Immovable Property

The primary form of security over immovable property is the real property mortgage, established through a two-step process:

• Mortgage registration (Sw. inteckning): The property owner applies to the Swedish mapping, cadastral and land registration authority to register a specific monetary amount in the property. Proof of registration is a mortgage certificate (Sw. pantbrev), which may be either a physical document or an electronic entry (Sw. datapantbrev).
• Pledging (Sw. pantsättning): The mortgage right is created when the mortgage certificate is delivered to the creditor as security for a debt. For electronic certificates, perfection occurs when the creditor is registered as the holder in the mortgage certificate register. If the certificate is not delivered, no perfected security interest is created, which means that the creditor holds only a contractual claim against the debtor. The undelivered certificate constitutes an owner’s mortgage (Sw. ägarhypotek), which may be seized by other creditors.

Movable Property

• Floating charge (Sw. företagshypotek): A floating charge over the movable assets of a business. Created by obtaining a business mortgage certificate and delivering it to the creditor (or, for electronic certificates, by registering the creditor as holder). Without delivery or registration, the security interest is unperfected and unenforceable against other creditors.
• Pledge (Sw. handpanträtt): The traditional form of security over tangible movable assets. Requires a pledge agreement and perfection through delivery (Sw. tradition) of the asset to the pledgee in a manner that effectively cuts off the pledgor’s control. If the asset is held by a third party, perfection is instead achieved by notice of assignment of claim (Sw. denuntiation) to that third party. Failure to meet this requirement renders the pledge invalid against the pledgor’s other creditors and bankruptcy estate. The requirement that physical delivery of the pledged asset must take place for the pledge to be perfected can often be a problem for non-Swedish creditors, as most legal systems internationally have no such requirement.
• Right of Retention (Sw. retentionsrätt): The right to retain possession of another’s property to secure a claim against the owner (e.g. a mechanic retaining a car until the repair bill is paid). A right of retention may arise by law or agreement and grants a special priority right.
• Security transfer of chattel (Sw. säkerhetsöverlåtelse): a security transfer involves the debtor formally transferring the property to the creditor, subject to an agreement that the property will be returned once the debt has been paid. The purpose of the transfer is therefore to create security rather than to actually transfer ownership of the property. Similar to a pledge, perfection of a security transfer requires delivery of the property to the creditor. As an alternative, if the property is to remain in the debtor’s possession, perfection of the security can be achieved through a registration procedure, which comes with strict formal requirements and time limits.

Enforcement of mortgages

For security based on a mortgage, such as a property mortgage and a floating charge, the involvement of the Swedish Enforcement Authority is required. The creditor cannot sell the mortgaged property themselves. To initiate a sale, the creditor must first obtain an enforcement order (e.g. a judgment or a ruling in a case concerning a payment order) establishing the debt. Thereafter, an enforcement sale through the Swedish Enforcement Authority may be requested.

Enforcement of a pledge

In the case of a possessory pledge, where the creditor has the pledged movable property in their possession, the creditor may, as a general rule, arrange the sale themselves, usually by public auction, without involving the Swedish Enforcement Authority. This also applies to pledged claims. However, there is an important prohibition against forfeiture clauses (Sw. förfallopant), meaning that an agreement whereby the creditor may retain the pledged property if the debt is not paid is invalid. Pledged shares and other financial instruments may be sold or realised through settlement by the creditor, provided that this is done in a commercially reasonable manner. A certain exception applies in bankruptcy proceedings for unlisted shares in a subsidiary of the bankruptcy debtor, see below.

Enforcement outside insolvency proceedings

Outside formal insolvency proceedings (such as bankruptcy or company restructing), there is no general moratorium preventing a creditor from enforcing their claim. A secured creditor may therefore commence enforcement in accordance with the methods described above as soon as the claim is due and any contractual conditions for termination are met.

It is worth noting, however, that a formal company restructuring under Swedish law entails a stay that halts attachment and other enforcement measures.

Enforcement in the event of bankruptcy

When a debtor is declared bankrupt, a bankruptcy trustee is appointed by the court. The trustee’s task is to liquidate all assets in the estate for the joint benefit of the creditors. The rights of secured creditors are affected as follows.

The trustee takes over and sells the debtor’s property, including property serving as security. The sale must take place as soon as is appropriate.

