Contents. For further information please see Starting a business - Legal frameworks

Transcription

1 Guides to starting and running a business in Sweden 2012

2 Contents Fact sheet Starting a business - Legal frameworks 1 Starting a business in Sweden - an introduction 3 Starting a limited liability company 7 Starting a branch 10 Starting a franchise business 12 Mergers and acquisitions - process overview Fact sheet Running a business 16 Running a business in Sweden - an introduction 20 Corporate taxes in Sweden 23 Commercial leases and rents 25 Buying and building commercial and industrial property 28 Business costs and prices of key services 31 Employing staff - contracts and conditions 35 Social security and pensions 39 Tax relief for key foreign employees 41 Work and residence permits and business entry visas 45 Regional financial incentives Fact sheet Useful information sources 49 Useful information sources For further information please see

3 Fact sheet Starting a business - Legal framework 1 Photo: Lars Dahlin / Umeå University Starting a business in Sweden - an introduction Setting up a business in Sweden is a straightforward process. Procedures are simple and efficient, based on a transparent system that seeks to facilitate establishment of new enterprises. in brief Straightforward system for business startups Limited liability company - most used form No Swedish partner needed to start a business Swedish society and industry is highly international and technology oriented. As a nation the mindset is to adapt to constant change. These assets, along with a strong supply of educated and trained people, present a solid platform for successful business in Sweden. Limited Liability Company or Branch? A foreign-based company wishing to establish an enterprise in Sweden will most likely choose one of two main business structures: Subsidiary a limited liability company (aktiebolag) Branch (filial) Most foreign investors who set up a business in Sweden opt for a limited liability company. Swedish legislation has long accepted limited liability companies with a sole owner (wholly owned subsidiaries). A limited liability company is a legal entity incorporated in Sweden. The minimum share capital is SEK 50,000. A branch is not incorporated in Sweden but is a divisional office part of a foreign limited company organized to conduct business in Sweden. Both must be registered at the Swedish Companies Registration Office (Bolagsverket) and the Swedish Tax Agency (Skatteverket). A limited liability company must appoint a board of directors and, if it is public, a managing director. A branch must have a managing director. Specific rules regarding residency of the managing director and the board of directors apply. Limited liability companies and branches over a certain size are required to appoint an auditor and comply with Swedish book-keeping regulations. A limited liability company must submit annual accounts to Bolagsverket. A branch has to keep its accounts separate from those of the foreign-based company. Whether the annual accounts of both the foreign-based company and the branch are to be submitted depends on a number of factors. For tax purposes, a limited liability company and a branch are treated in similar fashion, but they can give rise to different tax implications depending on the structure of the company group. Limited liability companies can gain tax exemption on profit through intra-group dividends. A branch structure can offer tax benefits for a transitional period when launching a business. This is because deficits may be tax deductible for the foreignbased company as the branch is not a legal entity in its own right. This advantage is not open to a subsidiary, which is considered a Swedish legal entity regardless of ownership. A representative office is sometimes proposed as an alternative business format. However, a representative office is not recognized as a legal entity under Swedish law. Published in January 2012

4 Fact sheet Starting a business - Legal framework 2 Summary of some legal differences between limited liability company and branch Limited liability company Branch of a foreign-based company Legal entity Yes Not a separate legal entity - part of the foreign-based company Owners liable for the debts of the business No personal liability. Only capital invested at risk Branch is part of the foreign-based company. Owners liability depends on the legal structure of the foreign-based company Registration With the Swedish Companies Registration Office and the Swedish Tax Agency Corporate tax payable Yes Yes Protection of name Throughout Sweden Throughout Sweden With the Swedish Companies Registration Office and the Swedish Tax Agency Number of owners One or more legal entities or persons No ownership in Sweden Branches part of the foreign-based company Auditor required Distribution of profit and loss Capital requirement Yes, at least one certified public accountant Small companies may choose not to have an auditor The profit can be distributed to owners in the form of dividends SEK 50,000 for a private limited company SEK 500,000 for a public limited company Yes, at least one certified public accountant Small branches may choose not to have an auditor The branch is a part of the foreign-based company Who represents the business? The board of directors, the managing director The managing director represents the branch through a power of attorney from the foreign-based company Can the business employ staff? Yes Yes Number of entities The foreign-based company may choose to start an unlimited number of companies in Sweden None A foreign-based company can start only one branch in Sweden Few business require licenses It is important to establish whether a license is needed to carry out the business of the company, although it should be noted that it is quite unusual for a business to require a license in Sweden. License requirements are generally regulated by law. Police authorities, municipalities and County Administrative Board (Länsstyrelsen) are often involved in licensing activities. Foreign banks and other financial institutions with subsidiaries and branches in Sweden are authorized/registered with the Swedish Financial Supervisory Authority (Finansinspektionen). useful contacts further information Government agencies Swedish Companies Registration Office (Bolagsverket) SE Sundsvall The Swedish Companies Registration Office is the government agency that registers new companies as well as changes in established companies and receives annual accounts, etc. Swedish Tax Agency (Skatteverket) SE Solna (from Sweden) (from abroad) The Swedish Tax Agency is the government agency for taxation, tax collection and national registration of residents. at Starting a limited liability company Starting a branch Starting a franchise business Mergers and acquisitions - process overview Running a business in Sweden - an introduction Business costs and prices of key services Useful information sources External experts have reviewed this fact sheet. However, the contents should not be viewed as legal or financial advice but only as an overview of current conditions in Sweden. These may change and thereby render descriptions of laws and other frameworks inaccurate. In all individual cases we request that advice always be sought with relevant organizations on specific issues.

