SWEDEN Law and Practice Contributed by: Magnus Wennerhorn and Victor Bengtson, Linklaters
corporate benefit, the upstream value of the Support will be dependent on the following restriction from value transfers. • Value transfer: in addition to the value of cor- porate benefit, upstream Support will be lim- ited to the company’s distributable reserves (as approved at the last annual shareholders meeting), subject to maintaining a certain buffer. As value transfers require shareholder approval (but which may take a more infor- mal form), approval of upstream Support is normally included in the direct parent entity’s board resolutions. Additional exceptions may be structured through by adopting more advance corporate group structures, debt push-down and mergers. Dif- ferent workarounds are available for this and the restrictions in the following sections. Consequence of Support granted in violation of the aforementioned restrictions may include A Swedish company may not provide Support for the debt financing the acquisition of itself or another Swedish parent company. It is estab- lished that this prohibition cannot be circum- vented by so-called minute loans. Instead, it is key that the lender stands a real credit risk before obtaining Support from the acquired company. There is no formal timeline, but the leading firms have established a market practice where the borrower undertakes to procure that the target group provides Support after 90 days. That means that this restriction will not apply to Support provided thereafter. Consequences of Support granted in violation of the financial assistance regulation may include invalidity and personal liability. 5.5 Financial Assistance
invalidity, personal liability and criminal sanc- tions. 5.6 Other Restrictions In addition to the value transfer provisions and the financial assistance restriction, the following provisions may limit the upstream value of guar- antees and security from Swedish companies. • General loan prohibition: generally, a Swed- ish company is prohibited from providing upstream Support, except for certain speci- fied exceptions. The most frequent exception is when Support is provided for the obliga- tions of a company within the same group where the parent company is domiciled within the EEA. This means, for example, that Sup- port can normally not be provided for the obli- gations of a direct parent company located in the UK or the USA, unless there is an ultimate parent company domiciled within the EEA. • Minority shareholder protection: another restriction is provided for under the principles of equal treatment of shareholders, which provides for restrictions on Support for a majority shareholder as such Support may discriminate minority shareholders financially. • Ultra vires: the provision of security and guarantees beyond what is permitted under the company’s articles of association may be invalid. • Insolvency: in insolvency situations, the granting of Support may be restricted under criminal law if it provides for a preferential position for a creditor over others. Consequence of Support granted in violation of the restrictions above may include invalidity, personal liability and, for the loan prohibition, criminal sanctions.
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