Squidoo Lense on Swedish Law

Seth Godin has a new company called Squidoo. The basic idea behind Squidoo is that each individual is an expert on topics that he or she cares about, and Squidoo will allow anyone to create a specialized webpage in which this expertise can be made available to others. Seth Godin calls these webpages lenses, which he suggests can be used to help others make sense of the world. Lenses are explained on the official Squidoo blog, SquidBlog.

My first try is the Swedish Law Lense, where I will try to add as many links to Swedish acts and other legal material available in English as possible. At present I have included links to Swedish Labour Legislation and to Swedish Business Legislation.

Do check it out and, more importantly, set up a lense your self. This is the new way to interact and share information, all a part of Web 2.0.

New Swedish Companies Act – Important changes – Part III

A new post has been posted in Swedish Corporate Law blog covering "the new concept of "Value Transfer" and the modified rules concerning loans to shareholders.

Blawg Review Guest Map

Swedish Law Blog has been placed on the Blawg Review Guest Map. Go there too!

New Swedish Companies Act – Important changes

A new post has been posted in Swedish Corporate Lawblog.

Swedish Supreme Court Decision in Åke Green now in English Translation

Roger Alford at Opinio Juris has obtained the decision of the Supreme Court of Sweden in an English translation, but before reading the translation chech out his comments.

Swedish Corporate Law - A New Blog

We have decided to start a new blog covering mainly the new Swedish Companies Act called Swedish Corporate Law.

This means that new posts on this subject will be published there but I will try to mention them here.

After-treatment measure responsibility under the Swedish Environmental Code

My earlier posts on this matter are now found here at the lawfirm’s site.

New Swedish Companies Act – Important changes

As mentioned in an earlier post the new Swedish Companies Act (link to Swedish version only) will enter into force on January 1, 2006. The act has been rewritten and consists of 31 chapters compared to the 19 chapters of the old act. Major changes have been made concerning i. a. shares, issuance of new shares, the statutory reserves, lending to shareholders, the new concept “value transfer”, changes of the board of directors and the contents of the Articles of Association (bolagsordning).

In this and a couple of following blog posts will cover the most important changes relevant to an established Swedish limited company without the aim of giving a thorough and detailed report on all the changes.


1.     Shares

• A share in a Swedish limited company will no longer have a par value. It will instead only represent a certain part of the company. This part of the company is calculated by dividing the total share capital with the number of shares.

• New share certificates shall include the social security number (person- or organisationsnummer) of the shareholder.

to be continued

Part IX – Swedish Economic Association - Forms of Business Ventures in Sweden

Basic Requirement

• The business activities of a Swedish Economic Association (“Ekonomisk förening”)  must be of financial benefit to a member, for example as producer, consumer or employee.

• An Economic Association must also be open to all and, in principle, it cannot refuse membership to anyone.

Formation

• A Swedish Economic Association (“Ekonomisk förening”) is formed by three or more natural persons or legal entities.

Foreign Owners

• All members of an Economic Association may be foreign nationals or companies and no special acquisition permit is required.

Legal Entity

• The Economic Association is a legal entity and is issued with a registration number (“organisationsnummer”).

Board and Managing director

• The board of an Economic Association shall consist of at least three members; normally also members of the Association.

• A managing director has to be appointed in an Economic Association only if the Association has more than 200 employees.

Accounts

• An Economic Associations must keep accounts and shall prepare annual reports kept available to the public.

Auditor

• Normally, an Economic Association does not need an approved or authorized public accountant. The auditor appointed must be competent enough to audit the Association´s activities. However, independent auditors may be required in large Associations.

Business name

• The registered business name of an Economic Association is protected throughout the country.

Financial Year

• A limited company may have a split financial year, which can facilitate financial planning with regard to taxes, credits, salaries and interest.

Responsibility and risk

• Every member of an Economic Association has to pay an agreed amount as contributed capital. It is also normal to pay an annual membership fee. There is, however, no requirement for a fixed capital comparable to the share capital of a limited company.


• In spite of this, the members have no personal responsibility for the debts or other obligations of the Association.

• N. B.!! The board of directors and the managing director, if any, has extensive responsibility and in certain circumstances, these persons can become personally responsible for the Association’s debts; especially unpaid taxes and social contributions.

