SWEDEN Law and Practice Contributed by: Corinne Ekman, Mikael Nagy and Joacim Kanstedt, Gernandt & Danielsson Advokatbyrå KB
is that it has expanded somewhat. In 2025, the expected timeline is typically between four and eight weeks, subject to regulatory approvals and investors’ requirements. If a term sheet is agreed upon, which is typically the case, the timeline can be shorter. In new financing rounds in growth companies, the lead investor typically takes an active role and has its own legal counsel. Other larger new investors may engage separate counsel, depending on size of investment and alignment of interest, while smaller investors tend to fol- low the terms negotiated by the lead investor, without engaging own counsel. The company will have its own counsel. Whether founders and existing investors have the same counsel or not largely depends on how aligned their interests are in the new round. The target is often required to cover reasonable legal fees of the lead inves - tor, subject to a cap. A new financing round in growth companies will typically require amendments to or deviations from the shareholders’ agreement to which all existing shareholders are parties. Consequent - ly, the existing shareholders need to agree to amend (or replace) the shareholders’ agreement in order to complete the new round, which typi - cally requires that all shareholders agree. Swed - ish law-governed shareholders’ agreements sometimes contain provisions such as that 90% of the shareholders can amend the agreement or power of attorneys, but they are seldom relied on in practice due to enforcement and revokement risks under Swedish law. 3.3 Investment Structure In Swedish start-ups, “ordinary shares” (as they are more commonly referred to in Sweden) are typically held by founders, key employees and potentially a few very-early-stage investors.
Ordinary shares have voting rights (all shares in Swedish limited liability companies must have voting rights – ie, it is not possible to issue non- voting shares, and no share may carry voting rights that are more than ten times greater than the rights of any other shares), but they are typi - cally last in the equity waterfall and last to be paid out in a liquidation event. Later-stage VC investors, typically invest via preference shares that sit higher up in the equity waterfall and have rights that are more advanta - geous than ordinary shares, such as liquidation, anti-dilution and distribution preferences. The standard practice in Sweden is to issue non- participating preference shares with a 1x liquida - tion preference. However, during the last years, some founders and existing investors have been forced to agree to more aggressive liquidation terms due to fundraising challenges in the pre - vailing market to avoid down rounds. 3.4 Documentation In Sweden, the typical key documents repre - senting a financing round in a growth company include the following. • Term sheet: Non-binding document outlining key terms of the investment round. Even if the term sheet is non-binding (save for with respect to “no-shop” , confidentiality and gov - erning law), it is nonetheless typically strictly adhered to by Swedish VC investors and considered morally binding by the parties. • Investment/subscription agreement: Binding agreement between the investors, the com - pany and the founders/existing shareholders, setting out the number and classes of shares to be subscribed for, subscription price and representations and warranties provided to investors as well as any conditions to closing and actions at closing.
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