A creditor with a mortgage over immovable property is in a very strong position and may, independently of the bankruptcy trustee, request a forced sale through the Swedish Enforcement Authority to recover their claim, even during ongoing bankruptcy proceedings.

A creditor with a possessory pledge retains the right to sell the pledged property themselves. However, this right is limited. The sale may not take place until four weeks after the drawing up of the estate inventory, without the bankruptcy trustee’s consent, and the bankruptcy trustee must be given the opportunity to redeem the pledge on behalf of the estate. Pledged shares and other financial instruments may be sold or realised through settlement by the creditor, provided that this is done in a commercially reasonable manner. If the pledged asset comprises unlisted shares in a subsidiary of the bankruptcy debtor, the creditor must first give the bankruptcy estate the opportunity to redeem the shares.

Certain types of pledged claims, such as those arising from a credit institution granting a cash loan, may be realised immediately by the creditor. For other claims, it is the bankruptcy trustee who recovers them.

Regarding business mortgage, the creditor has no independent right of sale. It is the bankruptcy trustee who sells the property, and the creditor is then paid in accordance with their priority right from the proceeds received.

Practical issues

Realising security can be a slow process. Particularly in the case of mortgage security (real property mortgages and business mortgages), the requirement to first obtain an enforcement order can be time-consuming, especially if the debtor disputes the debt and the matter must be decided in court.

As in all enforcement proceedings, there is a risk that the value of the security will fall during the time it takes to complete the sale.

If there are several creditors with security in the same property, the order of priority is decisive. This order is governed by detailed rules in, inter alia, the Priority Rights Act (1970:979) and the Land Code (1970:994). Special priority rights (e.g. a mortgage) take precedence over general priority rights. The order of priority between special priority rights is often determined by the date of registration or application. Establishing the correct order of priority is a central part of every enforcement procedure.

The formal restructuring and rescue procedure available under Swedish law is company restructuring under the Swedish Company Restructuring Act. The Swedish restructuring scheme has undergone major updates following the implementation of the EU Directive 2019/1023 on Restructuring and Insolvency. A new Company Restructuring Act went into effect in August 2022.

Restructuring proceedings can be initiated both by the debtor and by a creditor. In practice it is almost exclusively the debtor who files for restructuring, as a creditor application cannot be granted without the debtor’s consent.

Two criteria have to be fulfilled for an application to be granted. Firstly, the debtor must be insolvent or at risk of becoming insolvent. Secondly, there must exist clear grounds to believe that the viability of the debtor’s business can be secured through the restructuring process (the so-called ’viability test’).

If the application for company restructuring is granted, an automatic stay comes into effect against enforcement measures and asset realisations by creditors (with some exceptions). Creditors are also prohibited from terminating contracts on grounds of delays in payment or lack of performance in other aspects that have occurred prior to the order for company restructuring.

When approving an application for company restructuring, the court will at the same time appoint one or more administrators to oversee the restructuring process. An administrator has an advisory role and does not replace the company board or management. The debtor is, however, required to follow the administrator’s instructions on how the business shall be operated and major business decisions may not be taken without prior consent of the administrator.

Debt write-downs and other restructuring measures are implemented via a restructuring plan, which is subject to a vote by the creditors and other stakeholders that are affected by the restructuring plan. Creditors are divided into voting classes based on their respective interests. At a minimum, creditors must be sorted into the following mandatory classes:

(i) Creditors whose claims are associated with a right of priority, a security interest, or a right of set-off;

(ii) Creditors with claims under public law (i.e. claims from the Swedish state for unpaid taxes and similar);

(iii) Creditors with subordinated claims;

(iv) Unsecured creditors; and

(v) shareholders or other parties who have an ownership interest in the debtor or the debtor’s business (if affected by the restructuring plan in their role as shareholders, for example if the plan includes a debt-to-equity swap).

Creditors in the mandatory voting classes may in turn be divided into additional sub-groups, provided that they have equivalent interests. The division of creditors into voting classes must be approved by the court before the creditors vote on the plan.

Adoption of the plan requires two-thirds of the creditors in each group, representing two thirds of the eligible claims in the group, to vote for the plan. If the plan is not adopted by the requisite majority, it may under certain conditions be confirmed through a cross-class cram-down. The plan cannot be adopted over a creditor’s objection if the economic outcome for the affected creditor would be worse under the plan than it would have been in a bankruptcy.

