SWEDEN Law and Practice Contributed by: Niclas Rockborn, Pär Johansson, Daniel Sveen, Arijan Kan and Erik Schwartz, Gernandt & Danielsson Advokatbyrå
lish internal procedures to identify and exclude sanc - tioned exposures. Institutional investors often require evidence of such procedures and may request legal opinions on specific sanctions-related risks. Security-Sensitive Activities The Protective Security Act (Security Act) imposes obligations on entities that to any extent undertake certain security-sensitive activities (eg, operation of airports, information systems for electronic commu - nication and provision of payment services). From a private equity perspective, the key implica - tion is that the target entity must conduct a protective security assessment and a suitability assessment, and must consult with the relevant supervisory authority prior to any transaction, co-operation, or arrangement that may grant a third-party access to security-sensi - tive activities or information. Any transfer of shares pertaining to, in any part, secu - rity-sensitive activities that has not been approved by or not subjected to consultation with the supervi - sory authority may be declared legally invalid by the authority. Foreign Direct Investments Sweden has a foreign direct investment (FDI) regime applicable to Swedish undertakings engaged in vital societal functions or critical infrastructure. The scope of the regime is broad. Investors must notify the com - petent authority prior to completing an investment in such undertakings. Subject to limited exceptions, the target entity generally has a non-sanctionable obliga - tion to inform the investor that its activities are subject to notification. The notification threshold is triggered by direct or indirect acquisitions of voting rights reaching or exceeding 10%, 20%, 30%, 50%, 65%, or 90% in the relevant undertaking. Notification is also required where the investor otherwise acquires influence over the undertaking’s management – for example, through the right to appoint a board member. In addition, the supervisory authority has discretionary powers to review transactions that fall outside the mandatory notification thresholds.
The notification requirement applies to both Swed - ish and foreign investors and operates in parallel with the Security Act. However, only non-EU investors may be subject to conditions or prohibitions imposed by the supervisory authority. A breach of the regime may result in a penalty of up to SEK100 million and the invalidation of the transaction. The review process is divided into two phases: (i) an initial mandatory review spanning 25 business days (Phase I), and (ii) a more detailed review spanning up to three to six months (Phase II), initiated at the dis - cretion of the authority. While several Phase II reviews have resulted in the imposition of remedies, only one transaction has been prohibited to date. The vast majority of the notified transactions are approved in Phase I. From a private equity perspective, the FDI regime necessitates careful consideration during transaction planning, negotiation, and execution. This includes targeted due diligence to assess notification require - ments, as well as clear contractual allocation of responsibilities and risks related to regulatory approv - als and transaction timing. ESG and Sustainability The key ESG-related disclosure obligations stem from the following EU instruments. • SFDR – Regulation (EU) 2019/2088 on sustaina - bility-related disclosures in the financial services sector. • Taxonomy Regulation – Regulation (EU) 2020/852 on sustainable investments. • CSRD – Directive (EU) 2022/2464 on corporate sustainability reporting. In addition, the Corporate Sustainability Due Diligence Directive (CS3D) was recently adopted, introducing due diligence obligations regarding human rights and environmental impacts in supply chains. SFDR disclosure obligations under the SFDR apply only to private equity firms qualifying as “financial market participants” (eg, AIFMs and investment firms providing portfolio management). Detailed content and format requirements are set out in Delegated
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