Åke Green acquitted – follow up

As mentioned in an earlier post, the Supreme Court of Sweden has found the Swedish pentecostal minister Åke Green not guilty in spite of his sermon containing inflammatory and sick views on gays. Among other things he said:” The Bible clearly teaches about these abnormalities. Sexual abnormalities are a deep cancerous tumor in the entire society. The Lord knows that sexually twisted people will rape the animals. Not even animals can avoid the fiery passion of man's sexual lust.”

The Court’s reasoned as follows.

• Green is guilty under Swedish law unless the rules of freedom of speech or of religion in the Swedish constitution and/or in the European Convention on Human Rights prevent this.

• The court found that the Swedish constitution did not prevent the Court from finding Green guilty.

• The European Court of Human Rights has interpreted the rules of freedom of speech and of religion in the European Convention on Human Rights in such a way that a guilty verdict by the Supreme Court of Sweden would probably be overturned by the European Court. Consequently, the Court found Åke Green not guilty.

In my view the important conclusion to draw from the verdict by the Supreme Court of Sweden is that it has made it clear that the statements by Åke Green were fully within the criminalized area of the Swedish hate crime legislation and that, without of the cloak of religion, he would have been found guilty.

It is deplorable that a person like Green is allowed to make public his sick views. In my opinion it is a flagrant misuse of the freedom of religion. This freedom should only be interpreted to permit the exercise of any and all religion (including Islam) and not the condemnation of certain behaviour as contrary to the religious laws of some favourite god.

However, I feel that the verdict, although sending the wrong signals in a society as the Swedish where crimes against gays are on the rise (a 100 % increase in one year), will be of very little general importance. No one of sound mind will interpret the verdict of the Supreme Court of Sweden as a green light for similar attacks on gays. In addition, people like Åke Green are not taken seriously here.

Swedish Law Blog "Featured Feed" at blawg.org

I am happy to note and “to tell to the world" that Swedish Law Blog is today's Featured Feed at blawg.org “Your Source For Law & Legal Related Weblogs”.

Part VIII – Swedish Trading Partnership - Forms of Business Ventures in Sweden

Formation

• A Swedish Trading Partnership (“Handelsbolag”) is formed by two or more natural persons or legal entities.

• There must be at least two partners in a Trading Partnership. If the number of partners has dropped below two, the Trading Partnership is regarded as having gone into liquidation after six months.

Foreign Owners

• All partners of a Trading Partnership may be foreign nationals or companies and no special acquisition permit is required.

Legal Entity

• The Trading Partnership is a legal entity and is issued with a registration number (“organisationsnummer”). However, it should be noted that from a taxation point of view a Trading Partnership is not a legal entity and the partners of the Trading Partnership are taxed individually for the activities of the Trading Partnership.

Two Kinds of Trading Partnerships

• Swedish Trading Partnerships are divided into two categories, normal Trading Partnership and Limited Trading Partnerships (“Kommanditbolag”). The provisions of the Act on Partnerships and Non-registered Partnerships - (Lagen (1980:1102) om handelsbolag och enkla bolag) are applicable to normal Trading Partnership as well as Limited Partnership, but there is one major difference.

• In a normal Trading Partnership all partners have unlimited liability, jointly and severally, for the partnership's debts. A new partner who enters the Trading Partnership thereby becomes liable for all of the previous debts as well.

• In the Limited Partnership all partners save one may have a liability limited to the unpaid registered agreed contribution (which may be as small as SEK 1). At all times one partner must be fully liable for the partnership's debts.

Accounts

• A Trading Partnership is required to keep separate accounts. The income is declared in schedules attached to the partners’ personal tax returns as the Trading Partnership is not taxed itself.

Auditor

• Normally, a Trading Partnership does not need an auditor. However, independent auditors may be required in large Trading Partnerships.

Business name

• The registered business name of a Trading Partnership is protected in its county of registration.

Financial Year

• A Trading Partnership may have a split financial year only if there is no natural person as partner.

Åke Green acquitted

Åke Green was acquitted by the Supreme Court of Sweden today.

The Court found that Green’s inflammatory language against homosexuals contravened the Swedish hate crime legislation but under the circumstances a sentence against him would most likely be considered by the European Court of Human Rights as a breach of the European Convention on Human Rights.

The sentence can be read in Swedish at the site of the Swedish Supreme Court.

