Swedish Law - Civil limitations/ "preskription"

The rules on civil limitation/"preskription" are found in the Swedish Limitations Act/"Preskriptionslag (1981:130)". I can not find any English translation of the act on the internet. It can be found as a part of "Swedish Commercial Legislation" available here.

The ordinary period of limitation in Sweden is ten years. However, the period of limitation for claims against consumers is three years, where the claim relates to goods, services or other commodities supplied by a manufacturer in the course of its business activities, for primarily personal use by the consumer.

Swedish Bankruptcy Law – Employee Claims

An employment contract does not automatically terminate because the employer is declared bankrupt. The receiver has to decide whether or not to give notice of termination.

An employee’s salary claim is considered as a general preferential status. Unpaid salaries due within three months before and within one month after the bankruptcy decision have such preferential status. Claims in respect of salary or other remuneration, which have preferential status, are also at least partly covered by a ‘salary guarantee’ according to the Swedish Wage Guarantee Act of 1992. To the extent the assets of the bankrupt estate are not enough to cover these employee claims, the employees will be able to obtain a limited compensation from the Swedish Government.

Floating charges

The most common form of general preferential claims is a floating charge (“företagsinteckning”). It is a security which covers all business assets with certain exceptions e.g. liquid funds. However, creditors with a special preferential claim to a certain asset have, of course, priority before the holder of a floating charge.

For a couple of years the floating charge has been limited to only 55 per cent of the value of the assets to allow for an increased possibility of payment of non-preferential claims. On January 1, 2009 this will be changed and 55 will become 100 per cent again.

Swedish Bankruptcy Law – Preferential claims (claims with “förmånsrätt”)

Creditors who have a security with a special preferential claim are entitled to receive payment out of the assets of the bankruptcy estate so secured before other creditors. This may be the case, for example, where a certain asset has been pledged in security.

If a creditor has obtained an attachment by the Swedish Enforcement Authority (“Kronofogdemyndigheten”) of an asset, he has also a special preferential claim in such an asset.

Creditors who have a security with a general preferential claim are entitled to receive payment out of all the assets of the bankruptcy estate not covered by a special preferential claim before both creditors with lower preferential claims and creditors with no preferential claims. Non-preferential claims are treated equally in the distribution of the assets remaining after costs and preferential claims.

Swedish Bankruptcy Law – Creditor’s Set-off Rights

A creditor who has a claim against the bankrupt is allowed to a set-off against a claim which the bankrupt may have against the creditor, provided – in general terms - that the claims are of the same type (e.g. that they are both claims for money) and that the creditor’s claim has arisen prior to the date specified in the bankruptcy decision as the prior date when the bankruptcy should be considered effective (“fristdag”).

Swedish Bankruptcy Law – Lodging of Creditors’ Claims

If the assets are sufficient for full or part payment to the creditors who do not have a preferential claim, a proof of claim procedure is initiated by the receiver, who then applies to the court for such a procedure to start. The court decides on whether to grant the application and also on the length of time the procedure will last, which must be at least four but no longer than ten weeks.

The court’s decision to start a proof of claim procedure will be published in the Official Swedish Gazette and in one or more newspapers in the applicable geographical area. The creditors will then be allowed to lodge their claims in writingwith the court.

Swedish Bankruptcy Law - Creditors

The creditors, except the creditor who applied for bankruptcy, are informed of the bankruptcy through the publication of the bankruptcy decision in the papers. The bankrupt is obliged to tell the receiver, the court and the Supervisory Office who the creditors are.

The receiver will protect the rights of creditors in the bankruptcy. He/she has the right to question creditors with a particular interest on important matters to the bankruptcy estate.

Swedish Bankruptcy Law - Bankruptcy Estate Inventory Deed

The receiver will, based on information from the bankrupt, prepare and present to the court a bankruptcy estate inventory deed showing the assets and liabilities of the bankrupt. Thereafter a meeting is held in the court and the bankrupt is obliged to declare under oath before the court that the deed is correct. Before this has taken place, the bankrupt, and the directors in the case of a company, may not leave Sweden without the permission of the court.

If a creditor has lodged the bankruptcy petition, he/she will be summoned to this court meeting.

Swedish Bankruptcy Law - Effects of the Initiation of Bankruptcy Proceedings (continued)

The bankrupt, and the directors in the case of a company, is obliged to cooperate with and provide information to the receiver, the court and the Supervisory Office (“Tillsynsmyndigheten”), which is a part of the Swedish Enforcement Authority (“Kronofogdemyndigheten”) and supervises the administration of the bankruptcy estate by the receiver.

Swedish Bankruptcy Law - Effects of the Initiation of Bankruptcy Proceedings

The bankrupt may not dispose of property which belongs to the estate and he is not entitled to engage in any business activities. If the bankrupt is a company all rights to represent the company transfer to the receiver upon the bankruptcy decision by the court. Thus, the bankrupt is not entitled to enter into any agreements, sell assets or pay debts belonging to the estate.

All the bankrupt's property is included in the estate in bankruptcy and must as far as possible be used to pay off the debts. Certain exemptions apply if the bankrupt is a natural person.

The receiver administers the bankruptcy estate. He/she will consider all of the creditors’ common rights and wind up the estate as quickly as possible and will take charge of the bankrupt's property, sell the assets and finally distribute the balance, if any, among the creditors in the order of preference set out in the Preferential Claims Act (1970:979) (“Förmånsrättslagen”).