5 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X3 Photo: ABB Starting a limited liability company A limited liability company is the structure that foreign enterprises most often use when setting up business activities in Sweden. Investors can purchase a limited liability company off-the-shelf or form the company themselves. Either way, it is a quick procedure. in brief Off-the-shelf solution an easy way to start Shareholders may reside in any country No personal liability for shareholders Limited liability companies - the basics A limited liability company (aktiebolag) is a legal entity that draws a clear distinction between the company and its owners. It can enter into contracts and own property, such as real estate, and other assets. It can also be a party in legal proceedings. A limited liability company has a registration number composed of ten digits. This serves as its identification number and remains as long as it exists. Private or public? There are two forms of limited liability company: private and public. Certain differences exist between them in terms of applicable regulations. Since the vast majority of international companies choose to set up a private limited liability company, that is the focus of this fact sheet. Private limited liability companies A private limited liability company cannot offer its shares to the public on the stock exchange or any other organized market. Minimum share capital is SEK 50,000. The board of directors of a private limited liability company must have at least one director. If there are less than three directors, at least one alternate director must be appointed. The number of directors and alternate directors must be stated in the articles of association (bolagsordning). A managing director is not mandatory in a private limited liability company. The chairman of the board of a private limited liability company may also serve as managing director. Forming a limited liability company Very few companies choose to go through the process of forming a limited liability company themselves and therefore that process will not be described in this fact sheet. Buying a limited liability company off-the-shelf The easiest and most common way to set up a private limited liability company in Sweden is to use an off-the-shelf solution provided by a company agent or law firm. Many business services firms have this readily available, enbaling a fast startup process. Using an off-the-shelf solution gives quick access to a brand new, pre-registered limited liability company that has not previously traded or been engaged in commercial activity. The off-the-shelf solution means that the company can start business as soon as the share purchase agreement is signed and, the share capital (minimum SEK 50,000) is transferred to a bank account specially opened for the company. Once this Published in January 2012

6 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X4 is confirmed, a general power of attorney is received by the shareholders enabling them to act on the company s behalf. The new shareholders must then hold an extraordinary general meeting to change the articles of association to reflect the nature of the business (see Articles of association below) and to appoint a new board of directors. A board meeting must then be held to decide the company s new name (see Registering a company name, below) and elect a chairman of the board of directors and a managing director where applicable. The changes must be registered with the Swedish Companies Registration Office (Bolagsverket). The cost associated with purchasing a pre-registered limited liability company off-the-shelf is generally SEK 10,000 25,000+, depending on the services provided. The vast majority of foreign companies that set up a limited liability company use the off-the-shelf solution. Articles of association The articles of association must always include: The company name The location in Sweden of the registered office of the company The object of the business The share capital The number of shares The number of board members The number of alternate board members The number of auditors How the general shareholder s meetings will be convened The financial year It is possible to include two additional clauses in the articles of association: a reservation of consent, stipulating that shares can only be transferred with the company s consent; and a clause on the right of first refusal that stipulates the right of shareholders or others to receive an offer to buy shares before they are transferred to a new owner. Registering a company name The company name is registered with Bolagsverket to ensure it will not be taken by another business. The name protection for a limited liability company is valid for Sweden and for the business activity that the company has registered. Certain rules apply when applying for company names. The name must not be similar to any other registered company name or trademark; it must not be misleading; and it must do more than merely describe the business activity. All company names also include the Swedish word for limited liability company, aktiebolag, or its abbreviated form, AB. Registering for tax Companies register for tax by filling in a Notification of Tax and Contributions Liability form (Skatte- och avgifts anmälan) and sending it to the Swedish Tax Agency (Skatteverket). On registration, the company will automatically be sent all documents, VAT and PAYE returns and information required to account for and pay VAT, income tax and social security contributions. The Swedish people are innovative and on technology s cutting edge. We highly recommend Sweden as a market for foreign investment. Canning Fok, Managing Director, Hutchison-Whampoa Group Board of directors and managing director The duties of the board of directors vary according to the size of the company and whether a managing director has been appointed. The board is in charge of the organization and management of the company and appoints the managing director. In private limited companies, the board may appoint a managing director if it wishes. The board convenes the general meeting of shareholders and decides who is authorized to represent the company (power to sign). If the board comprises more than one member, a member must be appointed as chairman. This person leads the work of the board and ensures that the board performs its duties. The name of the chairman of the board must be reported to Bolagsverket. Rules of procedure for boards If the board appoints a managing director it is required to adopt instructions for the allocation of work between itself and the managing director. It also adopts rules of procedure for its own work. A company whose board has only one member needs no rules of procedure. The board is responsible for ensuring that taxes are paid in due time and that annual accounts are prepared and filed with Bolagsverket. The board must also report any changes in the company. The board s responsibilities are extensive and its members may in certain circumstances be held personally liable for the company s debts. Power to sign - and EEA residence If no individual is registered as having power to sign, the board is entitled to sign on the company s behalf. In such cases, more than half of the board members must sign jointly.