ÅKE GREEN SERMON

This short unbiased information on the case from BBC News gives you the background of this interesting case, which sets the freedom of speech and of religion up against the Swedish hate crime legislation. This legislation has been amended to cover also crimes against homosexuals.

Having found the sermon and read all 12 pages of it, I can really see the problems the Supreme Court of Sweden is facing.

On the one hand, it is a severe attack in homosexuality based on Åke Green’s reading of the bible and it falls well within the framework of the Swedish hate crime legislation.

On the other hand, the freedom of speech and of religion could as easily be said to prevent a conviction under the hate crime legislation.

The District Court convicted Green, but the Court of Appeals reversed that decision.

What I noted in the sermon was the tedious, repetitious and complicated (at least to a non-Christian) references to the bible. To Åke Green the bible contains the word of the Lord and cannot be disputed. The sermon does not seem to fit very well with the kind of language one would expect to see in a speech contrary to the hate crime legislation.

Neither does his closing statement in his sermon:” We must never think that some people, because of their sinful lives, would end up outside of grace. Paul says about himself that he was the foremost of all sinners, but he encountered an abundance of grace and mercy….. It is by showing all people grace and mercy that we can win them for Christ. We never win anyone by giving them the cold shoulder.”

Nothing about killing all gays at all; only a disgusting expression of assumed moral superiority over sinners (I am sure that I am among the sinners, even if I am not gay. I may have “entertained evil thoughts” when a nice blonde passed by).

If you read the sermon thoroughly (not recommended unless you want to fall to sleep) you would note that Green makes reference a number of times to his work on a hot-line for people with personal problems (“as a volunteer telephone counsellor”), where people told him about their urges to rape animals (?). Do they not screen people like that – I mean the counsellors. Imaging being in anguish over e g how your parents have reacted when you told that you were gay and get Green on the line telling that “you could be cleansed from these abnormalities”.

I await the decision by the Supreme Court with great interest. The hearing took place on November 9 and the sentence is awaited by the end of November.

Blogger Problems

If you think I have no control over headings and text sizes in my post, you are right! Blogger does not give me the chance to preview or even tag my posts the last days.

However, I post anyway, hoping that my readers value the contents more than the lay-out!

Part VII– European Company (Societas Europaea) - Forms of Business Ventures in Sweden

A European Company (Societas Europaea or SE) is a fairly new form of company based on an EU Regulation supplemented with regard to the involvement of employees by a Council Directive. In Sweden the European Company is regulated by an act on European companies, which entered into force on October 8, 2004.

The European Company is a European public limited company and it may be created by registration in any one of the Member States of the European Economic Area (EEA). The Member States are obliged to treat an SE as if it is a public limited company formed in accordance with the law of the Member State in which it has its registered office.

Legal Capacity
The European Company has full legal capacity comparable to a Swedish public limited company.

Formation
A European Company can be formed i.a. in the following ways:

1. by merger of two or more public limited companies in at least two Member States,


2. by two or more private or public companies establishing a holding company where at least two of the companies held fall under the legislation of different Member States,


3. by establishing a subsidiary the shares of which are held by at least two companies falling under the legislation of different Member States,


4. by transforming an already existing public limited company provided it has had a subsidiary in another Member State for at least two years,


5. by a European company establishing its own subsidiaries.

Registration
Registration of a European Company in Sweden shall be made at the Swedish Companies Registration Office, Bolagsverket

Company Name
The name of a European Company must be preceded or followed by the abbreviation SE. In addition the normal rules for names of Swedish limited companies apply.

Capital Requirements
The minimum share capital of a European company is € 120,000.

Management
There are two different systems to choose between as regards the managing and controlling a European Company. The statutes may, therefore, require either a one-tier or two-tier system of administration.

The Directive and the Swedish acts also make provisions for employees to be involved in the management of a European Company.

Accounts and Audit
The accounts and bookkeeping of a Swedish European Company shall be kept in accordance with the corresponding rules of limited companies and the same applies in respect of auditors.

Transfer of registration from one Member State to another
One of the explicit aims of the Regulation is that a European Company should be able to transfer its registered office to another Member State without being wound up. Consequently, a European Company registered in Sweden may transfer its registered office to another Member State and vice versa.

Supplementing Rules
To the extent the rules of the Regulation, the Directive or the Swedish acts directly applicable to European Companies does not contain anything to the contrary the general rules applicable to Swedish public limited companies will apply in principle to European Companies.

