The new Swedish Companies Act comes into force as from 1 January 2006. Here is some information about the most important changes. The new Companies Act is contained in the Swedish Code of Statutes, SFS 2005:551 and the Companies Ordinance in SFS 2005:559. See also prop. 2004/05:85.
Formation of a new company
The procedure when forming a new company has been simplified somewhat. The information is concentrated on the memorandum of association. The founders draw up the memorandum of association, and only the founders are permitted to subscribe to the shares. The memorandum of association must contain, inter alia:
- details of how much is to be paid for each share
- the full name, personal ID number and postal address of each board member, deputy and auditor
- articles of association
The company is formed when the memorandum of association has been signed by all founders. However, please note that the limited liability company only becomes a legal entity on the date on which it is registered at the Swedish Companies Registration Office. The rules relating to the statutory meeting have been removed.
Articles of association
The nominal amount of the shares has been removed. The articles of association must now instead contain details of the number of shares or the lowest and highest number of shares that there may be in the company.
The requirement that the mandate period for the board must be specified in the articles of association has also been abolished. According to the Act, the board’s assignment is in force until the end of the next ordinary shareholders’ meeting (annual general meeting). It is possible to include in the articles of association a provision to the effect that the mandate period must be longer, although as a maximum until the end of the annual general meeting that is held during the fourth financial year after the board members were appointed.
It is permitted to remove the enumeration of what must happen at the annual general meeting. However, it can be useful to retain this in the articles of association for information purposes.
The summons to a shareholders’ meeting in a public limited company must take place by means of an announcement in the Swedish Official Gazette (Post- och Inrikes Tidningar) as well as in a specified national daily newspaper.
The pre-emption clause is a voluntary provision, which may remain intact. However, the new Act opens a possibility to regulate who is entitled to vote for the shares during the period of pre-emption.
Furthermore, it has become possible to include two new clauses in the articles of association, a reservation for consent, stipulating that shares can only be transferred after consent of the company, and a clause regarding pre-emptive options, which stipulates the right for shareholders or others to get an offer to buy a share before it is transferred to a new owner.
The reservation for consent and reservation for pre-emptive options may not be used by companies registered by Euroclear Sweden AB (former VPC AB). If you choose to have several of the above-mentioned reservations, they must be kept apart in separate sections in the articles of association.
Board of directors, managing director, signatory power
One major new feature of the new Act is that changes in the composition of the board relating to the MD and signatory power only take effect when the notification of the change has been received by the Swedish Companies Registration Office. A company can, if it takes time to finish a complete notification procedure with minutes from the shareholders’ meeting, etc., choose to send notification of the change by fax or e-mail in order that the new board can quickly start working. The notification may then be supplemented at a later date with other information and documents.
According to the Act, the auditor’s mandate period is normally four years. If the auditor leaves prematurely, a new auditor must be elected for the remaining period of the mandate, i.e. for less than four years.
New issue of shares
A quota value system has replaced the nominal amount of the share. The quota value is the sum of the share capital divided by the number of shares, and is not specified in the articles of association. In the event of a new issue of shares, the subscription price may not be set at a lower value than the previous quota value of the share. It is no longer necessary to make a public announcement in respect of a decision to issue new shares.
It is possible to allow partial registration of a new share issue, as payment is gradually received for the newly subscribed shares.
Subscription rights can now be issued without any link to a debt instrument.
Distribution of profit at an extraordinary shareholders’ meeting
The new Companies Act contains directives about distribution of profit at an extraordinary shareholder’s meeting (supplementary dividend). The Swedish Companies Registration Office must be notified of the supplementary dividend. A confirmed copy of the minutes of the shareholders’ meeting with the resolution on the dividend must be submitted.
Reduction of share capital
A decision may be made to reduce the share capital to cover a loss, if the loss appears in the most recently adopted balance sheet or if a loss has arisen during the current financial year. If the amount of the reduction is to be used as a provision to a fund or as repayment to shareholders, a permit is required to be able to implement the reduction. With immediate effect, such a permit is obtained from the Swedish Companies Registration Office.
The previous rules on allocating a proportion of the profit for the year to the reserve fund have been removed.
There has been a simplification in the section on mergers. In the case of a merger between private companies, the merger scheme does not have to be reported for registration or a public announcement if all the shareholders have signed the merger scheme.
A new measure, division of a limited liability company, has been introduced in the new Companies Act. This means that all of the assets and liabilities of a company are taken over by two or more other companies, and that the transferring company is dissolved without liquidation. Another option is to let a proportion of the assets and liabilities be taken over by one or more other companies without the transferring company being dissolved. The division procedure has significant similarities with the merger procedure. A division plan must be drawn up, the shareholders’ meeting must pass a resolution on the division and a permit to implement the division must be obtained from the Swedish Companies Registration Office.
Deferred contribution in kind
The rules on deferred contributions in kind now apply only to public limited liability companies.
Public limited liability companies
If rules apply to public limited companies, these rules may be found at the end of each section in the new Act.
Adaptation the articles of association to the new legislation
The new Companies Act comes into force on 1 January 2006. Companies with articles of association in breach of the new Act must pass a resolution at the first ordinary shareholders’ meeting after the Act has come into force to adapt the articles of association to the new Act. If the only necessary adjustment is to remove the nominal amount and replace it with details of the number of shares, the company may delay this adjustment until the next time a resolution is to be passed on another change to the articles of association. This may be several years into the future. In due course all of the approx. 308,000 limited liability companies existing today must adapt the articles of association.
Re. these and other transitional rules, see SFS 2005:552.