7 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X5 The managing director, at least half of the board members, at least half of the alternate board members and at least one of the persons with power to sign must be resident in the EEA. If these conditions can not be met, the company may apply to Bolagsverket for special dispensation. If the company has no authorized representative resident in Sweden, the board of directors must authorize a person resident in Sweden to receive service of process on the company s behalf. This person must be registered with Bolagsverket. The person needs to reside in Sweden but does not need to be employed by the company. shareholders and share register Shareholders may reside in any country. The board of directors must draw up a share register and a list of shareholders. The share register is a public document and must be kept available to the public at the company s office. When a share is sold, the new shareholder must be entered into the share register. Bolagsverket does not register the ownership of the shares. Accounting guidelines All companies that carry on a business activity are obliged to maintain accounting records under the Swedish Accounting Act (Bokföringslagen) and to comply with generally accepted accounting principles. Annual accounts are to be filed with Bolagsverket within seven months of the end of the financial year. Failure to submit accounts in time results in a fine. If the annual accounts and audit report have not been filed 11 months after the end of the financial year, Bolagsverket may liquidate the company. Audit guidelines The role of the auditor is to ensure that the company s management complies with the Companies Act (Aktiebolagslagen) and articles of association. The auditor may never keep the company s accounts. Only a certified accountant and public accounting firms registered by the Supervisory Board of Public Accountants (Revisorsnämnden) may audit limited liability companies. A limited liability company needs to have an auditor if it meets at least two of the following criteria, for each and every one of the two most recent financial years: Average of more than 3 employees A balance sheet total exceeding SEK 1.5 million Annual net sales exceeding SEK 3 million A limited liability company must appoint a qualified auditor who has passed professional competence examinations if the company meets one or more of the following criteria: Average of more than 50 employees in past two years A balance sheet total exceeding SEK 40 million in past two years Annual net sales exceeding SEK 80 million Listed on the stock exchange Annual tax return The company must submit an annual tax return for the revenue derived from its business activities. Financial year The financial year of a limited liability company covers 12 months. The first financial year begins on the day the company is registered, even if the company does not engage in active business until a later date. The company s financial year is stated in the articles of association. A financial year may be identical with a calendar year or it may be split over two calendar years. Hence, a company can choose the month in which its financial year will start. It is permissible to have a financial year of less than 12 months or to extend the financial year to a maximum of 18 months when a company is formed or changes its financial year. documents to be filed annually with bolagsverket: Annual accounts - including balance sheet, income statement, directors report, additional notes to the directors report and financial statements. Large companies must also submit a cash flow statement Audit report Minutes of the general meeting of shareholders, if the meeting has adopted a dividend payment resolution Consolidated accounts and audit report for the majority of parent companies, if the company is part of a group All documents must be in Swedish. Annual accounts must be signed by all board members and, where applicable, the managing director.

8 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X6 useful contacts further information Government agencies Swedish Companies Registration Office (Bolagsverket) SE Sundsvall The Swedish Companies Registration Office is the government agency that registers new companies as well as changes in established companies and receives annual accounts, etc. Swedish Tax Agency (Skatteverket) SE Solna (from Sweden) (from abroad) The Swedish Tax Agency is the government agency for taxation, tax collection and national registration of residents. Supervisory Board of Public Accountants (Revisorsnämnden) Karlavägen 104 Box 24014, SE Stockholm The Supervisory Board of Public Accountants is a government agency that handles matters relating to chartered accountants and chartered accounting firms. at Starting a business in Sweden - an introduction Running a business in Sweden - an introduction Corporate taxes in Sweden Business cost and prices of key services Useful information sources External experts have reviewed this fact sheet. However, the contents should not be viewed as legal or financial advice but only as an overview of current conditions in Sweden. These may change and thereby render descriptions of laws and other frameworks inaccurate. In all individual cases we request that advice always be sought with relevant organizations on specific issues.

