SWEDEN Law and Practice Contributed by: Louise Rodebjer, Ólafur Steindórsson, Per Dalemo and Johannes Wårdman, CMS Wistrand
evant employment contracts automatically pass to the acquirer, and the transfer itself cannot constitute grounds for dismissal. If the transferor was bound by a collective bargaining agreement, the acquirer is gener - ally required to adhere to it. These rules primarily apply to asset transfers, as employees change employer, whereas in share transfers the employer remains the same. However, certain obligations, such as trade union notification requirements, may also arise in share transfers. Swedish labour legislation contains provisions on negotiations between employers or employers’ organ - isations on the one hand and employees’ organisa - tions on the other before (for example) the employer takes a decision on a major change in its activities. An employer’s obligation to negotiate before a decision on a major change in its activities is not directed at individual employees, but is directed at trade unions that shall safeguard the employees’ rights and inter - ests. The obligation to negotiate must be fulfilled on the employer’s own initiative with the trade union to which it is bound by a collective agreement. Restrictive covenants, including non-compete and non-solicitation clauses, are common in senior man - agement contracts, but are subject to statutory limits of reasonableness. Where such clauses are deemed excessively restrictive, courts may declare them whol - ly invalid, notwithstanding the fundamental principle that contracts are to be enforced as agreed. The case law of the Swedish Labour Court demonstrates that the court takes a restrictive approach to non-compe - tition clauses in employment contracts. When assess - ing the reasonableness of such a clause, the Labour Court conducts a comprehensive assessment. This assessment takes into account: • the extent to which the employer has a legitimate interest in imposing the restriction; • the extent to which the non-competition clause restricts the employee’s ability to engage in pro - fessional activities either as an employee or as a self-employed individual; and • whether the employee receives compensation dur - ing the period of restriction or whether the employ - ee’s salary and terms of employment have been
determined in light of the restrictions imposed by the clause. Other factors may also be considered, such as the employee’s position and length of employment, and whether the clause was the subject of genuine nego - tiations between the parties. 2.6 National Security Review Under the Security Protection Act (2018:585), opera - tors engaged in activities of significance to Sweden’s national security, or subject to international security protection commitments, must conduct a security protection assessment and suitability review, and consult the supervisory authority prior to transferring security-sensitive operations. Security protection includes safeguarding such operations and classified information against espionage, sabotage, terrorism and related threats. The supervisory authority, ISP, may order compliance measures and prohibit a transfer deemed inappropri - ate from a security perspective. Any transfer carried out in violation of such a prohibition is invalid. As previously mentioned, ISP is also responsible for reviewing and deciding on foreign direct investments in protected activities (see 2.3 Restrictions on Foreign Investments ). During 2025, notifications increased by 57% compared to the preceding year, reaching 1,987 filings, of which only two resulted in prohibition deci - sions. The vast majority of notifications concerned the foreign direct investment regime rather than the Security Protection Act. 3. Recent Legal Developments 3.1 Significant Court Decisions or Legal Developments As most M&A disputes are subject to arbitration, and since decisions are generally kept confidential, there have not been many significant court decisions in the last three years relating to pure M&A matters. In 2025, the council confirmed that underwriting and guarantee undertakings in rights issues may trigger mandatory bid obligations. However, consistent with
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