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Company & Commercial

Sweden

The government is shortly to put forward a bill on a new Companies Act. The act addresses the need for clear, flexible and well-functioning rules. Among other things, the rules will bring about new instruments for the creation of capital and the division of companies limited by shares, as well as instruments for the prevention of economic crimes.

The Societas Europea company form has been introduced in Sweden. Meanwhile, the Supreme Court has found that a delay in filing a company's annual financial report with the Swedish Companies Registration Office could in itself constitute false accounting, and result in a conditional sentence and fines.

The Swedish Commission on Business Confidence has proposed a Code of Corporate Governance setting out rules for the organization and working methods of a company's governance bodies. The code, which is based on the 'comply or explain' principle, is primarily written for stock market companies, but is also relevant to unlisted public companies.

The Swedish Supreme Court has clarified the concept of 'management' in ruling on a dispute over profit distribution between the owners of a partnership. Meanwhile, the Administrative Court of Appeal has ruled that a two-day delay in reporting the sale of shares with a total value of Skr2 million is more than a minor infraction of insider knowledge regulations.

A variety of proposals affecting company law are being considered in Sweden. Among other things, these would simplify the rules regulating small companies, introduce new regulations on the Societas Europea, and allow companies to follow EU international accounting standards.

The lack of female representation on the boards of Swedish limited liability companies has been the subject of debate recently. The government recently proposed that private limited liability companies be required to disclose the female and male representation of their management in their annual reports, in order to focus companies' attention on redressing the imbalance.

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Corporate Finance/M&A

Sweden

Overview
Including: Market Trends; Deal Financing; Deal Process; Significant Transactions; Outlook.

Changes for simplified mergers and demergers, which recently came into force, aim to reduce the administrative burden on companies. The boards of the companies which are involved in the merger must inform their shareholders at a general meeting of any significant changes in relation to the company's assets or liabilities which have occurred after the issuance of the merger plan.

There are clear reasons to take the Public Procurement Act into consideration in connection with M&A transactions. In conjunction with due diligence, it is important for Swedish companies to be especially vigilant when entering into contracts which are subject to the act, or where public contracts exist and the planned transaction risks involving an illegal direct award of contract which violates the act.

How the purchase price should be determined is an integral part of a share purchase agreement. Two different approaches prevail: the closing balance-sheet adjustment and the fixed purchase price or 'locked box' mechanism. Although the closing balance-sheet adjustment may be the most common approach in the current market environment, the locked box mechanism can be the preferred route from the seller's perspective.

Normally, the valuation of a company is based on its past performance and projected future performance. While the seller may be confident of the company's future growth, the buyer may be reluctant to pay the seller the whole purchase price upfront. This problem can sometimes be mitigated by the parties agreeing on the introduction of an earn-out provision into the transaction, thus spreading the risk between the seller and buyer.

The Commerce Stock Exchange Committee's revised rules for public takeover bids on the Swedish stock market have been adopted by NASDAQ OMX Stockholm and NGM Equity. The review of the rules has been undertaken in light of recent developments on the Swedish and international capital markets and a number of high-profile transactions.

The harsher financial market conditions over the last 12 months have had an adverse impact on the way in which deals are carried out, especially in relation to the purchaser's ability to secure financing. The slowdown in M&A activity has resulted in a less competitive market, putting the purchaser in a better position to negotiate favourable agreement terms at the expense of the seller.

E-commerce

Sweden

Overview
Including: Area of Application; The Duty of Information; The Right of Withdrawal; Exemptions

The Nordic consumer ombudsmen have agreed on a position statement regarding e-commerce and marketing in the Nordic market via the Internet. The statement establishes standards of conduct to be observed by businesses in online consumer transactions. It provides rules on marketing methods, information obligations, electronic contracts and internet payments, among other things.

Sweden and other EU member states have recently proposed amendments to the EU Directive on Data Protection. Sweden found the implementation of the directive difficult, due to the restrictions placed on the processing of everyday data. The argument behind the proposal is that data protection will be improved if unnecessary and costly requirements are removed.

Recent and pending court cases highlight the interplay between internet publishing and freedom of expression. Individuals can now publish material on the Internet which is not subject to the editorial restraints that govern media publication, and this has created a greater focus on privacy principles.

Three cases regarding the copyright protection of race programmes and fixture lists under the EU Database Directive have been referred to the European Court of Justice for preliminary rulings. They raise interesting questions on the directive’s application, and their outcomes will be of particular importance to the media sector.

The use of cookies in commercial communications is being debated both in Sweden and the European Union. Whatever the legislative outcome, public awareness has been raised by the debate and customers are now likely to show greater interest in how their personal data is used.

The E-commerce Law, which is a result of the implementation of the EU E-commerce Directive, is due to come into force later this year. This update outlines the effects that the law will have on e-commerce in Sweden.

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Employment & Labour

Sweden

One of the fundamental principles in Sweden regarding the processing of personal data is that it must be processed in accordance with 'good practice'. Thus, the processing of personal data in order to monitor employees must be based on objective criteria, including proportionality. Furthermore, personal data may be processed for legitimate purposes only.

The Act on the Protection of Trade Secrets grants the employer protection with regard to its trade secrets. This update examines the extent of the protection afforded to employers by the act and considers the steps that employers can take in order to protect their trade secrets from misappropriation.

The Act on the Protection of Trade Secrets grants the employer greater protection with regard to its trade secrets than the underlying duty of loyalty which applies during a period of employment. According to the act, it is prohibited for an employee to reveal business information, offensively or through negligence, that is kept confidential and where such revelation is likely to cause competitive damage to the business.

During the employment relationship, a duty of loyalty applies which includes the obligation to look after the employer's interests at all times and prohibits the solicitation of the employer's employees. However, this duty ends on the effective termination of employment; therefore, non-solicitation covenants must be used where protection is needed after an employment relationship has been terminated.

During the employment relationship a duty of loyalty applies which includes the obligation to look after the employer's interests at all times and prohibits the solicitation of the employer's clients and customers. However, the duty of loyalty ends upon the effective termination of employment; therefore, non-solicitation covenants must be used where protection is needed after an employment relationship has been terminated.

Non-compete agreements seek to prevent an ex-employee from directly competing with his or her previous employer or working for a competitor for a set period following termination. The 1915 Act on Contracts contains provisions on non-compete agreements in Sweden, while a collective bargaining agreement agreed in 1969, and the case law that has developed since then, are other important sources of law.

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Information Technology

Sweden

Overview
Including: IT Project; Internet Project; IT Services

An obsolete Swedish rule regarding criminal liability for planning a crime has been amended. As a result, keeping or handling a computer virus with the intent of committing a crime may itself constitute a criminal offence.

In this case a former employee copied the employer's customer database onto a computer disk and took it with him when his employment ended. The court ruled that this did not constitute trade espionage as the employee had been authorized to access the database as part of his work tasks.

A recent case decided that unauthorized links to MP3 files constituted a public performance of music and therefore were not subject to the usual copyright restrictions.