9 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X7 Starting a branch A foreign-based company can begin business activities in Sweden without opening a subsidiary by starting a Swedish branch. The branch is legally a part of the foreign-based company and has no individual share capital, making it a less capital intensive way to gain entry into the Swedish market. in brief Straightforward registration procedure No share capital required to open a branch A branch is treated as the divisional office of a foreignbased company A branch - the basics A branch (filial) is not a separate legal entity but a part of the foreign-based company a divisional office. It is subject to Swedish law and the decisions of Swedish authorities on legal matters arising in connection with its business activities in Sweden. A foreign-based company can only have one branch in Sweden. A branch is independently run in Sweden in compliance with the Foreign Branch Offices Act (Lag om utländska filialer m.m.). A branch has no share capital; its assets and liabilities are part of the total assets of the foreign-based company. However, the branch keeps its own accounting records and must hold these separate from the foreign-based company. In Sweden, a branch needs to have a managing director who is resident in the European Economic Area (EEA). Exceptions from these requirements may be granted by the Swedish Companies Registration Office (Bolagsverket). If the managing director of the branch does not reside in the EEA, the foreign company must authorize a person resident in Sweden to receive service of process on the branch s behalf. The person does not need to be employed by the branch but must be registered with Bolagsverket. The managing director is responsible for the branch s operations and will have a power of attorney from the foreign-based company authorizing him or her to act on behalf of the company in all matters concerning its activities in Sweden, to accept service of process on the company s behalf, and to be the company s legally responsible representative in Sweden. Registering a branch A company seeking to register a branch in Sweden must be registered as a legal entity in its country of origin. The first step is to submit an application for registration of a branch to Bolagsverket. The application should contain detailed information on the foreign-based company, including a certificate of incorporation for the foreign-based company as well as copies of the foreign-based company s two latest annual reports. In addition, it should include a certificate that the foreign-based company is not bankrupt, a power of attorney for the managing director of the branch and proof that the persons signing the power of attorney are authorized to do so. Published in January 2012

10 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X8 The branch can be registered once all the necessary information has been provided and approved and the registration fee of SEK 2,000 has been paid. When the registration procedure is complete, the branch receives a registration number composed of ten digits. This serves as its identification number and remains as long as it exists. The registration number should be printed on the branch s letterhead, invoices and order forms. Branches of banks and insurance companies Foreign banks and other financial institutes with branches in Sweden are also to be registered by the Swedish Financial Supervisory Authority (Finansinspektionen). Service companies with temporary business activities in Sweden A foreign company within the EEA delivering services as described in the EC service directive need not register a branch in Sweden. This applies if the enterprise only temporarily carries on business activities in Sweden. Registering the branch name The name of a branch in Sweden should include the word filial. The branch name is registered with the branch register kept by Bolagsverket. Please note that the registration may be delayed if the proposed name of the branch is too similar to a name or trademark already registered with Bolagsverket. Registering for tax Branch tax rules are similar to those for limited liability companies (aktiebolag). The branch registers for taxes and as an employer with the Swedish Tax Agency (Skatteverket). This is done by completing a Notification of Tax and Contributions Liability Form (Skatteoch avgiftsanmälan). Once registered, the branch will automatically be sent all the documents, VAT and PAYE returns and information required to account for and pay VAT, income tax and social security contributions. Accounting guidelines All companies that carry on a business activity are required to maintain accounting records under the Swedish Accounting Act (Bokföringslagen) and to comply with generally accepted accounting principles. A branch keeps its own accounting records in Sweden and holds these separate from the accounting records of the foreignbased company. In terms of the finalization and filing of accounting records, certain differences exist between branches of foreign companies which are subject to the legislation of a state in the EEA and those that are not. Branches of companies in the EEA Branches of companies in the EEA that are comparable with a Swedish limited liability company must file the foreign-based company s annual report with Bolagsverket. No separate annual report for the branch is necessary. Companies in the EEA that are not comparable with a Swedish limited liability company must file the foreignbased company s annual report and a separate annual report for the branch with Bolagsverket. Branches of companies outside the EEA Companies outside the EEA must file the annual report for the foreign-based company and a separate annual report for the branch with Bolagsverket. eu/eea countries EU member states are: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxemburg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and United Kingdom. EEA countries: The EEA consists of the EU member states and Iceland, Norway and Liechtenstein. Auditing guidelines A branch needs to have an auditor if it meets at least two of the following criteria, for each and every one of the two most recent financial years: Average of more than 3 employees A balance sheet total exceeding SEK 1.5 million Annual net sales exceeding SEK 3 million The auditor of the branch must be a certified accountant. If a registered accounting firm is appointed as auditor, the name of the auditor with principal responsibility must be stated. The Swedish Supervisory Board of Public Accountants (Revisorsnämnden) sets the qualifications for certified accountant status. Annual tax return The branch must submit an annual tax return to Skatteverket for the income derived from its business activities. A branch is subject, for instance, to Swedish corporate income tax.