Swedish Bankruptcy Law - Initiating Procedure

A debtor who is insolvent can be declared bankrupt. Insolvency is defined in the Swedish Bankruptcy Act (1987:672) as being unable to pay one’s debts in a proper manner where such inability is not temporary. This applies to natural persons as well as companies.

The bankruptcy application can be lodged by the debtor himself or by a creditor. The application should be lodged with the court where the debtor is resident, or in the case of a company, where the debtor is established. The court decides on whether to approve or disapprove the bankruptcy application and appoints at the same time an official receiver. The bankruptcy decision will be published in the Official Swedish Gazette (“Post- och Inrikes Tidningar”) and in one or more newspapers in the applicable geographical area.

Swedish Bankruptcy Law

As I received a question relating to Swedish Bankruptcy Law recently, I have decided to write a series of short posts on the Swedish bankruptcy rules.

Unfortunately, I cannot find an English translation of the Swedish Bankruptcy Act anywhere on the net. For those of you who understand Swedish I can give this link to the Swedish original text.

Access to Internet Information about Danish Companies

I have a new post today on this subject at my blog, Swedish Corporate Law

Access to Internet Information about Swedish Companies

I have a new post today on this subject at my blog, Swedish Corporate Law

Purchasing Real Estate in Sweden - Notes on Purchase of Commercial Real Estate including Tenement Buildings - Signatures

It should be kept in mind that the managing director of a selling company normally would not be authorised to sign the purchase agreement in his capacity as managing director.

The agreement should be signed by authorised signatories as stated in the registration certificate.

A managing director has the right to enter into agreements in the daily course of business but a sale of real estate does not normally fall within that category. However, it is not uncommon that the managing director has been appointed sole signatory of the company, in which case his signature, of course, is enough.

Purchasing Real Estate in Sweden - Notes on Purchase of Commercial Real Estate including Tenement Buildings – Guarantees related to Tenants

Normally a purchase agreement for tenement building should include guarantees in respect of the rent level, the payment discipline of the tenants and any disputes with tenants. All tenement contracts should also be made available to the purchaser prior to signing.

Purchasing Real Estate in Sweden - Notes on Purchase of Commercial Real Estate including Tenement Buildings - Environmental issues

As a purchaser of commercial real estate, you acquire the risk of being liable for any necessary clean-up and after-treatment measures; provided that the previous owners conducting an environmentally hazardous activities causing pollution are not able to pay for these measures. However, if the purchaser did not know or should not know of the pollution he is free of this responsibility.

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

It is a general principle in Swedish law as mentioned in a previous post that a purchaser of real estate has an obligation to investigate the real estate thoroughly. The purchaser is not able to claim that he 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.

A purchaser of real property has to safeguard himself against unwanted and unknown liabilities to the extent possible and should at least carry out a thorough environmental due diligence to ascertain the possible risks of environmental liability. 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.

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 Purchase Agreement should provide for a compensation from the seller if, and, when, the purchaser is required to undertake and pay for the clean-up and after-treatment measures. 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.

Purchasing Real Estate in Sweden - Notes on Purchase of Commercial Real Estate including Tenement Buildings

In addition to what is applicable to private homes / villas certain points need to be considered if the object of a purchase is a commercial real estate or a tenement building.

Certain issues have already been mentioned such as permits but the following should also be kept in mind.

• Environmental issues
• Guarantees related to tenants
• Signatures

These points will be covered in later posts.

Purchasing Real Estate in Sweden - Registration of new owner

The buyer should register his title to the real estate within three months of completing the transfer. However, failure to register the title within the stipulated time will not make the purchase invalid.

The registration in the Land Register is important for many reasons; mainly because it gives the buyer – in good faith – priority to title from the day of application for registration. As mentioned before, i.a. in this post, it is also necessary for the buyer when applying for mortgages.

Competitor to Swedish Law Blog???

A friend of mine alerted me to a site called swedishlaw.com

Interesting! So off I went to the site.

• The first thing I noted was that the left side links seemed a bit curious for a site devoted to “Swedish law” e.g. Swedish Bitters, Sweden Travel, Sweden Hotel, Swedish fish, Swedish food, Flight to Sweden. But the links lead you to other links about Swedish bitters, hotels etc. at least. So far so good!

• The second link was to “Bankruptcy Law Reform”. Hmm, interesting but the new Bankrutcy Act was enacted in 1987/88 in Sweden? No breaking news. When I followed the link I got to a list of new links – about English bankruptcy issues. I learnt that “ It Is Possible to Avoid Bankruptcy”. Good to know but not so Swedish.

• Next link. “Law blog” New list of links. The only one related to blogs was “AOL Women - Community Blogs”. Otherwise there were some interesting links. You could get “Unlimited legal advice for only £12.75 for six months”. I did not check the site but I think that we are still using the Swedish Krona (SEK) here in Sweden!

• The link “Law school” seemed interesting. Well, if I should go to law school again and learn some Swedish law I do not think “University of Edinburgh, School of Law” would be my first choice. But it was the first link I saw. No Swedish links.

• The links to “Common law” and “Federal law” could not refer to Swedish law as we do not have a common law system or any federal legislation.

• The best laugh I got when I clicked on “Sweden Map”. I got two links, one to “Free Download to Learn Swedish Fast” and to “Switzerland Maps”. Well, it is easy to mix up Sweden and Switzerland, but at a site called swedishlaw? Come on!!!

So that site is not a very useful site, if you are interested in Swedish law, but if you have a sweet tooth, do follow the link suggested by swedishlaw.com and check out ebay uk for Swedish Fish.