SWEDEN Law and Practice Contributed by: Niklas Sinander, Elin Carlsson, Axel Schelén and Björn Wendleby, Harvest Advokatbyrå
the pledgor being restricted from disposing of the funds in the bank account. 5.2 Floating Charges and/or Similar Security Interests General Security Concepts There is no general security interest recognised under Swedish law that covers all assets of the security grantor. However, security may be taken over busi- ness mortgages (floating charges), represented by business mortgage certificates and covering certain movable property (such as inventory, claims and simi- lar) of the security provider. A business mortgage does not include cash, proceeds in bank accounts, shares or other financial instruments. There is no restriction on including different types of assets over which security is created under one gener- al security agreement, but specific perfection require- ments for each type of asset should then be taken into account. However, in Swedish loan financings there will typically be different security agreements covering different types of assets subject to security. 5.3 Downstream, Upstream and Cross- Stream Guarantees Swedish limited liability companies ( aktiebolag ) may not grant monetary loans, security or a guarantee for monetary loans to shareholders, board members, managing directors, certain relatives and spouses/ co-habitants ( sambo ), or to any person who, alone or together with others, exercises a controlling influ- ence in the company or another company in the same group. A “group” means any other group of undertakings of a corresponding nature in which the parent company is: • a Swedish legal entity that is obliged to maintain accounts pursuant to the Swedish Accounting Act (SFS 1999:1078); • a corresponding foreign legal entity domiciled within the EEA; or • a municipality, county council or association of local authorities. However, there are exemptions in cases where the borrower is a municipality or similar, or where the loan
was borrowed by the Swedish National Debt Office pursuant to Chapter 5 of the Swedish Budget Act (SFS 2011:203). Further, there is an exemption where the borrower is a company within the same group as the lending company, or where the loan is intended exclusively for the borrower’s business operations and the company provides the loan for purely commercial reasons. There is also an exemption regarding loans and grant- ing of security to a shareholder or connected persons where the total shareholding in the company held by the borrower and connected persons does not amount to 1% of the share capital. Advances, loans or security may, however, never be provided where full coverage for the restricted share capital is thereafter not available. When calculating whether full coverage for the restricted share capital is available, advances and loans pursuant to the first foregoing paragraph shall be treated as receivables of no value and security pursuant to the first paragraph shall be treated as a liability of the company. Transactions in which a limited liability company pro- vides a loan or grants a security or guarantee may be limited or even void if the transaction reduces the limited liability company’s net worth, and if such transaction is not deemed to have corporate benefit for that limited liability company. These transactions are referred to as “value transfers” under Swedish law. As regards downstream guarantees, these are typically considered to have corporate benefit if the subsidiary is wholly owned by the parent company. In relation to upstream or cross-stream guarantees, the limited liability company guaranteeing obligations of another legal entity must carefully consider whether the transaction has sufficient corporate benefit, which in many cases may be that the subsidiary accesses more favourable financing terms and conditions on a group basis. 5.4 Restrictions on the Target A Swedish limited liability company is generally pro- hibited from granting an advance or providing loans or security for loans in order that the debtor or any natu- ral or legal person connected thereto (as referred to in Chapter 21, Section 1 of the Swedish Companies Act
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