Part VI – European Economic Interest Grouping (EEIG)- Forms of Business Ventures in Sweden

An EEIG is a vehicle which allows companies or individuals of different EU countries to combine and register in any EU country a grouping which has a legal personality and can operate across national frontiers. The primary legal foundation is to be found in the EU Council Regulation (EEC) No 2137/85 of 25 July 1985

Legal Capacity
Each member state determines for itself whether the EEIG has legal capacity; this is the case in Sweden.

Formation and Registration
An EEIG is set up in the same way as a normal company. At least two companies or individuals of different EU countries must request its formation. These are members, who in turn must appoint managers to operate the EEIG on a day-to-day basis. Registration of an EEIG in Sweden shall be made at the Swedish Companies Registration Office, Bolagsverket on its form 908.

Members
The rules of membership of the EEIG are set out in Article 4 of the EU Regulation establishing EEIGs. The main requirement is that each potential member should have been engaged in an "economic activity" in the EU prior to becoming a member of the EEIG.


The members decide how the EEIG will carry on its activities in a contract of formation for the EEIG. Each member shall have at least one vote. The members are free to decide the voting procedures to be set down in the contract of formation except for certain fundamental decisions, for which unanimous decisions are required.

The members appoint and lay down the powers of the managers who run the EEIG and make normal daily decisions. The actions of the managers are binding on the EEIG and the members are jointly liable for those actions.

Capital Requirements and Liability
The members of the EEIG are not required to subscribe any capital. As there are no capital requirements for an EEIG, the members have unlimited joint and several liability. This means that there is no limit to the liability of any of the members for the activities of the EEIG, but also that each member can individually be held liable for those activities.

Activities
An EEIG's activities must relate to the economic activity of its members and must be ancillary to them, but the concept of "economic activity" can be interpreted widely. Unlike a company, an EEIG is not intended to make profits for itself.

An EEIG cannot hold shares in any of its members, be a member of another EEIG, employ more than 500 persons nor be used to make loans to a company director or any person connected with him where that would be restricted or controlled by national law.

Accounts
The accounts and bookkeeping of a Swedish EEIG shall be kept separate from the accounts of its members.
    

Part V – Swedish Branch - Forms of Business Ventures in Sweden

If a foreign company wishes to establish a business venture in Sweden without doing it in the form of a Swedish limited liability company, one alternative is to carry on its activities through a Swedish branch office (“filial”).

• According to the Act on Branches of Foreign Companies (Lag om utländska filialer), a branch office may normally be established without approval by the Swedish authorities. However, the branch office has to be registered in the branch register kept by the Bolagsverket.

• The branch is not a separate legal entity but a part of the foreign company and, thus, the foreign company establishing the branch is liable for the branch office’s debts and obligations with its own total assets. This is an important difference when compared with the Swedish limited liability company, where the shareholders will not ordinarily be liable for the company’s debts and obligations. The financial risk is limited to the share capital, SEK 100,000 or SEK 500,000 depending of whether it is a private or public company. Look at my previous post on the Swedish limited liability company here.

Registration

• A foreign company desiring to start a branch office in Sweden has to register it in the branch register. The foreign company must be registered as a legal entity according to the laws of its country of origin and must carry on business there.

• The application should preferably be made through the prescribed form. Further information about branch registration can be found in English at Bolagsverket’s site.

• An application for registration must be sent to Bolagsverket before starting any business activities in Sweden.

Name

• The activities of the branch office shall be carried on and registered under a name that includes the name of the foreign company with the addition of the word ”filial”, and clearly indicate the nationality of the foreign company. In addition, the name must be distinguishable from other registered names and trademarks.

Management of the branch office

• The branch office shall be lead by a managing director, who shall be legally competent, not in bankruptcy, resident in the European Economic Area, (EEA)


• and not subject to a prohibition to conduct business. However, Bolagsverket may grant an exemption from the residence requirement.

• If the managing director is not a resident of Sweden, the foreign company must appoint a Swedish resident to accept service on its behalf.

• The managing director shall be responsible for the branch office’s operations. The foreign company shall issue a power of attorney for the managing director. Such power of attorney shall authorize the managing director to act on behalf of the foreign company in all matters concerning its activities in Sweden, to accept service of process on behalf of the foreign company, and be the legally responsible representative of the foreign company.

