The Essential Corporate Law in Sweden (1)

These are the highlights if you want to know the essential of Corporate Law in the Sweden.  This entry was drafted by  Moll Wendén for”E-IURE COMPENDIUM” 2018. Link to e-IURE Network.

This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case “ Moll Wendén” is an excellent option in Sweden.

Corporate Law In Sweden

General

The Swedish corporate law is largely based on the written laws that apply to each specific kind of legal entity that is available in Sweden. A Swedish business can be conducted as a trading partnership, as a limited partnership, as an economic association or as a sole trader (which is not a legal entity). As in other EU-countries, it is in Sweden also possible to establish a European company (SE) in accordance with the Council Regulation (EC) No 2157/2001 and Council Regulation (EU)517/2013 of 13 May 2013.and, as in other EEA-countries, to register a European Economic Interest Grouping (EEIG).

However, these legal entities are normally not chosen by foreign companies and investors when establishing a business in Sweden, and they will therefore not be part of this description of the Swedish corporate law.

Foreign companies and investors establishing a business in Sweden most commonly form subsidiaries in the form of limited liability companies. An alternative is to set up a branch office in Sweden. The Swedish law for limited liability companies and the alternative to use a branch office are described below.

Limited liability companies

General

There are two kinds of limited liability companies in Sweden; private and public limited liability companies. Public companies may distribute their shares to the public, which private companies may not. The vast majority of the companies in Sweden are private companies. The company name of private companies may not include the word “public” and the names of public companies may not include the word “private”. Some rules in the Swedish Companies Act (the “Act”) (Sw. Aktiebolagslagen) apply only to either type of company.

However, most rules in the Act apply to private as well as public companies. In addition to the Act, companies which are quoted on the Stockholm Stock Exchange must follow certain set of rules which apply to quoted companies only.

Forming a limited liability company

A limited liability company is formed by one or more founders. A founder may be any natural person or legal entity. ,

The founders shall sign a memorandum of association which shall contain certain information including articles of association for the company. All shares in the company shall be subscribed for in the memorandum of association.

The articles of association shall contain certain information as stated in the Act, for example information about the financial year of the company. The financial year shall be the calendar year or 1 May–30 April, 1 July–30 June or 1 September–31 August. It is however also possible to apply for permission to adopt any other twelve-months period as the financial year of the company.

Before the company can be registered with the Swedish Companies Registration Office (the “SCRO”), the share capital of the company must be paid to the company by the founders of the company. The minimum share capital of a private company is SEK 50,000 and of a public company SEK 500,000. The share capital may also, subject to certain rules, be contributed in kind to the company.

The board of directors (see 2.4 below) shall register the shares in the share register of the company. Shareholders may be residents of any country. When the shares are transferred to new shareholders, the new shareholders must be entered into the share register. Shares in quoted companies are registered electronically through a system known as Euroclear Sweden. Companies that are not quoted may in their articles of association prescribe that the shares may be registered in Euroclear Sweden. Share certificates may be issued and shall be issued to a shareholder which presents such request. Share certificates may not be issued in companies that use the VPC-system. Shareholders in companies that use the Euroclear Sweden-system can instead prove their ownership of certain shares through a print-out from the Euroclear Sweden-system.

Buying an “off the shelf company”

If a company is needed with short notice, an alternative to forming a new company may be to acquire an existing limited liability company (which always is private) that previously has conducted no business, i.e. a so-called off the shelf company. Such a company can normally be acquired very quickly, provided that the share capital of SEK 50,000 is transferred to a new bank account in the name of the company.

Management

The board of directors is elected by the shareholders at a shareholders’ meeting. The board is responsible for the operations of the company. Normally, the directors are elected at the annual shareholders’ meeting until the next annual shareholders’ meeting. However, the directors can be discharged from their position at any time prior to the next annual shareholders’ meeting by resolution at an extraordinary shareholders’ meeting.

A public limited liability company must have a board with at least three directors. In private companies, the board may consist of only one or two directors provided that at least one alternate director is elected. If the board consists of more than one director, a chairman of the board shall be elected by the board. At least half of the directors and the alternate directors must be resident within the EEA (it is possible to apply for an exemption). If no board member, no managing director and no special authorised signer (which can be appointed by the board) has its residence in Sweden, the board of directors must grant a power of attorney to a person who has its residence in Sweden to accept service of process for the company.

Public companies shall and private companies may appoint a general manager. The general manager will have authority to represent the company in all matters that fall into the day-to-day management of the company. The managing director may be discharged at any time by the shareholders’ meeting or by the board of directors (subject of course, from a labour law perspective, to his employment contract). The managing director shall have its residence in the EEA (it is possible to apply for an exemption).

The founders, directors of the board or the managing director may be liable to pay damages if they wilfully or negligently cause the company damage when performing their duties. The founders, directors of the board or the managing director may also be liable to pay damages if a shareholder or another person suffers damages through a violation by the director of the Act, of the Annual Accounts Act or of the articles of association.

There is no requirement for Swedish limited liability companies (except for quoted companies) to appoint a secretary of the board of directors.

Shareholders and shareholders’ meetings

Within six months from the expiry of each financial year, an annual general shareholders’ meeting shall be held in the company at which the annual report shall be presented. In addition to the annual general shareholders’ meeting, it may in the articles of association of the company be stated that other general shareholders’ meeting shall be held during each year. Additionally, the board of directors may at any time during each year convene extraordinary shareholders’ meetings.

A shareholder has a right to participate at a shareholders’ meeting if the shareholder at the day of the shareholders’ meeting has been entered into the share register. In companies that use the Euroclear-system, the shareholder shall be stated in the share register on the fifth day (or at a later day if stated in the articles of association) before the shareholders’ meeting to have a right to participate at the shareholders’ meeting.

Most decisions can be adopted by the shareholders’ meeting by simple majority. However, some decisions, such as amendments to the articles of association, require qualified majority. Normally, all shares have equal voting rights but it is possible, by the articles of association, to prescribe that there shall be shares of different classes and that these shares shall have different voting rights.

A shareholder may be liable to pay damages if such shareholder wilfully or by gross negligence causes damage to the company, to any other shareholder or to another person if the shareholder participates in a violation of the Act, of the Annual Accounts Act or of the articles of association.