Swedish Law – Purchasing Real Estate in Sweden - Sale of Co-Owned Property

I have received a question about the sale of a property by a 50 % owner.

Question:

Is it possible for a 50% share owner of a property to order the sale of the entire property without the consent of the remaining partners?

As my answer may be hard to find among the old posts on Purchases of real estate in Sweden I publish it here.

Answer:

Yes and no. I am a lawyer you know ;)

The rules of the Swedish Act on Co-Ownership (Lag (1904:48 s.1) om samäganderätt) apply.

According to this act, if a house or other real property is owned by more than one person, each co-owner, irrespective of the share he owns, has the right to go to court and ask the court to appoint a custodian, who will then arrange for the sale of the property through a public sale.

The Pirate Bay Sentence Today

The four men connected with The Pirate Bay were sentenced today to one year of imprisonment each for being accessories to copyright infringement. They shall also pay damages in an amount of SEK 30 million corresponding to about US$ 3.5 million. The Local has more in this article Pirate Bay guilty.

Swedish Law – SAAB Reorganisation

The Vänersborg City Court decided today at the creditors’ meeting that the SAAB reorganisation shall continue until May 20, 2009. At the request of some creditors the court appointed a creditors’ committee. As mentioned in an earlier blog post the administrator shall consult with the committee in all significant issues.

Swedish Law – SAAB Reorganisation

As mentioned in an earlier blog post the SAAB creditors’ meeting will take place in Vänersborg today. Further information can be found in this article in the Local.

Swedish Law – Company Reorganisation – Compulsory Composition (continued)

Only creditors whose claims arose prior to the application for company reorganisation may participate in composition proceedings.

A creditor whose claim may be satisfied through set-off or whose claim is subject to rights of priority may not participate in the proceedings. If a creditor has a subordinated claim, he is not allowed to participate in the composition proceedings, unless the other creditors who are participating in the proceedings should consent to this.

If a creditor waives its rights of set-off or priority, in whole or in part, the creditor may participate in the proceedings to a corresponding extent. It should be noted that a creditor may participate in the proceedings, even if his claim is not due and payable or is tied to certain conditions in order to be payable.

(to be continued)

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)

Swedish Law – Company Reorganisation – Termination of Reorganisation

Before I go into the next steps in a successful company reorganisation, I find it appropriate to mention the situations where the reorganisation will be terminated by the district court. They are:

• when the purpose of the reorganisation is deemed to have been achieved,
  
  
• if the company requests a termination and a decision to proceed to composition has not been passed,
  
  
• if the company fails to participate in the creditors’ meeting,
  
  
• if the administrator or a creditor so requests and the purpose of the reorganisation is deemed not to be possible to achieve and
  
  
• if a special cause otherwise exists for a termination.
  

As mentioned in an earlier blog post, the time period during which the administrator should finalise his action to achieve a reorganisation is three months from the date of the reorganisation decision by the court. In line with that, the court has a duty to terminate the reorganisation three months from that decision.

However, if special causes exsist, the court may prolong this period by additional periods, each time of a maximum of three months, but the total reorganisation period may not exceed one year.

Swedish Law – Company Reorganisation – Right to Set-Off (continued)

The first of the exemptions from the right to set-off mentioned in my last blog post covers claims on the company acquired from a third party later than three months prior to the date when the application for company reorganisation was filed. Such a claim may only be offset against a claim which the company possessed at the time at which the creditor acquired its claim, if the acquisition could be deemed as ordinary.

Also exempted are claims where the creditor has incurred liabilities towards the company under such circumstances as may be equated with payment other than by customary means of payment, but only to the extent such payment could have been the subject of recovery procedures according to the recovery rules in the Swedish Company Reorganisation Act (1996:764). These rules will be covered later as they are part of the provisions regarding judicial composition.

It should be noted that a claim of a guarantor or other person who has acquired a claim, because he has satisfied an obligation (right of recourse), shall be deemed to have been acquired at the time when the obligation of the guarantor or such other person arose and not at the later date when the claim was acquired.

If, after the date when the application for company reorganisation was filed, the company transfers a claim in such a manner that a creditor thereby loses its right to set-off, the company shall compensate the creditor.

Swedish Law – Company Reorganisation – Right to Set-Off

The basic rule concerning right to set-off is that anyone who held a claim against the company when the application for company reorganisation was filed has the right to offset such claim against claims which the company had at such date against such person. The right to set-off applies even if the claim was not due and payable.

There are, of course, some exemptions to this basic rule and I will cover them in my next blog post.

Swedish Law – Company Reorganisation –Company’s Agreements (continued)

The provisions about what happens to the agreements of a Swedish company undergoing reorganisation apply even if the parties have agreed otherwise. Any agreement contrary to the rules in the Act is null and void.

It should also be noted that the provisions do not apply to employment contracts not to creditors holding financial instruments or currency as security.

Swedish Law – Company Reorganisation –Company’s Agreements

If a party to an agreement with the company was entitled to terminate the agreement prior to the reorganisation decision due to actual or anticipated delay in payment or performance, such party is prevented from effecting such termination provided the company with the administrator’s consent demands within a reasonable period of time that the agreement shall be performed. The company is also obliged at the request of the other party to provide notice whether the agreement will be performed.

There are of course certain conditions that have to be fulfilled by the company.

• If the performance of the other party is due, the company shall, if so requested, perform its corresponding obligations.

• If the performance of the other party is not due, the other party is entitled to receive security for the company’s future performance to the extent this is required by special cause in order to protect the other party against loss.


If the company should fail to provide a notice when requested by the other party or fail to fulfil the conditions mentioned above, the other party is entitled to terminate the agreement.