Restructuring is initially granted for a period of three months from the initial order, but may be extended for additional three-months periods on request by the debtor or administrator, up to twelve months. If a plan negotiation has been ordered within the twelve-month period, the restructuring may be further extended to a maximum of fifteen months. The stay against enforcements measures will however cease to apply after twelve months even if the restructuring has been extended.

The court largely plays a passive role after the initial approval of the restructuring application and mainly oversees that the debtor complies with formal rules and deadlines. The court also oversees that the restructuring plan fulfills the formal requirements and approves the voting classes. Formally, the court has the power to reject the restructuring plan even if all creditors vote in favour, for example if the court deems that the plan does not have reasonable prospects of preventing the debtor from becoming insolvent or securing the viability of the business. In practice however, unless there are any objections to the plan from the creditors, the court mainly ensures that the plan complies with formal requirements.

The Swedish Tax Authority also plays a significant role in most restructuring proceedings. As tax claims and other public claims form a mandatory separate voting class, the Tax Authority in practice has a veto on whether the restructuring plan should be approved (which may be overridden through a cross-class cram-down if the conditions for a cram-down are fulfilled).

Shareholders only vote on the plan if the plan affects them in their role as shareholders, for example if the plan includes a debt-to-equity swap that will dilute existing shareholders.

During restructuring proceedings, the debtor may with the administrator’s approval take on temporary financing (Sw. tillfällig finansiering). Such temporary financing is granted a super-priority right that takes priority over a floating charge in case of a bankruptcy. The super-priority right does not however take priority over a previously granted pledge or lien. The super-priority right for temporary financing terminates if a restructuring plan is confirmed or, if the restructuring proceedings terminate without a plan being confirmed, three months after the termination of the proceedings if a bankruptcy application is not filed within that time.

Super-priority rights can also be given to new financing (Sw. ny finansiering) through the restructuring plan, provided that such new financing is necessary to implement the plan and does not unduly prejudice the interests of the creditors. Super-priority rights for new financing are granted to the extent and for the time period stated in the plan. Temporary financing that has been provided during the restructuring proceedings may also be converted to new financing through the plan.

The restructuring procedure and the stay against enforcement measures applies only to the individual debtor, which means that creditors can still pursue recovery from third-party guarantors. Group restructuring schemes are not possible under Swedish law. It is therefore often necessary to initiate restructuring proceedings for parent entities in order to protect against enforcement measures related to guarantees. A debt write-down in the restructuring plan of the primary debtor does not release the guarantor from its obligations, which means that the creditor can still seek full recovery from the guarantor unless the write-down is mirrored in the restructuring plan of the guarantor.

Restructuring proceedings do not result in an automatic discharge of liabilities for directors of the debtor company. Shareholders, creditors or a bankruptcy trustee may still initiate claims against directors for damages caused by misconduct (see section 15).

An initial creditors’ meeting shall be held within three weeks of the order for company restructuring or, if necessary, at a later date. At the meeting, the creditors have the opportunity to voice their opinion on whether the restructuring should continue. If any creditor requests it, the court shall appoint a creditors’ committee from among the creditors. The administrator shall consult with the creditors’ committee on all material issues unless there is some impediment to doing so. It is rare in practice for a formal creditors’ committee to be appointed, but the debtor and the administrator will usually consult with the major creditors on an informal basis. It is also not unusual for the larger and more sophisticated creditors to coordinate among themselves on a voluntary basis.

Advisory fees for individual creditors and members of the creditors’ committee are borne by the creditors themselves. The debtor is not required to cover such costs.

The insolvency test under Swedish law is a liquidity test: a debtor is insolvent if they cannot duly pay their debts as they fall due and this inability is not merely temporary. A balance-sheet deficit is therefore not in itself evidence of insolvency, though it may be a strong indicator. The assessment is forward-looking — the decisive question is whether the debtor’s financial position can be expected to improve within an acceptable timeframe.

There is no general statutory obligation for directors to file for bankruptcy when a company becomes insolvent. However, an indirect obligation to act arises through several mechanisms.

The Companies Act (2005:551) requires the board to act when there is reason to believe the company’s equity has fallen below 50% of its registered share capital. The board must immediately prepare a special control balance sheet (Sw. kontrollbalansräkning) and convene a general meeting to consider whether the company should be restored to financial health or enter liquidation. Failure to follow this procedure results in the directors becoming jointly and personally liable for all obligations the company incurs during the period of non-compliance.