11 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X9 useful contacts further information Government agencies Swedish Companies Registration Office (Bolagsverket) SE Sundsvall The Swedish Companies Registration Office is the government agency that registers new companies as well as changes in established companies and receives annual accounts, etc. Swedish Tax Agency (Skatteverket) SE Solna (from Sweden) (from abroad) The Swedish Tax Agency is the government agency for taxation, tax collection and national registration of residents. Supervisory Board of Public Accountants (Revisorsnämnden) Karlavägen 104 Box 24014, SE Stockholm The Supervisory Board of Public Accountants is a government agency that handles matters relating to chartered accountants and chartered accounting firms. at Starting a business in Sweden - an introduction Running a business in Sweden - an introduction Corporate taxes in Sweden Business cost and prices of key services Useful information sources External experts have reviewed this fact sheet. However, the contents should not be viewed as legal or financial advice but only as an overview of current conditions in Sweden. These may change and thereby render descriptions of laws and other frameworks inaccurate. In all individual cases we request that advice always be sought with relevant organizations on specific issues.

12 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X 10 Photo: Ordning & Reda Starting a franchise business Sweden presents ample opportunities for international franchisors. Franchising is a well established business model, especially in the retail industry. in brief Strong growth in franchising in Sweden in recent years Franchising especially popular in retail, consulting and restaurant sectors Franchising - the basics Franchising is the granting of a license by a person who runs a business (the franchisor) to another (the franchisee) which entitles the franchisee to trade under the franchisor s company name and use its business concept in exchange for some form of compensation. It can also mean granting a license to another with a right to sublicense the concept (master franchising). Franchising often involves long-term cooperation between two business parties, who sign a franchise contract that is regulated by general Swedish contract law. Franchising can be described as a kind of sale permission and may be practised in almost any sector where products and/or services are marketed. A franchise is not a business entity but rather a way of doing business. How franchising works A franchise contract is between two independent parties who continue to be independent legally and economically. In the contract, the franchisor grants the franchisee the right to use a company name, a trademark and a concept. The franchisor also offers experience and know-how to the franchisee. The franchisee commits to the policy of the operation in order to strengthen the image of a group of stores with a standardized structure, quality and service. Normally the franchisee pays an entry fee and thereafter a royalty that is usually based on a percentage of sales. Franchising in Sweden Sweden has well over 640 franchise chains and 24,500 franchisees, the majority of the chains with Swedish origin. These employ 102,000 people and have a total estimated sales of SEK 169 billion (2010), 5% of Swedish GDP. About half of all franchisees are active in the retail industry. Other popular sectors include consulting and restaurants. Franchise law There is no specific comprehensive franchise legislation in Sweden. The only direct franchise-related legislation is a disclosure obligation for the franchisor (Law no 2006:484). Under Swedish disclosure rules, a franchisor must provide a prospective franchisee with certain information before a franchise contract is entered into. The legislation covers all franchise contracts in Sweden: domestic and foreign contracts; master franchise contracts and unit contracts; new contracts; and renewals of old contracts. What is a franchise contract? Swedish legislation defines a franchise contract as one by which an entrepreneur (the franchisor) agrees with another party (the franchisee) that the latter may use the franchisor s special business idea for the marketing and sale of goods or services in return for compensation. Published in January 2012

13 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X 11 The contract entitles and obligates the franchisee to use the franchisor s distinctive trademarks and other intellectual property rights. It also requires the franchisee to cooperate with regular checks to ensure compliance with the contract. In our experience, the Swedish retail market place is very lucrative and it embraces new ideas and technologies faster than any other market in Europe. Ingo Schroeder, Master Franchisee Scandinavia, Cartridge World Franchisor s duty to provide information A franchisor has a duty to provide the franchisee with the information required in respect of the implications of the contract and other conditions. The information must be in writing and be clear, understandable and provided within a reasonable time before the contract is signed. Minimum requirements are: A description of the franchise activity that the franchisee is to run. Information on other franchisees with which the franchisor has concluded a contract within the same franchise system, and the scope of their activity. Information on the compensation that the franchisee is to pay the franchisor and other financial conditions for the franchise activity. Information on the intellectual property rights that will be granted to the franchisee. Information on the goods or services that the franchisee is obliged to buy or rent. Information on the prohibition to compete that will apply during or after the time for which the franchise contract will last. Information about the term of the contract, conditions for modification, extension and termination of the franchise contract, as well as the financial consequences of termination. Information on how a contractual dispute will be adjudicated and liability for the cost of legal proceedings. Other considerations when setting up a franchise Franchisors and franchisees need to consider Swedish legislation in other areas prior to drawing up and signing a franchise contract. The primary areas here are: contract law, intellectual property law, agency law, competition law, commercial law and consumer protection legislation. Additionally, the content of the business operating manual should be reviewed and adjusted to Swedish regulations and business custom. RegistERING a company Franchise contracts often require franchisees to operate as a legal entity. Franchisees generally choose to trade as limited liability companies (aktiebolag). Starting a company is a straightforward process in Sweden. The easiest and most common way to set up a private limited liability company in Sweden is to use an off-the-shelf solution provided by a company agent or law firm. useful contacts further information Industry association Swedish Franchise Association (Svenska Franchiseföreningen) Mässans gata 18 V, SE Göteborg Franchise systems, companies and individuals are eligible for membership. Law Firms Swedish Bar Association (Sveriges advokatsambund) Box 27321, SE Stockholm Member organization for Sweden s practising lawyers. The website contains a search engine enabling users to find lawyers based on their areas of expertise and location. at Starting a business in Sweden - an introduction Starting a limited liability company Running a business in Sweden - an introduction Useful information sources Retail- opportunities in a retail growth market External experts have reviewed this fact sheet. However, the contents should not be viewed as legal or financial advice but only as an overview of current conditions in Sweden. These may change and thereby render descriptions of laws and other frameworks inaccurate. In all individual cases we request that advice always be sought with relevant organizations on specific issues.