Accounts

• The accounts and bookkeeping of a branch office shall be kept separate from the accounts of the foreign company.

• The managing director of the branch office shall annually submit to Bolagsverket certain accounts for the branch office and/or the foreign owning company, depeding on whether that company is within the European Economic Area, (EEA) or not. Detailed information is, again, to be found at Bolagsverket’s site.

Auditor

• A Swedish authorized (certified) public accountant or an approved accountant or a registered accounting firm shall audit the administration and accounts of the branch office.

Part IV – Swedish Limited Company - Forms of Business Ventures in Sweden

The most common way of establishing a business in Sweden is through a company limited by shares (“Aktiebolag”). This form of companies is regulated by the Swedish Companies Act

Formation

• It is formed by one or more natural persons or legal entities.

Foreign Owners

• All shares in the company may be owned by foreign nationals or companies and no special acquisition permit is required.

Legal Entity

• The company is a legal entity and is issued with a registration number (“organisationsnummer”).

Two Kinds of Limited Companies

• Swedish limited companies are divided into two categories, private companies and public companies. The provisions of the Swedish Companies Act are applicable to all limited companies, but there are some statutory rules that differ between the two kinds of limited companies. The main rules that differ are the following.

• Public limited companies shall have a share capital of not less than SEK500,000 while the minimum share capital of private companies is SEK 100,000.

• Only public limited companies may issue investment certificates to the public and thus only public limited companies can be listed on an exchange. A private company, or a shareholder of such company, may not attempt through advertising to distribute shares or subscription rights in the company or debentures or warrants issued by the company.

• The board of a public company shall consist of at least three members but a private company is allowed to have one or more.

• A managing director has to be appointed in a public company. In private companies it is allowed to have a managing director and most private companies has appointed one.

Auditor

• A limited company must appoint one o more approved or authorized public accountants to act as company auditor.

Business name

• The registered business name of a limited company is protected throughout the country.

Financial Year

• A limited company may have a split financial year, which can facilitate financial planning with regard to taxes, credits, salaries and interest.

Responsibility and risk

• A considerable capital investment is necessary when starting up a limited company, but apart from that, the owners have no personal responsibility for the company’s debts or other obligations.

• N. B.!! The board of directors and the managing director has extensive responsibility and in certain circumstances, these persons can become personally responsible for the company’s debts; especially unpaid taxes and social contributions.

Voting Rights

• The Swedish Companies Act sets out the general rule that each share has one vote, but the articles of association may provide for shares with differences in voting rights. However, no share may have a voting right exceeding more than ten times the voting right of another share.

Rights in dividend etc

• The main rule is that all shares carry equal rights in the company. However, the articles of association may provide for shares of different classes. Shares may carry different rights to dividend and/or in the assets in case of liquidation.

New Swedish Companies Act 2006

• It should be noted that a new Swedish Companies Act is proposed to enter into force on January 1, 2006.

Part III – Swedish Sole Trader (”Enskild firma”) - Forms of Business Ventures in Sweden

Sole Trader (“Enskild firma”)

• A sole trader is a natural person who runs a business and represents it her/himself. The business is not a legal entity and, thus, the sole trader is personally liable for the debts accumulated in the business, the performance of contracts etc.

• If a person not domiciled in Sweden wishes to trade as a sole trader in Sweden, he or she has to appoint a manager domiciled in Sweden, who will then be the person responsible for the business activities.

• If the activities carried on by the sole trader is such that he would have been obliged to keep accounting records according the otherwise obsolete Book-Keeping Act of 1929, he has to register the business with Bolagsverket (the Swedish Companies Registration Office) Registration is always necessary for businesses involving trade in goods, chattels, securities or real estate, legal practise, patent offices and theatres.

• Registration is made in the trade registry for the county in which the business is carried on and the business name is protected only in that county. However, it is allowed to apply for registration in the trade registry of more than one county.

• The identity of the business is tied to the Swedish social security number (“personnummer”) of the sole trader. The business registered is not assigned a separate identity number and, thus, several different businesses may be registered under the same number.

• The business name may be selected freely but may not be misleading or too general.

Part II - Forms of Business Ventures in Sweden

Sole Trader

• Only a natural person may act as a Sole Trader (“Enskild firma”). A person living abroad (not legally domiciled in Sweden) must appoint a manager who will be held responsible for the business in Sweden. The manager must be legally domiciled (folkbokförd) in Sweden.