Directors who continue to operate a business recklessly in the face of insolvency, thereby materially worsening the company’s financial position, may be convicted of recklessness towards creditors (Sw. vårdslöshet mot borgenärer) or, where significant assets are disposed of, dishonesty towards creditors (Sw. oredlighet mot borgenärer). Directors may also be held personally liable for unpaid taxes and social security contributions if the failure to pay was the result of wilful misconduct or gross negligence. In practice, this has come to mean that directors are regularly held personally liable if they do not file for bankruptcy at the latest on the day taxes become due.

Whilst Sweden does not impose a formal filing obligation, the combined effect of these rules — particularly the strict personal liability under the Companies Act and the personal liability for unpaid taxes — creates significant indirect pressure on directors to take action when a company enters financial distress.

Two types of formal insolvency proceedings are available in Sweden: company restructuring under the Company Restructuring Act and bankruptcy under the Bankruptcy Act.

Company restructuring

The purpose of company restructuring is to secure the continuity of business operations when the debtor is insolvent or at risk of insolvency but the business, or parts thereof, are viable. The company management retains control of the business, but under the supervision of a court-appointed administrator who has to approve major business decisions. The restructuring measures are usually implemented through a restructuring plan that is voted on by the creditors. Please see section 3 for details.

Bankruptcy

In bankruptcy, a trustee is appointed by the court and replaces the company management. The purpose of the bankruptcy is to liquidate the debtor’s assets and distribute the proceeds to the creditors. When the bankruptcy proceedings are finished, the debtor (if a company) is dissolved.

The bankruptcy trustee is supervised by the court and the Supervisory Authority in Bankruptcies (Sw. Tillsynsmyndigheten i konkurser), a division of the Swedish Enforcement Authority.

There is no set timeframe for the bankruptcy process. The time the process takes to complete may vary considerably depending on the size and complexity of the estate.

Upon the commencement of bankruptcy an automatic stay on all enforcement actions against the bankruptcy estate is triggered. Individual creditors may no longer seek seizure of the debtor’s assets through the Swedish Enforcement Authority. Any enforcement action taken in breach of this prohibition is void.

In company restructuring an automatic stay is triggered upon a restructuring order, suspending enforcement actions, asset realisations, and prohibiting counterparties from terminating contracts on the basis of pre-restructuring defaults or ipso facto clauses. The moratorium is in effect for the duration of the restructuring process, up to a maximum of twelve months.

Pending lawsuits are not automatically stayed. In bankruptcy, the estate must decide whether to take over proceedings initiated by the debtor prior to bankruptcy. If the estate declines, the property is considered abandoned and the debtor may continue the proceedings for their own account. Where proceedings are brought against the debtor, the estate may join as a party alongside the debtor.

A Swedish main insolvency proceeding has automatic and universal extraterritorial effect throughout the EU under the EU Insolvency Regulation, preventing enforcement against the debtor’s assets in other Member States. A similar regime applies within the Nordic countries under the Nordic Bankruptcy Convention of 1933. Between Sweden and Finland, the Insolvency Regulation replaces the Nordic Bankruptcy Convention.

Bankruptcy proceedings for a debtor with Swedish domicile are from a Swedish legal perspective considered to have extraterritorial effect even outside of the EU and Nordic area, but in practice this extraterritorial effect depends on whether the Swedish bankruptcy proceedings are recognised in a particular jurisdiction.

The most significant exception to the stay benefits secured creditors. In bankruptcy, a creditor holding a specific pledge — such as a real property mortgage or a possessory pledge — may enforce their security in the pledged asset despite the stay. A creditor with a possessory pledge may arrange a private sale, subject to procedural requirements including notifying the trustee and allowing an opportunity to redeem the asset. In company restructuring, the right of secured creditors to enforce is more restricted; a creditor with a possessory pledge may only do so where enforcement would not jeopardise the restructuring, and the consent of the administrator is required. Claims for maintenance support and employee wage claims are generally exempt from the stay in both proceedings.

In bankruptcy, creditors’ direct influence is limited. The court-appointed bankruptcy trustee manages the estate and makes most decisions regarding the administration and sale of assets. The trustee is obliged to consult with particularly affected creditors on significant matters, such as the sale of valuable property.