14 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X 12 Mergers and acquisitions - process overview Attractive business opportunities, high transparency and uncomplicated legal and regulatory procedures underpin Sweden s attractiveness to companies seeking business opportunities. This fact sheet aims to provide a brief overview of the market as well as information on the process for mergers and acquisitions (M&A). business opportunities Small and medium sized enterprises in Sweden host a rich diversity of advanced technology that presents unique opportunities for international companies seeking to enter the Swedish market, expand their footprint or develop new know-how. Advanced technology Sustained investment in higher education and core research, an array of homegrown research-intensive multinationals and a commitment to top scientific infrastructure have made Sweden a leading supplier of innovative solutions and products to international business. A proven ability to work across disciplines and bridge corporate and academic research environments makes Sweden eminently placed to deliver results. The capacity to develop and integrate complex systems is evident in Sweden s advanced industrial sectors. Family controlled businesses Family owned or controlled businesses have historically been a pillar of the Swedish enterprise landscape. Demographics are in brief Opportunities in private and family owned enterprises No discrimination of foreign investors M&A process built on openness and transparency Relatively simple agreements now coming into play as the baby boomers who built many of these companies look to retire. Many of them will be seeking to hand over their businesses to the next generation. But equally, many are contemplating new external owners. Firm framework for M&A activity In many countries, the process of acquiring a company is often seen as complex and time-consuming. This is not the case in Sweden, where a culture of openness and transparency avoids bureaucracy and red tape and facilitates business dynamism. Legal agreements are relatively simple by international standards. Information on a target company s shares, articles of association, real property or floating charges is easily available in publicly available registers. Low transaction costs Transaction and legal costs are competitive and lower than in many countries. Lawyers and other advisors are typically involved throughout the transaction process. This is standard practice and merely reflects a desire for professional certainty and accuracy. It is not considered a sign of mistrust or implicit conflict. Swedish contracts and agreements are usually considerably Published in January 2012

15 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X 13 shorter than US or UK equivalents, for example. Business dealings in Sweden are marked by willingness on both sides to achieve consensus, and the managements of target companies are usually helpful during transaction processes. Defense measures such as the white knight, golden parachute or poison pill are seen rarely or never in Sweden, while trade unions generally do not oppose or impede transactions. An effective arbitration and courts system provides for rapid settlement of disputes and conflicts. Arbitration is the general route for solving any M&A-related disputes. Openness and transparency Freedom of information is far-reaching in Sweden. Company financial data is readily available in public registers and is easy to access. For instance, all companies must submit detailed year-end financial statements to the Swedish Companies Registration Office (Bolagsverket) and this information is freely available on demand. Sweden s high standards of transparency are also reflected in accounting practices. A robust regulatory framework comprises the regulations of the Swedish Accounting Standards Board (Bokföringsnämnden) and the Institute for the accountancy profession in Sweden (FAR). All listed Swedish companies are also required to apply the International Financial Reporting Standards (IFRS). Together, these frameworks create a high degree of transparency and certainty in financial reporting, making financial statements easy to read and unlikely to conceal off-balancesheet items and other invisibles. Legal requirements Sweden has no rules that discriminate foreign investors. Shareholders may reside in any country. However, the managing director and at least half of the board members of the aquired Swedish company, must be resident in the EEA. For private M&A, no specific regulations exist regarding share or asset purchases other than general contract law and the Companies Act. For businesses that require specific licenses, for example financial companies, the owner must follow certain regulations regarding ownership assessments etc. Competition rules must also be complied with and Swedish regulators may intervene if a merger is seen as impeding effective competition in the Swedish market. Public M&A is regulated by the Stock Market (Takeover Bids) Act, the Securities Market Act and the Companies Act. Rules of the market place where the target company s shares are listed also apply, for example the OMX Nordic Exchange Stockholm Rules Concerning Public Takeover Bids in the Stock Market as well as rules issued by the Financial Supervisory Authority. The regulations concern, for example, notification obligations of shareholders which acquire or dispose of shares. Acquiring a company or its operations One way to purchase a company is to take over the business operations, including assets and liabilities. Known as assets and liabilities business, this involves buying the business s assets and the right to run the enterprise. This may include everything from equipment and stock to clientele and agreements entered into. Payment is by assuming the debts of the business and other obligations connected to the assets. If the buyer instead purchases all shares and participation rights in a company, this includes ownership of the entire business, with its assets, liabilities, agreements concluded, name, and corporate identity number. We value the competency of Swedish engineers and the consensus-oriented approach to business that Sweden and Japan share, and appreciate the solid and stable economy. Philip de Wolf, Managing Director, DENSO Sales Sweden Price and other terms and conditions of purchase are negotiated with the owner. The company continues to exist and be liable for agreements and obligations entered into, regardless of the ownership change. For this reason, it is important to examine the company carefully before completing the acquisition. The process for M&A in Sweden - an example Acquiring a limited liability company (aktiebolag) involves a multi-step process that starts with strategic evaluation, preliminary analysis and feasibility study and ends with due diligence and completion of the deal. A typical process might take 8 10 months from initial strategic evaluation of multiple acquisition targets to final completion, or around 6 months from first approach. The various steps are described below.

