New Swedish Legislation on Right of Priority in Bankruptcies

The current Swedish right of priority legislation, which is set forth in the Right of Priority Act (SFS 1970:979) was amended on 1 January 2004. The new legislation has been preceded by considerable disunion in the Swedish Parliament with several controversial questions being raised. So what are the reasons for changing the legislation? The overall aims of the new rules are 1) to facilitate business reorganisations without bankruptcy through earlier reorganisations, 2) to strengthen the employees wage protection and through a reduction of special interests in composition negotiations, 3) to abolish the possibility of competition on unequal terms due to the fact that an estate in bankruptcy can continue to conduct the business as a result of the fact that wages are compensated from the wage guarantee, and to 4) focus decisions with respect to loans more on the borrower’s repayment than on security interests.