A formal claim lodging procedure is not required unless deemed required by the trustee, and claims can be handled based on the debtor’s books and records. Where the court does order a formal procedure, creditors must submit a written claim stating the amount, the basis for the claim, and any priority right being asserted. Starting from 1 July 2026, claim lodging procedures will be held by the bankruptcy trustee without involvement from the court. Contested claims can still be tried by the court if the trustee is unable to settle the claims.

Creditors have the right to attend the estate inventory meeting, where the debtor confirms the accuracy of the estate inventory. It is possible for the debtor to propose a composition within the bankruptcy, though this is a separate process and relatively uncommon in practice.

There is no reorganisation plan in bankruptcy. The proceeding is a liquidation process, and the trustee distributes the proceeds of the estate to creditors in accordance with the statutory order of priority, as described in the answer to section 11.. Creditors with special priority rights — such as secured creditors — are paid first from the proceeds of the relevant assets, followed by creditors with general priority rights, and finally unsecured creditors on a pro rata basis.

The distribution of assets in a Swedish bankruptcy follows a strict priority scheme, deviating from the basic principle of equal treatment of creditors:

Estate debts are covered first. These include the costs of the bankruptcy proceedings itself — such as the trustee’s fee — and any debts incurred by the bankruptcy estate during its administration. These have absolute priority over all other claims.

Secured creditors with special priority rights are paid next, from the proceeds of the specific asset over which their security is held. This includes creditors holding a pledge over movable property, a real property mortgage, or a floating charge. If the proceeds of the secured asset are insufficient to cover the full claim, the shortfall ranks as an unsecured claim.

Creditors with general priority rights are paid from the debtor’s general assets after secured claims have been satisfied. This category includes, in order of internal ranking:

(i) Costs incurred to initiate the bankruptcy and fees relating to a prior company restructuring;

(ii) Super-priority rights (Sw. superförmånsrätt) for claims based on agreements entered into during a company restructuring with the administrator’s consent, as well as for temporary and new financing during a company restructuring (see section 3 for details). Super-priority rights rank above certain secured claims such as floating charges;

(iii) Claims for compensation for the performance of compulsory audits and preparation of accounting records, to the extent the claims relates to work performed within six months before the filing of the bankruptcy application;

(iv) Employee claims for wages and remuneration, generally covering a period of up to three months before and one month after the bankruptcy application. Most such claims are covered by the state wage guarantee up to a statutory cap. Shareholders with significant influence over the company (i.e. directors, CEOs and other leading members of management) are excluded from this priority. Pension liabilities have a similar general priority, limited to a six-month period.

(v) Unsecured creditors — including trade creditors, unsecured lenders, and damages claimants — share proportionally (pro rata) in any assets remaining after all mass claims and priority claims have been satisfied.

Subordinated claims rank after unsecured creditors. Subordination may be contractual, where a creditor has agreed to rank below all other creditors, or statutory, where claims for fines, penalties, and forfeitures arising from criminal conduct are placed last in the payment order by law.

Shareholders are at the very bottom of the hierarchy and are only entitled to a distribution if a surplus remains after all creditors, including subordinated ones, have been paid in full.

The trustee is expected to investigate the debtor’s pre-insolvency transactions and bring clawback (Sw. återvinning) claims on behalf of the estate. Time limits (the ’grace period‘) are calculated backwards from the critical date, ordinarily the date of the bankruptcy application. Transactions that can be challenged through clawback include:

(i) Undue preference/actio pauliana — legal acts that have unduly favored a creditor, reduced the debtor’s assets, or increased the debtor’s liabilities can be subject to clawback if the debtor was insolvent or through the challenged act became insolvent and the counterparty knew or ought to have known of the debtor’s insolvency and the facts which made the act undue. The grace period for unrelated parties is five years. For closely related parties, the grace period is theoretically unlimited, but in practice ten years due to the general principles on statutory limitations. Closely related parties are also presumed to be in bad faith unless otherwise shown.

(ii) Gifts — gifts perfected within six months before the critical date are recoverable outright. Gifts perfected prior thereto but later than a year prior to the critical date, or later than three years prior to the filing if the gift was made to a closely related party can also be challenged unless it is proven that the debtor was clearly sufficient after the gift.