The remaining five forms of business ventures are open to foreign companies as well as natural persons interested in starting business in Sweden.

Limited Company

• The most common way of establishing a business in Sweden is through a company limited by shares (“Aktiebolag”). All shares in the company may be owned by foreign nationals or companies and no special acquisition permit is required.

• Swedish limited companies are divided into two categories, private companies and public companies. Only public companies can offer their shares to the general public and have to have a share capital of at least SEK 500,000 while the minimum share capital of private companies is SEK 100,000.

• It should be noted that a new Swedish Companies Act is proposed to enter into force on January 1, 2006.

Branch

• A foreign company may do business in Sweden through a branch with its own independent administration. A branch does not require any actual capital investment by the foreign owner, as the branch has no share capital. It is not considered as an independent legal entity but as a part of the foreign parent company.

EEIG

• The next alternative, the European Economic Interest Group, EEIG, is only open to nationals and companies domiciled in the European Economic Area, EEA. The EEIG is especially useful in a situation when several companies in at least two of the EEA countries want a separate entity for a special project.

European Company (SE)

• Another alternative, open only to companies within the European Union is the European Company or SE (“Europabolag”).

Trading Partnership and Limited Partnership

• Going back to more traditional Swedish company forms, one way is to establish a Trading Partnership (“Handelsbolag”) or a Limited Partnership (”Kommanditbolag”). In a Trading Partnership all partners are liable for the company´s commitments, but in a Limited Partnership one or several partners can agree to be liable for all debts of the company while the remaining partners are liable only for their investment, which has to be at least SEK 1 (one).

Economic Association

• Finally, an Economic Association (”Ekonomisk Förening”) could be established. It is, however, an open association mainly for co-operative activities and, in principle, it cannot refuse membership to anyone. There is no demand for a starting capital similar to a share capital of the limited company. The business activities of the association should be to the financial benefit of the members.

Part I - Forms of Business Ventures in Sweden

There are several forms of business ventures in Sweden; all are open to natural persons and legal entities domiciled within the EEA. However, certain forms are also open to non-EU companies.  

The business venture forms recognised under Swedish law are the following:

1. sole trader (“Enskild firma”)


2. Swedish subsidiary i.e. a Swedish corporation/limited company (“Aktiebolag”)


3. branch office (“Filial”)


4. European Economic Interest Group, EEIG


5. European Company (SE)


6. Trading Partnership or a Limited Partnership (“Handelsbolag or Kommanditbolag”)


7. Economic Association (”Ekonomisk Förening”).

In the next post I will very shortly give some basic facts about these six forms. I will then devote one or more posts on each of these forms later on.

Part VI – Responsibility of parent companies - After-treatment measure responsibility under the Swedish Environmental Code

• A much debated question in Sweden – probably only among environmental lawyers - is to what extent a shareholder or a parent company could be considered to be as an operator and thus could be held responsible for clean-up and after-treatment measures.

• The Swedish Environmental Code defines operators as “persons who pursue or have pursued an activity or taken a measure that is a contributory cause of the pollution”.

• It has been forcefully argued that this should be interpreted to include a parent company in the group of operators if the activities of a subsidiary constitutes a natural part of the parents group of companies and if the parent has exercised a legal and factual substantial control over the activities of the subsidiary. Against this has been argued, equally forceful, that such an interpretation is much too wide and not in line with the language of the Code.

• Chapter 10 of the Swedish Environmental Code is intended to fulfil the obligations of Sweden under the European Union directive 96/61/EC (the IPPC directive). This directive states clearly that an operator is “any natural or legal person who operates or controls the installation or, where this is provided for in national legislation, to whom decisive economic power over the technical functioning of the installation has been delegated.”

• However, a complication is that the translation into Swedish – if translated back to English – does not use the expression “who operates or controls” but “who operates or holds”. There is an obvious difference between controlling an installation, on the one hand, and holding an installation, on the other. It has, been argued that, unless the Swedish courts adopt the wider interpretation and includes parent companies as operators under certain circumstances; Sweden will be in breach of the IPPC directive.

• Until a ruling is made by the Supreme Court of Sweden, it is impossible to say whether a parent company may be responsible for the clean-up and after-treatment measures of a subsidiary.

