareholder holding at least 10% of all outstanding shares has the right to, inter alia, convene an extraordinary general meeting, delay certain resolutions, invoke a distribu - tion of dividends (subject to certain preconditions and limitations), and refuse the discharge of liability for the board of directors. By contrast, a minority shareholder holding less than 10% of all outstanding shares has limited influence over the company. Furthermore, a majority shareholder holding at least 90% of all out - standing shares may initiate a compulsory buyout of the minority, while the minority shareholder may, con - versely, require the majority shareholder to purchase its shares. It is common for JV partners to seek to implement more enhanced governance provisions in relation to the partnership dynamics and the purpose of the JV. This will be regulated in a shareholders’ agreement between the parties and often includes super-majority provisions or veto rights for certain resolutions, rights to nominate a certain number of directors to the board and occasionally restrictions on mandatory minority protections. It should be noted, however, that the
enforceability of restrictions on mandatory minority protections is doubtful and may give rise to disputes. 6.8 Applicable Law and Dispute Resolution in International JVs The most prevalent mechanism for dispute resolution is arbitration. This is particularly the case when the joint venture is governed or established in accordance with Swedish law. Arbitration is commonly adminis - tered by the SCC (Stockholm Chamber of Commerce) Arbitration Institute. Nevertheless, there are no explicit limitations on the parties’ selection of dispute resolu - tion mechanism or the applicable governing law. In the event that the joint venture is conducted through a Swedish corporate vehicle, such as a Swedish limited liability company or a general or limited partnership, Swedish law will apply with regard to the corporate vehicle. In such a case, the most appropriate choice of law for a JV agreement or a shareholders’ agreement would be Swedish law. If the JV partners to a Swedish JV fail to agree on the applicable law in the JV agreement, the applicable law shall be determined in accordance with the conflict of laws provisions in the Rome I Regulation. Subject to the circumstances in the individual case, the appli - cable law will likely be determined by the place of incorporation of the JV vehicle. Swedish limited liability companies follow a one-tier management system provided by the Swedish Com - panies Act. The overall management of the company lies with the board of directors, which acts as the executive body and exercises broad powers, while the general meeting is the decision-making body of the company. The general meeting is competent to decide on all matters that do not explicitly fall within the exclusive competence of another corporate body. Swedish law requires private limited liability compa - nies to appoint at least one director to the board. Nor - mally, directors are appointed by shareholder voting during the general meeting, but Swedish law allows for alternative methods of appointment if explicitly 7. The JV Board 7.1 Board Structure
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