(iii) Improper payment of debts — payments made within three months before the critical date that have been made prematurely, using non-customary means of payment, or in an amount which significantly diminished the debtor’s financial position can be challenged unless they can be deemed to have been made in the ordinary course of business. For closely related persons, the grace period is two years before the critical date.

(iv) Late granting of security — security granted for a pre-existing debt within three months before the critical date, if not conditional at the time the debt arose or not perfected without delay. For closely related persons, the grace period is two years before the critical date.

A successful challenge reverses the transaction, requiring return of the property or its equivalent value. The counterparty’s original claim is reinstated as an unsecured claim. Recovery from a good-faith third party is generally not possible; the claim is instead directed at the original counterparty.

Bankruptcy

The bankruptcy estate is not automatically bound by the debtor’s existing contracts. The bankruptcy trustee, however, has the option of stepping into existing contracts, whereby the bankruptcy estate assumes all rights and obligations arising from the contract, including any obligation incurred prior to the bankruptcy. If the other party shall perform prior to the debtor, the party has the right to request security from the bankruptcy estate for its performance.

The other contracting party has the right to request confirmation from the bankruptcy whether the bankruptcy estate will step into the contract. If the bankruptcy estate does not provide confirmation within a reasonable time, the other party may terminate the contract.

It is a disputed question in the Swedish legal literature if contractual terms that entitle the other party to terminate the contract in the event of the debtor’s bankruptcy are valid and enforceable under Swedish law.

A valid retention of title provision is, in principle, enforceable against the bankruptcy estate, provided that the property can be identified and has not been commingled with the debtor’s other assets. In such cases, the seller is entitled to reclaim the property from the bankruptcy estate.

A right of set-off generally exists if the claims were reciprocal before the bankruptcy, subject to certain restrictions.

Company restructuring

As described in section 3, an order for company restructuring prohibits creditors from terminating contracts on grounds of delays in payment or lack of performance in other aspects that have occurred prior to the order for company restructuring. So-called ipso facto clauses, i.e. provisions that entitles a party to withhold its performance, terminate the contract or otherwise amend the contract to the debtor’s disadvantage due to the application or order for company restructuring, are also invalid under Swedish law.

The debtor has the right, with the administrator’s consent, to request performance of contracts entered into prior to the order for company restructuring. The consent of the administrator is not required where the contract is in the course of the day-to-day management of the business. If the contract relates to ongoing or divisible obligations, the debtor may decide to fulfill the contract partly, e.g. for a certain period of time or for a certain number of deliveries, unless this would cause a significant inconvenience to the other party.

If the debtor requests performance of a contract, the other party is obliged to perform its remaining obligations. If the other party shall perform prior to the debtor, the party has the right to request security from the debtor for its performance. Claims by the other party related to such performance are considered to have arisen during the restructuring and will therefore not be affected by the restructuring plan.

The other contracting party has the right to request confirmation from the debtor whether a contract shall be performed. If the debtor does not provide confirmation within a reasonable time, the other party may terminate the contract. If the debtor decided that a contract shall be performed only partly, the other party may terminate the contract related to such obligations that shall not be performed.

The debtor also has the right, with the administrator’s consent, to terminate long-term contracts subject to three months’ notice. This converts the counterparty’s claim for performance for the remaining period into a claim for damages, which is considered to have arisen prior to the order for company restructuring and can therefore be subject to write-down in the restructuring plan.

Retention of title provisions remain valid and enforceable during restructuring proceedings, provided that they are valid against the debtor’s creditors.

Set-off provisions remain valid in restructuring proceedings, subject to certain restrictions, for example regarding claims that have been acquired for the purpose of set-off within a certain time period before the application for company restructuring.

Generally speaking, the purchaser acquires assets ’free and clear‘ from claims and liabilities. However, in the case of encumbered assets, security interests do not automatically cease upon transfer but remain attached to the asset. It is therefore the bankruptcy trustee’s responsibility to ensure that the claims of priority creditors are settled, by paying them from the proceeds of the sale.

In bankruptcy, the trustee sells assets by public auction or private sale in the manner most beneficial to the estate. A private sale of secured assets generally requires the consent of the secured creditor and the Supervisory Authority in Bankruptcies.

Credit bidding is not expressly prohibited under Swedish bankruptcy law, but it is not common practice.

