The most important laws on how to handle financial problems are the:
Stabilising a business
Importance of liquidity
If your company experiences financial difficulties, the business must be assessed and possibly transformed. Both commercial and public advice is offered in this context.
There are many ways to improve liquidity:
- continuous invoicing with payment terms of 14 or 10 days;
- sending payment reminders as soon as an invoice is overdue;
- increasing the company's cheque credit (while taking care to avoid high credit costs);
- leasing equipment and property;
- extending credit from suppliers to 45, 60 or 90 days;
- input of funds by owners;
- selling assets;
- obtaining risk capital.
Record of non-payment
If a company has poor liquidity then it is important to take action quickly so that it does not start falling behind with payments. A company that is behind in payments may be issued a record of non-payment, which can make it difficult to obtain loans or enter contracts with suppliers in the future. The record of non-payment is drawn up by a credit rating agency.
Debt recovery and the Swedish Enforcement Authority
Companies can hire a debt recovery company to get help with collecting outstanding debt. However, a debt recovery company cannot force anyone to pay.
If the debt is not paid, the debt recovery company can refer the matter to the Swedish Enforcement Authority (Kronofogden), which is responsible for collecting debts.
Objecting to incorrect claims
With regard to companies – but not sole traders – even an application for a payment injunction is registered as a record of non-payment.
Therefore, it is especially important for companies to object to incorrect claims immediately when a demand for payment of outstanding debt is received, rather than waiting for a payment order from the Swedish Enforcement Authority.
Swedish Data Inspection Board monitors the handling of personal data and can also provide more information on credit ratings.
A company with financial problems can be reconstructed instead of being declared bankrupt. A company that is insolvent may reach with its creditors a composition agreement. The company's debts are then written down so that it can continue to exist.
This means not only settlement with its creditors to reduce the debt, but also measures for improving the company's profitability.
The applicable conditions and how reconstruction works in practice are described in the Company Reconstruction Act and the Composition Act
Some commercial bodies specialise in investing in companies which are experiencing insolvency, but which can survive with the aid of investments and restructuring.
Access to different sources of finance can help overcome financial difficulties.
When filing for bankruptcy is the only option left for a business owner, it pays to cut your losses, initiate proceedings sooner rather than later, and move on to a new project.
Order for payment
A company that wishes to object to incorrect claims must ensure that the applicant withdraws his/her application with the credit rating agencies so that the record can be removed.
Such a disclaimer must include a written explanation from the debt collection company to the credit information company that the application for a payment injunction was incorrect.