Part V – Due Diligence investigations related to real property - After-treatment measure responsibility under the Swedish Environmental Code

• As mentioned in the previous post a purchaser of real property in Sweden may acquire a liability for any necessary clean-up and after-treatment measures; provided that the company conducting the environmentally hazardous activities causing the pollution on the real property is not able to pay for these measures.

• A purchaser of real property has a general obligation to carry out a substantial and thorough investigation of the real property he is buying according to the Swedish Real Property Code (cannot find any English translation!). Caveat emptor! It is not 100 per cent clear that the investigation to be carried out according to the Swedish Environmental Code is equal to the one under the Real Property Code but it is generally assumed that this is the case.

• It should, however, be noted, as very important point, that no agreement between the seller and the purchaser will influence the purchaser’s after-treatment measure responsibility towards the authorities; even if such an agreement may give the purchaser the possibility to seek compensation from the seller e.g. due to a breached guarantee.

• The due diligence investigation under the Swedish Environmental Code must first of all include a thorough ocular investigation. Should any land unevenness, rusting barrels or drums be visible, this must cause added investigations e.g. digging and analyzing soil samples. Normally, an investigation under the Swedish Real Property Code could be limited to non-destructive investigation. The purchaser need thus not open up floors or walls or start digging, but if there is an indication that something might be wrong such investigations have to be made.

• It is also clear that a purchaser has an obligation to find out what kind of business activities have been carried out on the property to be purchased. Any indication that such activities could have entailed a risk for pollution, such aspects must be deemed to cause additional investigations.

• The purchaser’s investigation under the Swedish Real Property Code may be limited because of information from the seller. This is not the case for investigations under the Swedish Environmental Code. The reason for this is, of course, that in the first case, it is a matter solely between seller and purchaser. Under the Environmental Code, however, such information does not effect the purchaser’s obligation to investigate, because one of the purposes of the Code is to bring about these investigations and thus to reveal pollution.

Part IV ... cont - Purchase of business assets including real property - After-treatment measure responsibility under the Swedish Environmental Code

• As a purchaser of real property you have to safeguard yourself against unwanted and unknown liabilities to the extent possible and you should take the following steps.

• Carry out a thorough environmental due diligence to ascertain the possible risks of environmental liability resting on the company. This should preferably be done separate from the normal real property due diligence as the investigators called in most probably should have different fields of expertise. I will revert to some questions related to the environmental due diligence in a later post.

• Provide for a compensation under the purchase agreement from the seller if, and, when, the purchaser is required to undertake and pay for the clean-up and after-treatment measures.

• However, such a provision is not enough, as the purchaser’s liability is only triggered if the company conducting the environmentally hazardous activities is unable to pay for the clean-up and after-treatment measures. This company will most probably be the seller, and if he cannot pay for these measures he will not be able to compensate the purchaser. Some kind of additional independent guarantee will be need provided by a parent company or a bank or financial institution.

• The contractual provision will only apply between seller and purchaser. The legal claims under Chapter 10 of the Swedish Environmental Code will still have to be handled and borne by the purchaser.

The next post will cover “Due Diligence investigations related to real property”

Part IV - Purchase of business assets including real property - After-treatment measure responsibility under the Swedish Environmental Code

Considerations in connection with the purchase of the business assets including real property of a Swedish company

• If you purchase the business assets of a company and that purchase includes real property, you have also acquired the risk of being liable for any necessary clean-up and after-treatment measures; provided that the company conducting the environmentally hazardous activities causing the pollution is not able to pay for these measures. However, if you did not know or should not know of the pollution you are free of the responsibility.

• If we assume that the seller did not inform you of any pollution and even if he guaranteed that the real property was free from pollution, you, as a purchaser, may have acquired liability, because you ought to have known.

• It is a general principle in Swedish law that as a purchaser of real property, you have an obligation to investigate the real property thoroughly. You are not able to claim that you should be entitled to rescind the purchase contract nor to compensation for “hidden defects”, if such defects would have been possible to find at a competent investigation of the real property prior to the purchase. The same principle may be said to apply also to pollution.

To be continued

Part III - Purchase of shares - After-treatment measure responsibility under the Swedish Environmental Code

As a purchaser of shares in a Swedish company you have to consider the environmental aspects mentioned in earlier posts.

• If you purchase the shares of a company which has been or is conducting environmentally hazardous activities, owning real property or buildings or even leasing real property, a building or only a part thereof, the shares of that company  will introduce any and all of its environmental responsibility under the Swedish Environmental Code into your own group of companies. The change of owner does of course not change in any way the fact that the company in question may have liabilities under the Code.