There is no formal system for pre-packaged sales, although this is feasible in practice.

In company restructuring, a sale of the business or its assets may form part of the restructuring plan, conducted by the debtor with the administrator’s consent.

The specific obligations that arise when a company’s equity falls below 50% of its registered share capital are addressed in detail in section 7 above. Beyond these obligations, directors may be held liable for damages for losses caused to the company or its creditors through intentional or negligent breach of their duties under the Companies Act (2005:551).

Criminal liability may also arise under the Criminal Code for creditor offences such as dishonesty towards creditors or recklessness towards creditors, as well as personal liability for unpaid taxes and social security contributions where the failure to pay results from wilful misconduct or gross negligence.

Shareholders are generally protected by limited liability, though an exception applies where a shareholder with knowledge of a liquidation obligation participates in a decision to continue the business.

Individuals who exert a controlling influence over a company without formal appointment as directors may be held to the same standards and liabilities as registered directors.

Liability insurance is commonly available and most larger businesses have some sort of directors’ and officers’ insurance policy in place. There is commonly an exception for intentional or grossly negligent acts.

Insolvency and restructuring proceedings do not automatically release directors or other stakeholders from liability for their previous actions and decisions.

The bankruptcy trustee has a duty to investigate the debtor’s pre-bankruptcy affairs and may pursue legal action against directors on behalf of the estate, whether for damages arising from breach of duty or for clawback of transactions, as described in section 12.

A prior decision by the shareholders’ meeting to grant discharge from liability protects directors only from claims brought by the company itself. It does not shield directors from claims brought by the bankruptcy estate or by individual creditors, particularly where the discharge was granted based on misleading information or where the relevant actions caused harm to creditors.

As a general rule, Sweden does not recognise foreign restructuring and insolvency proceedings. Insolvency proceedings initiated in other EU member states are recognised under the EU Insolvency Regulation. Insolvency proceedings initiated in the Nordic countries are recognised under the Nordic Bankruptcy Convention. Between Sweden and Finland, the Insolvency Regulation applies instead of the Nordic Bankruptcy Convention.

The UNCITRAL Model Law on Cross Border Insolvency or the UNCITRAL Model Law on Recognition and Enforcement on Insolvency-Related Judgements have not been adopted into Swedish law. To our knowledge, Sweden does not consider adoption of either of the model laws.

Yes. As the EU Insolvency Regulation no longer applies to the UK, UK proceedings are not automatically recognised in Sweden.

Debtors incorporated in other EU member states may enter into restructuring or insolvency proceedings in Sweden either as a main proceeding (if the debtor has its COMI in Sweden) or as a secondary or territorial proceeding (if the debtor has an establishment in Sweden). For a debtor with its COMI outside of the EU, insolvency proceedings may be initiated in Sweden if the debtor has an establishment/branch office in Sweden, encompassing only the debtor’s assets in Sweden. Most commonly, an international group will conduct its Swedish activities through a Swedish subsidiary, which can be subject to a Swedish insolvency or restructuring proceeding.

In recent years, a number of companies incorporated in Sweden have chosen to restructure through Chapter 11 proceedings in the US. This has created cross-border problems, as the stay imposed by the US proceedings are not recognised by Swedish courts or enforcement authorities or by Swedish creditors without US presence or assets.

Each company in a group is a separate legal entity and is not affected by the initiation of restructuring or bankruptcy proceedings against other companies in the same group. Consolidated or group proceedings are not possible under Swedish law, but there is usually some coordination in that the same practitioner can be (and usually is) appointed as administrator or bankruptcy trustee for several companies in the same group. It is also not uncommon for “healthy” companies in a group to continue operations while other members of the group undergo restructuring or bankruptcy proceedings.

The transposition of Directive 2019/1023 has not resulted in any changes in this regard.

Not to our knowledge.

Several significant changes to the Swedish insolvency regime are forthcoming.

A reform of the Bankruptcy Act is set to enter into force on 1 July 2026. The central aim is to create a more efficient process by reallocating responsibilities: administrative tasks currently handled by the courts will be transferred to the bankruptcy trustee and the supervisory authority, while the courts’ role will be refocused on judicial functions and dispute resolution. The number of courts handling bankruptcy and restructuring cases will also be reduced in order to allow for greater specialization.

