Monday, December 19, 2005

New Swedish Companies Act – Important changes – Part III

“Value transfer”
  • The legislator has introduced a new concept “Värdeöverföring” to cover all transfers of assets from the company to a shareholder or other person. (I have not found any official translation but will be using the expression “Value Transfer” for this concept.)

  • Value transfers may only be carried out in amounts allowing full coverage of the restricted shareholder’s equity directly after the transfer.

  • In addition, there is a general rule of cautiousness stating that a value transfer may only be executed if it is “reasonable” considering

  • the demands put on the amount of the shareholder’s equity by the type, extent and risks of the company’s business activities and

  • the need of consolidation, liquidity and general position.

  • When the company’s board of directors proposes profit distribution, the board is obliged to give a written motivation to the effect that the proposal is “reasonable”.

  • Additional distribution of profit may be decided at an extra ordinary shareholder’s meeting.

  • The previous rule concerning profit distribution in groups of companies has been removed but the rule of cautiousness shall be considered at group level in the parent company.

Prohibition on Loans to Shareholders
  • These rules are kept in principle but one important change has been made. It will be possible to sell a subsidiary on credit because only loans for purchases of shares in the company itself or in superior companies of the same group.

to be continued

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