Swedish Law – Company Reorganisation - Enforcement Measures during Reorganisation

During the reorganisation period no levy of execution or other enforcement measures may take place against the company with the exception of claims where the creditor has a possessory pledge right or a right of retention.

No decisions regarding provisional attachment (arrest) or payment security may be passed during the reorganisation period.

If there is a special cause to believe that the company is acting in a way that may jeopardise a creditor’s rights, the creditor may apply for and the court may pass such decisions as it deems fit to secure such rights.

Should a creditor apply for bankruptcy during the reorganisation period, the court should stay the bankruptcy proceedings if so requested by the company.

Swedish Law – Company Reorganisation - Creditors’ Meeting

As mentioned earlier a creditors’ meeting should be held within three weeks from the date of the reorganisation decision or, if it is an unavoidable necessity, at a later date. Such an unavoidable necessity seems to have caused the SAAB creditors’ meeting to be held on April 6, 2009, more than six weeks from the date of the reorganisation decision.

The administrator will present at the meeting the information available to him concerning the financial status of the company and normally also a preliminary reorganisation plan setting out the manner in which the reorganisation can be achieved.

At the meeting the creditors are given the opportunity to express their opinion about whether the reorganisation should continue or not, but no formal vote is taken. It is of course of the outmost importance for the success of the reorganisation, that a substantial majority of the creditors agree to continue as a majority is needed in order to carry through an official composition with the creditors; although only a 40 % majority is needed to lodge an application for composition.

The creditors are entitled to request the court to appoint a creditors’ committee at the creditors’ meeting. If such a committee has been appointed the administrator shall consult with the committee in all significant issues.

It should be noted that during the reorganisation period, any creditor has the right to apply to the court for a decision to stop the proceedings. The court will agree to such an application if the court determines that the purpose of the reorganisation cannot be achieved.

Swedish Law – SAAB Reorganisation

Swedish news agencies now report as in The Local that GM agrees to pay SAAB's debts to suppliers.

Swedish Law – SAAB Reorganisation

The Local’s latest SAAB news. It does not add very much to my latest post on the subject.

Swedish Law – SAAB Reorganisation

Three points to note:

1. The future custom duties problem of SAAB seems to be solved through an agreement between SAAB and the company ”Tullxperten”. The release of the material already held by the Swedish Customs is, however, still a problem to be solved.

2. The sub-suppliers of SAAB consider the agreement they were asked by GM’s company, GPSC UK Ltd, to enter as tough. GPSC UK Ltd offered to purchase the claims of the sub-suppliers on SAAB but to this purchase were tied some tough conditions.

3. Saab AB, the defence and security company, and the car manufacturer Saab Automobile AB are two different companies with unrelated ownership structures. Since 2000 Saab Automobile AB is 100 percent owned by General Motors and Saab AB is listed on the Stockholm Stock Exchange. For further information check Saab – one name, two different companies.

Swedish Law – Company Reorganisation - Company’s obligations

During the reorganisation the company has to provide the administrator with all financial information of significance in the reorganisation and shall comply with the administrator’s instructions regarding the way the company’s business shall be conducted.

The Company needs the consent of the administrator

• to pay debts incurred prior to the reorganisation decision by the court,
  
• to provide security for such debts,
  
• to incur new obligations and
  
• to transfer, pledge or grant any rights in property of material significance to the company’s business.

If the company fails to obtain the administrator’s consent this does not affect the validity of the company’s action.

It should be noted that the administrator may give his consent only where special cause exists.

Swedish Law – Company Reorganisation

Duties of the Administrator

The administrator is obliged to inform all known creditors of the company of the reorganisation decision within one week. Such information shall also include

• a preliminary schedule of the assets and liabilities of the company,
  
• the most recent balance sheet and any additional information required about the company’s financial position,
  
• the reasons for the payment difficulties and how the business activities of the company may be reorganised and
  
• information about the date of a creditors meeting set by the court in connection with the reorganisation decision.
  

The last mentioned court meeting shall be held within three weeks from the date of the reorganisation decision or, if it is an unavoidable necessity, a later date.

The Swedish Company Reorganisation Act requires the administrator to examine if the business activities of the company can be continued, in whole or in part, and, if so, how this can be achieved, and, finally, if it is possible for the company to obtain a composition with the creditors.

A plan which sets out the manner in which the goals of the reorganisation shall be achieved shall also be prepared by the administrator in consultation with the company.

What the act does not explicitly state is that the administrator, together with the management and board of the company, has to find ways to finance the continued activities and the possible composition with the creditors. Normally this is the major obstacle and less than 10 per cent of the Swedish company reorganisations are successful.

The administrator has to take these actions within a period of three months unless the court finds it necessary to prolong this period for additional periods of three months but no longer than one year.

Swedish Law – Company Reorganisation

Application and Court Decision
The application for reorganisation should be filed with the district court which has territorial jurisdiction over the company. The court will make a decision immediately if the application has been made by the company; normally on the day the application is filed. If the application is filed by a creditor, a court meeting to try the application will be held within two weeks.

If the court decides that a reorganisation shall take place, it will also appoint an administrator of the reorganisation and decided a date for a creditors meeting, which normally will be held within three weeks.

The decisions of the local court may be appealed to the applicable Court of Appeal, if permission is granted, and to the Swedish Supreme Court.

Swedish Law – Company Reorganisation – Administrator Appointed

As a very short update about the SAAB Automobile AB reorganisation I can tell you that the Swedish lawyer Guy Lofalk of Lofalk Advokatbyrå in Stockholm has been appointed administrator of the SAAB reorganisation by the City Court of Vänersborg.

The creditors meeting will take place in Vänersborg on April 6, 2009.

For further information about the SAAB reorganisation you may read this news item from The Local, "Sweden’s News in English".