At EU level, a proposed directive on harmonisation of insolvency law would require Sweden to introduce a statutory pre-packaged sale procedure — a process currently lacking a formal basis in Swedish law — as well as harmonised avoidance rules to improve predictability in cross-border insolvency matters.

The same directive would also introduce a direct statutory duty for directors to file for insolvency within a set timeframe of becoming aware of the company’s insolvency. This would represent a significant shift, as Swedish law currently imposes no such general duty, relying instead on the capital deficiency procedure under the Companies Act.

The Swedish insolvency framework is broadly creditor-friendly in its foundational design. Secured creditors benefit from strong priority rights over encumbered assets, and the extensive clawback provisions allow the bankruptcy estate to recover assets transferred prior to insolvency for the benefit of all creditors. Directors are subject to strict personal liability rules in cases of capital deficiency, creating a powerful incentive to protect creditor interests at an early stage of financial distress.

The state as a creditor also benefits from the liability for directors for unpaid taxes and social security contributions, which as described in section 7 has evolved into an almost strict liability for taxes that are not paid by the due date.

However, the legislative trend over the past two decades has moved towards a more balanced environment that also supports the rescue of viable businesses. The company restructuring scheme can be characterised as a debtor-friendly instrument, providing a structured legal framework within which a distressed but viable business may attempt a turnaround. The 2022 reform of the Company Restructuring Act — implementing the EU Restructuring and Insolvency Directive — further strengthened the debtor’s position by providing earlier access to proceedings and introducing tools to impose a restructuring plan on dissenting classes of creditors.

Sociopolitical factors play a meaningful role in shaping the Swedish insolvency framework, particularly in relation to the protection of employees. Employees enjoy a particularly strong position under Swedish insolvency law, reflecting the broader sociopolitical priority attached to labour protection. Wage claims benefit from priority status in a bankruptcy, and the state reinforces this protection through the state wage guarantee (Sw. lönegaranti). Under this scheme, the state pays employees’ priority wage claims directly and subrogates into the employees’ claims as a creditor in the bankruptcy estate.

The state’s primary contribution is through the legal frameworks it provides rather than through direct financial intervention or support. The wage guarantee scheme constitutes a direct form of support for employees of distressed companies. This mechanism constitutes an important social protection instrument that effectively transfers the immediate risk of non-payment from the employee to the state and ensures that employees are not left without income whilst awaiting the outcome of the insolvency proceedings.

The state’s position as a creditor has changed significantly over time. Tax liabilities previously enjoyed a general priority in insolvency proceedings. This priority was abolished in 2004 as a deliberate policy choice aimed at facilitating restructurings and creating a level playing field for private creditors. However, as described in section 7 above, claims for unpaid taxes and social security contributions are indirectly privileged through the rules on personal liability for directors for such liabilities. This means that distressed companies usually prioritise paying tax liabilities over other unsecured claims. Payment of taxes is also expressly exempted from the rules regarding clawback.

A major criticism of the previous Swedish restructuring scheme was the ’inverted waterfall‘ that a restructuring often involved. As the restructuring rules provided no mechanism to affect shareholder rights, company restructuring regularly involved creditors’ claims being written down while the shareholders retained their full rights, even though shareholders would retain no value in a bankruptcy. This led to the restructuring procedure losing credibility amongst particularly institutional creditors.

One of the main intentions of the 2022 reforms to the Swedish restructuring scheme was to avoid the inverted waterfall and maintain the priority order of claims also in company restructuring. This was done, inter alia, by introducing mechanisms for debt-to-equity swaps through the restructuring plan and by introducing an ’absolute priority rule‘. The absolute priority rule provides that a plan may not be confirmed through cram-down if affected groups with lower priority than the group or groups that voted against the plan receive any payment or retain any rights under the plan, unless the dissenting group(s) of creditors receive full satisfaction for their claims. Exceptions to the absolute priority rule requires ’exceptional reasons‘ (Sw. synnerliga skäl).

However, in practice many restructuring plans implemented under the new scheme have avoided the absolute priority rule by defining shareholders as ’unaffected parties‘ that are therefore not subject to the absolute priority comparison. Several lower courts have accepted this reasoning and the Supreme Court has so far declined to take up the issue. It remains to be seen if this will result in any legislative changes.

Another major barrier to efficient and effective restructurings is the lack of a developed infrastructure for DIP financing in restructuring proceedings.