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16 November 2007
In 2004 the Right of Priority Act was extensively revised. The main changes were that: (i) the priority rights in bankruptcy were abolished for taxes and tenancy; and (ii) floating charges could be claimed on 55% of the creditor’s assets only. A primary aim of the revision was to create an increase in the dividend in bankruptcy for unsecured claims.
In February 2007 the government appointed a special investigator who was charged with the task of strengthening the priority right in bankruptcy for floating charges. This was done to facilitate the granting of credit for small and medium-sized companies. The investigator has recently presented a report to the government proposing an increase from 55% to 75% of the share of the creditor’s assets to which floating charges can be claimed. It is also proposed that the priority right of the state concerning effected salary guarantees will be abolished.
According to the investigator, the proposed changes concerning floating charges will lead to improved credit facilities for companies - most significantly in the manufacturing sector - since the use of floating charges as security for credit is frequent in this field. Also, the dividend in bankruptcy will increase for banks and other credit lenders with floating charges as security. The proposed change to abolish the priority right for effected salary guarantees will increase the costs for the state but will also, according to the investigator, increase the dividend in bankruptcy for unsecured claims.
If the proposed changes are approved by Parliament, the preliminary date for them to come into force is July 1 2008.
For further information on this topic please contact Margareta Andersson or Jörgen Wistrand at Wistrand Advokatbyrå by telephone (+46 31 771 21 00) or by fax (+46 31 771 21 50) or by email (email@example.com or firstname.lastname@example.org).
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