SWEDEN Law and Practice Contributed by: Niklas Sinander, Elin Carlsson, Axel Schelén and Björn Wendleby, Harvest Advokatbyrå
7.4 Rescue or Reorganisation Procedures Other Than Insolvency Reorganisation of Companies Companies with temporary financial problems may apply for a company reorganisation ( företagsrekon- struktion ) in order to achieve a more viable financial situation by way of not allowing enforcement actions taken by creditors during the reorganisation period. A reorganisation will also generally involve the creditors, whereby the company’s debts are reduced to a certain extent by agreement. On 1 August 2022, the new Swedish Reorganisation Act (SFS 2022:964) entered into force, implement- ing the EU Directive on restructuring and insolvency (Directive (EU) 2019/1023). This has resulted in sub- stantial changes to the measures available in corpo- rate reorganisations. Courts should now generally apply a stricter approach when assessing whether a reorganisation is appropriate for the relevant com- pany – this is referred to as the so-called viability test. A legally binding reorganisation plan may be estab- lished, which should (among other things) set out the parties involved, actions to be taken during the reor- ganisation, and the timing aspects thereof. Further, conversion of debt to equity (by way of debt-to-equity swaps) can be made part of the binding reorganisa- tion plan. In addition, cross-group cram-downs may include not only unsecured creditors (as was the case previously) but also secured creditors. Informal processes outside court-supervised restruc- turing are also common and may include tailored solutions that take into account the specific circum- stances of the case. 7.5 Risk Areas for Lenders If the borrower, security provider or guarantor were to become insolvent, the lenders would face the risk of not receiving part of or the entire loan amount (includ- ing interest, both accrued and future). Lenders may also need to take into account claw-back periods of granted security and ensure that any security granted to the lender is duly perfected.
• general priority right – eg, costs that are connected with initiating the insolvency proceeding; • unprioritised claims – ie, everything else (any assets remaining after creditors under the two points above have been paid should be divided between the creditors in this category); and • subordinated claims. The priority order of special priority rights is listed in Sections 3a to 7 of the Swedish Priority Rights Act (SFS 1970:979). Before any creditors are paid in the above priority order, certain costs related to the administration of the bankruptcy estate, as well as fees to the bankruptcy receiver, should generally be paid. Any remaining amount after repayment of debt has been made in full should be distributed among the shareholders. The concept of a secondary pledge is recognised under Swedish law, whereby two creditors may agree that a secondary pledge be made over an asset, giv- ing the secondary pledgee a subordinated right to the pledge. Parties involved in a Swedish loan financing generally address competing security interests by way of enter- ing into a subordination agreement or an intercreditor agreement, in which a contractual priority between different lenders or groups of lenders may be created. Such agreements are generally based on LMA stand- ards. 7.3 Length of Insolvency Process and Recoveries If a company itself submits a bankruptcy filing to the relevant court, the court usually issues its decision on the very same day. If a creditor files for bankruptcy, the court will generally take up to two weeks or more due to negotiations between the parties involved. The insolvency process itself can vary in length, from a few weeks to many years. The bankruptcy receivers are obliged by law to ensure that all assets are man- aged in the best way possible and that the priority order between different creditors is followed.
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