16 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X 14 Overview of process and related tasks 1. analysis of the company and buyer 2. analysis of pricing mechanism and deal structure 3. analysis of share data 4. Management presentation 5. Letter of intent Issues to consider: Potential synergies Restructuring needs and risks Capital structure Documents: Engagement letter Issues to consider: Cash or equity Pricing mechanism Terms and conditions Issues to consider: Listed or unlisted company Minority shareholders Determine share certificate status Issues to consider: Buyer meets owner and management Issues to consider: Letter of intent, confidentiality agreement Documents: Letter of intent Confidentiality agreement Exclusivity agreement 6. due diligence 7. Approval 8. Signing 9. Approval 10. Closing Issues to consider: Review of public registers Annual reports and interim financial statements Documents: Due diligence report Share transfer agreement Issues to consider: Preparation of applications and filings, e.g. to Competition Authority Issues to consider: Share transfer agreement Documents: Signing memorandum Issues to consider: Submission of applications and filings, e.g. to Competition Authority and to Financial Supervisory Authority Agreements with Change of control clauses Issues to consider: Conditions precedent to share transfer agreement Payment of purchase price Documents: Closing memorandum 1. Analysis of company and buyer Initial evaluation involves detailed analysis of the target company or companies. Potential synergies, restructuring needs and intrinsic risks and potential problems are assessed at this stage. Capital and equity structures are also reviewed, along with any excluded assets and loss carryforwards in the target company. At this point the client and advisor sign an engagement letter outlining the scope and terms of the assignment. 2. Analysis of pricing mechanism and deal structure The primary considerations here are whether the acquisition will be financed by debt or equity or a combination of the two, and identification of the pricing mechanism and terms and conditions of purchase and sale. 3. Analysis of share data Swedish limited liabilities companies fall within one of two categories depending on how their shares and dividends are organized. VPC companies (avstämningsbolag) are those whose register of shareholders is held by a central securities depository, in this case Euroclear. These companies are generally, but not always, listed on a stock exchange and do not issue share certificates. Non-VPC companies are known as coupon companies (kupongbolag). For unlisted companies, the board of directors is responsible for keeping, maintaining and making available the shareholders register. In all cases, the buyer needs access to share data, including information on minority shareholders. 4. Management presentation Management presentations involve the owner and management team, together with the investment banker, inviting the buyer or group of buyers to hear a management presentation highlighting key information. Presentations also allow an opportunity to ask questions to the management. 5. Letter of intent The parties may enter into a confidentiality agreement and/ or letter of intent to protect sensitive information and to acknowledge that the acquisition is being seriously considered. A letter of intent will specify the final and best price the

17 Fact sheet XXXXXXXXX Starting a business - XXXXXXXXXX - Legal framework 1/X 15 buyer is willing to pay for the business and explain details of the transaction structure, including the amount of debt and equity needed to secure the transaction. At this point the buyer s advisors will negotiate with the seller to determine whether the buyer is granted exclusivity, meaning sole entitlement to proceed with the intended acquisition. 6. Due diligence Due diligence involves the buyer s professional advisors, including lawyers, accountants and consultants, completing an exhaustive evaluation of the target company a process that includes a review of all financial records plus anything else deemed material to the sale. A review of public registers is standard practice. The seller s data is summarized in a due diligence report containing the advisers conclusions on legal and financial risks relating to the transaction and other matters of interest to the buyer. The due diligence report further constitutes the basis for the pricing of the target company. 7. Official approval Applications, filings and applications for official approvals, such as from the Swedish Competition Authority (Konkurrensverket), the Swedish Financial Supervisory Authority (Finansinspektionen) and Bolagsverket are drawn up. 9. Official approval Applications, filings and applications for official approvals, such as from Konkurrensverket, Finansinspektionen and Bolagsverket are filled in, signed and submitted. 10. Closing The closing involves finalization of the purchase/sale contract and the filing of registration documents with Bolagsverket. Preparations are also made for the finalization of pension arrangements, collateral, bank accounts, insurance and settlement of intra-group issues and internal debts. A closing memorandum outlines closing actions to be taken in accordance with the share transfer agreement, such as transfer of the shares and confirmation of receipt of the purchase price. The actual closing is the day when funds are transferred to pay the purchase price and refinance the target company, and all executed documents are delivered. Shares are transferred and an escrow agreement signed. Any post-closing actions cover the finalization of, and any adjustment to, the purchase price and fulfilment of any escrow agreement. 8. Signing A signing memorandum outlines the documents signed or provided at signing, such as powers of attorney, minutes of board of directors meetings, share transfer agreements. Issues relating to timing, power to sign and disclosure schedules are resolved. useful contacts further information Government agencies Swedish Companies Registration Office (Bolagsverket) SE Sundsvall The Swedish Companies Registration Office is the government agency that registers new companies as well as changes in established companies and receives annual accounts, etc. Swedish Tax Agency (Skatteverket) SE Solna (from Sweden) (from abroad) The Swedish Tax Agency is the government agency for taxation, tax collection and national registration of residents. at Starting a business in Sweden - an introduction Starting a limited liability company Running a business in Sweden - an introduction Useful information sources External experts have reviewed this fact sheet. However, the contents should not be viewed as legal or financial advice but only as an overview of current conditions in Sweden. These may change and thereby render descriptions of laws and other frameworks inaccurate. In all individual cases we request that advice always be sought with relevant organizations on specific issues.

