Tuesday, March 24, 2009

Swedish Law – Company Reorganisation – Compulsory Composition

According to the old Composition Act of 1970 the creditors could be force to accept a composition provided a majority of the creditors voted for such a solution. The procedure under the old act was not part of a reorganisation procedure but a separate institute.

When the new legislation on company reorganisation was introduced in 1996 the old Composition Act was recalled and the composition procedure was integrated as a part of the new reorganisation procedure. It is, thus, no longer possible to obtain a forced composition outside the scope of a reorganisation.

Under normal circumstances and in order to be valid

  • the composition must provide all similarly entitled creditors with similar rights,
  • the composition must provide at least 25 percent of the amount of the claims, and
  • the prescribed minimum distribution shall be paid within one year following the composition order.

(to be continued)

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