Insolvency

This is insolvency law

Insolvency law becomes relevant when a company or an individual (hereinafter also referred to as "debtor") has become, or is at risk of becoming, insolvent. Insolvency means that the debtor cannot pay their debts as they fall due and that this inability is not merely temporary.

When a company is solvent, there is no competition among its creditors; everyone gets paid. In insolvency, rules are triggered that aim to orderly manage the competition among creditors for the debtor's assets. The provisions in, among others, the Priority Rights Act, the Bankruptcy Act, and the Company Reconstruction Act aim to ensure equal treatment of creditors and thereby prevent a race for the debtor's assets. The Penal Code's provisions on creditor offenses also serve the same function.

Certain types of payments and other legal actions taken in an insolvency situation can, in a subsequent bankruptcy, lead to recovery claims against the creditors and other parties who have been favored at the expense of others. Such claims, particularly under the Bankruptcy Act's rules on recovery, are relatively common in bankruptcy. Unduly paying debts to certain selected creditors can, in some situations, even lead to criminal liability.

In an insolvency situation, high demands are placed on the actions of the company's management. If the board, for example, is passive during a critical capital shortage and fails to fulfill the obligation to prepare a so-called control balance sheet, the result can be personal liability for the new debts incurred by the company. And if tax debts are not paid to the Swedish Tax Agency by the due date, there is a significant risk that the company's management will be personally liable for these through the so-called tax representative liability.

Bankruptcy

What does bankruptcy entail? Which are the possible paths forward when your company cannot pay its debts? Lindahl's lawyers have handled some of the largest bankruptcies in Swedish history.