• As a purchaser you have to safeguard yourself against unwanted and unknown liabilities to the extent possible and you should take the following steps.

• Carry out a thorough environmental due diligence to ascertain the possible risks of environmental liability resting on the company.

• Provide for a compensation under the share purchase agreement from the seller if, and, when, the company is required to undertake and pay for clean-up and after-treatment measures. Such a provision will only apply between seller and purchaser. The legal claims under Chapter 10 of the Swedish Environmental Code will still have to be handled and borne by the company.

The next post will cover “Purchase of business assets including real property”

Swedish codes in English

Some Swedish codes have been translated into English. The main problem is that the government does not seem to be able to keep them up to date.


A summary of the available material is found in this List of translations into English of Swedish Codes.  


The major Swedish codes translated are

• The Swedish Code of Judicial Procedure

• The Administrative Court Procedure Act

• The Swedish Penal Code

• The Swedish Enforcement Code

• The Swedish Environmental Code

You will find some information in English about the Swedish Rules of Family Law
and Public Access to Information and Secrecy with Swedish Authorities


The Proposal for a Swedish Code of Corporate Covernance has also been translated.

Part II – Responsibility Issues - After-treatment measure responsibility under the Swedish Environmental Code

After-treatment measures

• Environmental damage requiring clean-up and after-treatment is considered to have occurred when pollution may cause detriment to human health or the environment. The rules covering after-treatment of contaminated sites can be found in Chapter 10 of the Swedish Environmental Code and are mainly based on the Polluter Pays Principle.  

• The party who carries the liability for the pollution must, to a reasonable extent, also perform or pay for investigations of the possible pollution and then for the after-treatment measures necessary to counteract damage or detriment to health or the environment.

Responsible parties

• According to Chapter 10, it is primarily the operator, former or present, conducting the environmentally hazardous activity, which is responsible for the clean-up of the pollution. In case of several operators contributing to the pollution, they are held jointly and severally responsible.

• It is possible to hold persons or legal entities which can be considered as holding controlling interest over the actual operator as a liable party. I will revert to this question in a later post.

• If none of the operators can perform or pay for restoration and after-treatment measures, then the landowner is liable in the second instance provided that the landowner when purchasing the land was neither aware of the pollution nor should have been aware of it.

• If the person responsible cannot be identified or is insolvent, the public pays for the after-treatment.

The next post will cover “Purchase of shares”

Part I - General Issues - After-treatment measure responsibility under the Swedish Environmental Code

Aim of the Swedish Environmental Code

• The Swedish Environmental Code states in its first chapter that its purpose is to promote sustainable development in order to assure present and future generations in Sweden a healthy and sound environment.  

Rule of environmental consideration

• Chapter 2 of the Code contains a general rule of environmental consideration applicable to all activities.

• The Swedish Environmental Code applies to all operations and measures that affect the environment or human health. It is thus not important if the operation or measure takes place as part of commercial or of non-professional, private activities.

Environmentally hazardous activity

• Environmentally hazardous activity is defined in Chapter 9 i. a. to refer to any use of land, buildings or fixed installations that involves an emission to land, the atmosphere or water including all other nuisances to human health or the environment as e.g. light. noise, vibration and radiation.

• It is important not to read too much into the word “activity” and also to view the concept of ’use’ in a long-term perspective. A rubbish dump is considered an environmentally hazardous activity, even if waste is no longer deposited, as long as the waste may result in pollution.

The next post will cover “Responsibility Issues”

After-treatment measure responsibility under the Swedish Environmental Code

The Swedish Environmental Code was made part of Swedish law on January 1, 1999 and then replaced 15 different laws and regulations in the environmental field. You will find a short résumé of the Code here and the full text here.

One of the most important chapters in the code from the point of view of the general business lawyer is Chapter 10 with the heading “Polluted areas - Responsibility for investigation and after-treatment”. I will try to give some pertinent information about this chapter through a number of posts.

Clean-up and after-treatment measure responsibility under the Swedish Environmental Code

I thought that I would start this Swedish Law Blog by a series of short articles on the Swedish rules on clean-up and after-treatment measure responsibility.

Just to wet your appetite I will give you the link to the Swedish Environmental Code today.