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05 January 2007
The Supreme Court has recently ruled that no general liability for damages falls on a bankruptcy receiver who brings a lawsuit without appropriate cover for legal costs that might accrue should the bankruptcy estate be unsuccessful.
According to the Company Act, the board members who participated in a decision regarding a transaction may be liable to pay the outstanding amount where a deficiency arises in conjunction with restitution from the recipient. In the case at hand a bankruptcy receiver brought suit against several board members of the bankrupt company on these grounds. The bankruptcy estate - which held no assets - demanded that the board members pay approximately Skr30 million.
The bankruptcy estate was successful in the district court, but lost on appeal. The court of appeal ordered the bankruptcy estate to reimburse the board members' legal costs, which amounted to approximately Skr2.8 million. As the bankruptcy estate held no assets and lacked the capacity to pay, the board members brought suit against the bankruptcy receiver and demanded that he be made personally liable for the legal costs of the bankruptcy estate. The case was transferred from the district court pursuant to a special regulation of the Code of Judicial Procedure and was heard by the Supreme Court. The Supreme Court found that, under Swedish law, a plaintiff need not be able to reimburse the defendant for its legal costs should the plaintiff lose the case; as a consequence, such a finding cannot be made against a bankruptcy estate.
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 (firstname.lastname@example.org or email@example.com).
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