SWEDEN Law and Practice Contributed by: Magnus Wennerhorn and Victor Bengtson, Linklaters
5.7 General Principles of Enforcement Enforcement proceedings for security interests in Sweden follow established legal principles. • Out-of-court enforcement: share pledges or other security involving possession can often be enforced outside court through private sale or auctions. • Formal forms of enforcement: enforcement of real property and business mortgages typically require involvement of the Swed- ish Enforcement Agency ( Kronofogdemyn- digheten ) or court. • Duty of care: a pledgee owes a general duty of care, which at the time of enforcement entails an effort to realise the security assets at a reasonable market price. Any value of the security assets in excess of the secured liabilities needs to be repaid to the pledgor. Therefore, a valuation of the assets will be key in case the pledgee takes possession of the security assets at enforcement. In Swedish acquisition finance transactions, guarantees play a crucial role in securing lender recovery. The different types include the follow- ing. • On demand guarantees: the strongest version of guarantees and may be separate from the guaranteed obligations. • As for its own debt: guarantee granted as for its own debt ( proprieborgen ) is directly tied to the guaranteed obligations. The beneficiary may pursue the guarantor directly before directing a claim towards the debt. 6. Guarantees 6.1 Types of Guarantees • Basic guarantee: the basic guarantee under Swedish law is the basic guarantee ( enkel
borgen ) where the beneficiary first needs to direct a claim towards the debtor before turn- ing to the beneficiary. 6.2 Restrictions The same restrictions as for security, referred to from 5.4 to 5.6. apply to guarantees. 6.3 Requirement for Guarantee Fees There is typically no general requirement under Swedish law to charge guarantee fees for pro- viding a guarantee. However, a guarantor may require fees on a commercial basis, as evidence of the commercial benefit the guarantee provides when challenged on corporate benefit grounds. 7. Lender Liability 7.1 Equitable Subordination Rules Swedish law does not formally recognise the concept of “equitable subordination” as it exists Under Swedish insolvency law, transactions made by a company can be challenged and potentially clawed back to the estate follow- ing insolvency, particularly if they are deemed to unfairly benefit one creditor over others and in some other situations. Key situations include the following. • Improper preferential treatment: a transaction involving a preferential treatment of a credi- tor ahead of other creditors can be subject to claw-back during a period of up to five years if the transaction alone or together with other actions caused insolvency. • Payment of debt prior to bankruptcy: pay- ment of debt within three months prior to bankruptcy and which has been made either in other jurisdictions. 7.2 Claw-Back Risk
469 CHAMBERS.COM
Powered by FlippingBook