Swedish Company Guarantees Security for Borrowings

In a move to boost business confidence, Swedish companies can now guarantee security for borrowings incurred to finance or refinance the direct or indirect acquisition of shares in their own company, parent companies, or sister subsidiaries.

Amendments to the Swedish Companies Act

The Swedish Companies Act has been amended to provide clearer guidelines on financial assistance. According to the act, a Swedish limited liability company may not provide financial support to borrowers or affiliates for the purpose of acquiring shares in the company or its parent entity.

Uncertainty Surrounding Sister Subsidiaries

However, there is some uncertainty surrounding financial assistance for acquisitions of sister subsidiaries. While the intention of the legislator was to prohibit such transactions, the relevant provisions of the Companies Act seem to indicate otherwise. As a result, companies should exercise great caution when considering such transactions.

Opportunities for Financial Assistance

In related news, Swedish law provides opportunities to grant financial assistance after an acquisition has been completed, and there is also a regime in place for granting exemptions for otherwise unlawful financial assistance.

Lender Representation

Lenders may appoint agents or trustees to represent them in matters relating to finance documents and security interests. These agents are permitted to enforce rights under the finance documents and apply proceeds from enforcement to satisfy secured claims of all lenders.

• Agents can also act as representatives appointed by lenders.
• This is particularly important for foreign lenders, as Swedish law does not recognize foreign law trusts.

Loan Registration

There are no taxes or significant costs that would be incurred by foreign lenders. However, Swedish legislation does contain interest deduction restriction rules on intra-group loan structures, including back-to-back structures involving third-party lenders.

Foreign Judgments

Swedish courts will recognize and enforce foreign judgments, but only under certain circumstances. The court may assess whether the jurisdiction clause is valid, whether due process was observed, and whether the recognition of the judgment would not contravene fundamental principles of Swedish legal policy.

Boosting Business Confidence

The changes to the Companies Act are expected to boost business confidence and provide greater clarity on financial assistance for acquisitions in Sweden. This development is a positive step towards creating a more favorable environment for businesses operating in the country.