If one shareholder holds more than nine-tenths of the shares in a Swedish company, he is entitled to buy-out the remaining shares of the other shareholders of the company. This also applies in a situation where one shareholder together with one or more of its subsidiaries holds more than nine-tenths of the shares. However, it does not apply when two non-related shareholders together hold more than nine-tenths of the shares.
Any person or legal entity whose shares may be bought out by a majority holder is also entitled to compel the majority shareholder to purchase his shares.
If a demand for a buy-out was preceded by a public offer to acquire all of the shares of the company not held by the offeror and such offer was accepted by holders of more than nine-tenths of the shares to which the offer was related, the purchase price shall correspond to the consideration offered, “unless special cause otherwise dictates”.
Otherwise, the purchase price shall correspond to the price expected at a normal sale.
Initiation of Arbitration Procedure to decide the Purchase Price
If the parties are unable to agree on the purchase price, the majority holder is obliged to refer the matter to arbitration. One of the arbitrators is appointed by the majority shareholder, the other by the minority shareholders and the third (the chairman) is jointly appointed by the first two arbitrators.
The Swedish Arbitration Act will apply to the arbitration procedure.
Trustee acting on behalf of Minority Shareholders
The minority shareholders are given a two week time period to appoint their joint arbitrator. It is very unlikely that the minority shareholders succeed or even try to succeed in doing this, and the board of the company will instead formally ask the Stockholm District Court to appoint a trustee, who then will appoint the arbitrator on behalf of the minority holders and who shall protect the interests of the minority shareholders during the compulsory redemption process.
After an exchange of briefs between the parties and the hearing of arguments of the parties, the arbitrators will decide the purchase price to be paid by the majority shareholder for the shares to be redeemed. The payment of the purchase price will include interest and will be made in cash.
During the redemption procedure the Stockholm District Court and the arbitrators have to make certain decisions, some of which may be appealed. The redemption procedure is normally brought to a stand still during these appeal periods. This, together with the time necessary for the exchange of often lengthy briefs between the parties, results in a protracted redemption procedure period.
Advance Vesting of Title
Under normal circumstances, the majority shareholder may be vested in advance of the minority shares, provided the parties agree that a right of buy-out/compensation exists or this is otherwise obvious and further provided that the majority shareholder provides security for the purchase price (including interest) to be paid to the minority shareholders.