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Beyond Borders: Eversheds Sutherland's ICR insights series. EU Mobility Directive – Legal Update – Sweden

  • Sweden
  • Europe
  • Corporate
  • Labor law and trade union issues

10-11-2022

Country specific – Sweden

This country specific outline contains further information regarding the implementation of the provisions of the EU Mobility Directive into Swedish law and provides further local insight.

For further information and to access any of our other country-specific briefings that we have prepared, please refer to the bottom section of our general briefings page here.

Cross-border mergers, divisions and conversions

Status of the implementation

On 13 September 2022 the Swedish Government submitted a government bill 2021/22:286 (the “Proposal”) to the Swedish Parliament, on the implementation of Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 with regard to cross-border conversions, mergers and divisions (the “Directive”). The Directive states that the EU member states shall have the Directive implemented by 31 January 2023 at the latest, which is also the date the Swedish Government proposes that the new Swedish provisions shall enter into force. The Proposal will have to go through a few steps in the Swedish legislative process before the bill can be passed by the Swedish Parliament. Of the three cross-border procedures (mergers, divisions and conversions), only cross-border mergers can take place under the current regulation. The government’s Proposal does not contain any transitional provisions to regulate cross-border mergers that have commenced prior to the law taking effect. The absence of transitional provisions entails a risk that cross-border mergers which have been initiated, but have not completed, prior to the law taking effect will have to be redone.

Summary of Sweden’s current and future legal landscape

The proposed changes to Swedish company law in summary mean that the existing regulation regarding the possibility of cross-border mergers is further developed and the possibility of cross-border divisions and conversions of limited liability companies is introduced. The proposed legal provisions introduce three detailed frameworks for cross-border mergers, divisions and conversions respectively, that are all designed and structured in a similar way to correlate with the corresponding articles in the Directive. The proposed changes concerning limited liability companies aim to preserve and protect the rights of shareholders, creditors and employees.

Safeguards for shareholders, creditors and employees

To ensure shareholders’ protection in cross-border proceedings, the Swedish Government proposes that a right should be introduced for shareholders who vote against a cross-border proceeding to have their shares redeemed by the company in exchange for a compensation offered by the company. To exercise this right, the shareholder needs to vote against the cross-border plan at the general meeting (or within one month thereafter) and declare his or her decision to exercise this “exit right”. Each shareholder who has decided to use this right but considers that the offered compensation is not adequate, has the option to individually submit a claim for additional cash compensation before Swedish general court. The same goes for, where applicable, shareholders who are not having their shares redeemed but are dissatisfied with the share exchange ratio offered. Such claims for additional compensation are tried under the Swedish regulation for civil proceedings in general.

Furthermore, the Swedish Government proposes that the basic features of the legislation regarding protection for creditors in cross-border mergers should be retained. As before, the companies’ creditors have the opportunity to oppose an application to execute a cross-border merger plan on the basis that the merger poses a risk in respect of the satisfaction of their claims. Should any creditor oppose the execution of the merger plan, the issue of approving or rejecting the application is referred to Swedish general court. The main difference from current legislation is that a burden of proof is placed upon the creditor to present credible information that, due to the merger, the satisfaction of their claims is at stake and they have not obtained adequate safeguards from the merging companies. To clarify, the same applies with respect to cross border divisions and conversions.

The Government also proposes that the employees’ right to information and to participate in cross-border mergers are to be expanded and adapted to also apply to cross-border divisions and conversions.

Timings

The timing of a cross-border procedure depends on the legislative process in the other jurisdiction involved in the process and takes at least six months to complete under the current regulation. It is unclear how long time the procedure will take when the new regulation is implemented, but our estimate is that it will take approximately eight months from a corporate Swedish law perspective.

Competent authority and anti-abuse checks

The Swedish Companies Registration Office (the “SCRO”) is the competent authority that supervises and registers the Swedish realisation of the above mentioned cross-border proceedings. In the case of an outbound cross-border merger (whereby a Swedish company is absorbed by a company based in another EU/EEA Member State), the Swedish company must submit the merger application to the registration authority of the foreign company. After the merger is complete, the applicable registration authority of the foreign company must inform the SCRO of the transaction’s completion. In case of an inbound cross-border merger (whereby a company based in another EU/EEA Member State is absorbed into a Swedish company), the Swedish company must report the transaction to the SCRO. The SCRO informs the applicable registration authority of the foreign company that the merger has been completed in Sweden.

As part of any cross-border proceeding application, the SCRO will have to conduct an anti-abuse check. The SCRO will have the right to reject a cross-border transaction that is carried out for improper, fraudulent, or criminal purposes.

Effective date of inbound cross-border transactions

Inbound cross-border transactions become effective when the SCRO registers the transaction and announces the registration in the Official Swedish Gazette.

Key local contacts

Should you have any questions or if you require any assistance please do not hesitate to contact us.

Other country specific

In case you are interested, please find other country-specific information we prepared as part of this Insight Series here.