Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties - if they keep a close eye on the financial situation of their business.
There are several ways to resolve the problems which arise when a company cannot pay its debts. The type of company and the seriousness of the situation determine which method should be used.
The most important laws on how to handle financial problems are the:
Coping with bankruptcy
If a company cannot pay its debts on time, its suppliers and creditors may demand a seizure order at the Swedish Enforcement Authority. The company's assets will be seized and sold in order to pay its debts.
Composition is not usual in the case of bankruptcy. If a bankrupted company can, on the other hand, show that it has reached with its creditors a composition agreement, it may be possible to avoid bankruptcy. The company's debts are then written down so that it can continue to exist. More details can be found in the Company Reconstruction Act.
If a company cannot pay its debts, the company or its creditors can file for bankruptcy as a last resort.
An administrator sells the company's assets, and after the costs of the bankruptcy have been paid it distributes the remaining funds to the creditors.
The official receiver's duty includes finding out who is owed money by the company.
More detailed regulations about bankruptcy can be found in the Bankruptcy Act. You can read more about bankruptcy on the business portal verksamt.se and on the 'Swedish courts' website (Sveriges Domstolar).
Liquidation is the winding up of a company, where assets are converted into cash, debts are paid and any surplus is distributed.
A company in liquidation is represented by its board and its managing director (MD) until one or more liquidators have been appointed.
Liquidator carries out the liquidation, and winds up the company until it is dissolved. You can read more about liquidation and the rules for different types of company on the Swedish Companies Registration Office website.
A trading prohibition means you cannot run a business activity or act as a member of the board or as a partner of a company.
An entrepreneur can receive a trading ban if they have been judged guilty of a crime linked to their business activities, or of gross negligence, such as having disregarded their business obligations and at the same time neglected to pay certain taxes, customs duties and fees on a large scale. More details can be found in the Trading Prohibition Act.
Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.
Stages in bankruptcy
Filing for bankruptcy
A filing for bankruptcy (and Company reconstruction) is made at the district court (tingsrätten) in the municipality (kommun) where the limited company has its registered office. It can be made both by the limited company's board and by its creditors.
If acceptable to the creditors, the official receiver may continue the business to pay off as much debt as possible.
If a trial balance shows more than half of the share capital has been exhausted and it cannot be restored, then the shareholders' meeting or the board must file for liquidation of the company in the district court.
If a company continues to run its operations when more than half of its share capital is exhausted, then its management risks being held personally liable for the company's debts. The Swedish courts' website contains details of how to file for bankruptcy.
The Swedish Companies Registration Office decides on compulsory liquidation. The question of compulsory liquidation may be raised by the Swedish Companies Registration Office on its own initiative, or after an application from the board or a board member, the Managing Director, a shareholder, a creditor or anyone else, depending on whether there is someone able to represent the company.
Deregistering a company
You can use the business portal verksamt.se to deregister a company that is no longer active.
Starting a new company
Following bankruptcy, you can apply for a new corporate tax card (F-skattsedel) at the Swedish National Tax Board. However, you must not have tax debts greater than SEK 20 000.
If you do not live in Sweden and want to start a sole trading company, you must present a certificate proving you are free from tax liabilities in your country of domicile - the same applies for foreign companies applying for corporation tax (F-skatt).
If you want to register a new company, you can use the Swedish National Tax Board’s and the Swedish Companies Registration Office’s on-line services on the business portal verksamt.se