The Swedish Companies Act
The Swedish Companies Act contains the legal rules for share limited companies in general – H I Law Firm will in the following text break down the rules contained within that law regarding this category of companies.
Chapter 1 – Introductory provisions
In a limited company (AB), the shareholders have no personal payment responsibility for the company’s obligations. Therefore, if the company fails to fulfill its financial obligations, it only affects the company and not the owners of the company. In order to start an AB, the owner(s) must have at least a capital of SEK 50,000 at start-up. When starting an AB, it is good to keep track of the rules that apply and here some more difficult terms may arise. If you want to read more about what different legal concepts regarding the Swedish Companies Act (ABL) mean, you can take a closer look in Chapter 1 § 9 ABL. You can read more about the concepts of parent company, subsidiary and concern in Chapter 1, Section 11 ABL.
Chapter 2 – Formation of limited companies
An AB can be formed by one or more natural persons or legal entities. This means, for example, an already existing AB can form a new AB without any natural persons standing as owners without only the first company. A person who is underage or in bankruptcy or placed under a trustee or has a business ban may not start an AB.
The measures that need to be taken when forming the company are (1) the founders shall prepare a draft foundation agreement, (2) one or more of the founders shall subscribe for all shares in the company, (3) the shares shall be paid, (4) the founders shall complete, date and sign the foundation agreement and (5) the board must notify the company for registration in the Companies Register. You can read more about each step in Chapter 2 ABL.
Chapter 3 – Articles of association
Part of the founding record must consist of Articles of Association. This is dealt with in more detail in Chapter 3 ABL and shall contain (1) the company’s company name, (2) the geographic place in Sweden where the company’s board of directors is based, (3) the object of the company’s operations, (4) the size of the share capital, (5) the number of shares. (6) the number of board members, (7) the number of deputy directors, (8) the number of accountants, (9) how the General Meeting should be convened, and (10) the time to cover the company’s financial year.
In general, limited liability companies purpose is mainly profit (profit maximization), if the company’s operations have another purpose (in whole or in part), this must also be stated in the articles of association. Any changes to the Articles of Association are decided by the General Meeting, which we will discuss in more detail later.
Chapter 4 – The Shares
Regarding the shares in the company there is a so-called equality principle, which means that all shares have equal rights in the company. There are certain exceptions, for example, different types of shares (shares with different rights in the company) which shall be specified in the articles of association, see sections 4, 2-5, §§ ABL.
Shares may also be transferred and acquired freely unless otherwise specified in the Articles of Association. The reservations that can prevent free transfer are, among other things. reservation of consent (consent is required from other shareholders or specially specified persons for shares to be transferred) (sections 8-17), pre-purchase reservation (one shareholder or another must be offered to acquire the shares before third party have the opportunity) (sections 18-26) and home equity reservation (reservation that a shareholder or other person has the right to redeem a share that has been transferred to a new owner) (27-36).
Chapter 5 – Share form
All AB must have a share form containing information regarding shares and shareholders. This share book is intended to form the basis for the exercise of shareholders’ rights and shall provide the company, shareholders and others with a basis for assessing the ownership conditions in the company.
The share register must be kept with automated processing and must be retained for as long as the company lasts and 10 years after its dissolution. The company is responsible for personal data for the personal data contained in the share register, for this reason it is also important to keep track of the rules in the GDPR (Data Protection Regulation).
The Board of Directors has the main responsibility for the share register being updated, maintained and kept available.
Chapter 6 – Stock certificates
If a shareholder in an AB so requests, the company shall issue a stock certificate for its shares, this is proof that someone has a participant right in an AB. In the stock certificate, several information shall include: the company’s name and organization number, as well as the shareholder’s name and social security number, etc. (see Chapter 6 § 2 ABL for more information).
Share certificates must be signed by the Board of Directors or by a person authorized by the Board.
Chapter 7 – General Meeting
The shareholders’ right to decide on the company’s affairs is exercised at the General Meeting. At this meeting, all shareholders who are included in the share form on the current day have the right to participate. Shareholders who are not personally present at the General Meeting may exercise their right by proxy with written authorization. In addition, a shareholder (or a representative) may also bring up to two assistants at the General Meeting, who may also express their views at the meeting.
A shareholder may vote for the same number of shares he or she owns in the company.
The General Meeting shall be held within 6 months from the end of each financial year, and the meeting shall also present the annual report and audit report there. In addition, certain specially stated resolutions must be made at each annual general meeting, see Chapter 7, Section 11, ABL. Each shareholder also has the right to submit matters that they wish to be raised at a General Meeting and these requests must be submitted in writing to the Board.
There are also some specially stated rules for how to call the General Meeting, which are stated in Chapter 7, sections 17 and 23-24, sections ABL, and it is the Board that calls these meetings.