18 Fact sheet XXXXXXXXX Running a business - XXXXXXXXXX 1/X 16 Photo: Dan Boman / Scania Running a business in Sweden - an introduction Skilled professionals, smooth business procedures and receptivity to international ownership make Sweden an easy country to operate in. International businesses will find an environment that is modern, open and enterprise friendly. in brief One of the world s most knowledge-intensive economies Wage levels - cost-effective for skilled employees Transparent and user friendly business frameworks Competitive corporate tax rate of 26.3 percent Operating in Sweden Swedish commercial legislation is adapted to both foreign investments and international trade. There are no restrictions on ownership or operations of foreign companies and the same legislation applies to foreign- and domestically owned companies. Sweden has a strong economy and a stable political climate and is characterized by openness and transparency within both the private and public sectors. Internet usage is high and most services are available online. The infrastructure is well-developed in communications and transportation as well as energy. The Work Environment Act (Arbetsmiljölagen) outlines the regulations for maintaining a safe work environment. The employer has the main responsibility for the work environment and employees are required to follow safety instructions. Environmental awareness is strong in Sweden and the country has taken a proactive role in areas such as recycling and pollution control for several decades and more recently in biofuel development. Skilled and outward-looking workforce As a knowledge-intensive economy that invests heavily in research and development, Sweden draws on an extensive pool of highly skilled labor and is amongst the most knowledgebased economies in the world, according to World Bank figures for This resource is a prime attraction for businesses of international caliber. Productivity levels are high and the country scores consistently well in international studies of skills levels. Swedish managers, engineers and marketing specialists are accustomed to working in global markets and different cultures. Swedish executives are highly regarded for their international management skills and knowledge of global affairs. The Swedish workforce is open to foreign-owned employers. More than 600,000 people in the country are employed by foreign-owned companies. A very high percentage of salaried workers speak English and, in many cases, other languages. Nationally, the Swedish workforce is highly multicultural, with around 15.8 percent of total manpower being foreign-born. Wage levels - competitive for skilled employees Salary levels for highly skilled staff are relatively low, and costs for manufacturing labor are similarly competitive. Wage differentials between different types of work are narrower than in many developed countries. Published in January 2012

19 Fact sheet XXXXXXXXX Running a business - XXXXXXXXXX 1/X 17 There is no statutory minimum wage; wage issues are instead left to employers and employees and their representatives. Labor relations - stability and cooperation Sweden has a tradition of mutual respect and cooperation between companies and their employees. Labor relations between employers and trade unions are cordial and constructive. Industrial disputes and conflicts are rare. Trade unions are important partners for employers because the vast majority of workers are unionized. Employers hold discussions with the unions to agree collective agreements for employees. These regulate pay, training and other workplace issues, run normally for 1 3 years and operate under a two-tier system, with traditional centralized industry-wide agreements supplemented by local, company-level agreements. Some 69 percent of wage earners and 73 percent of salaried workers belong to a trade union. Wage earners are mainly members of unions within the Swedish Trade Union Confederation (LO) and salaried workers are generally in unions that are part of the Swedish Confederation of Professional Employees (TCO) or the Swedish Confederation of Professional Associations (SACO). Equality and diversity - principle of non-discrimination The principle of equal pay for the same job, regardless of gender, has long applied in Sweden. Pay differentials between men and women are narrow compared to many other countries, though women still earn somewhat less than men on average. In Sweden, women constitute 46 percent of the total labor force, which is a very high proportion compared to other countries. Extensive legislation is in place to prohibit workplace discrimination. The Distrimination Act (Diskrimineringslagen) covers, for example, equal opportunity and employment conditions for men and women; measures against ethnic discrimination in working life; measures against discrimination based on sexuality; and the prohibition of workplace discrimination against people with disability. The legislation also prohibits direct and indirect discriminanon-hierarchical swedes Sweden is known for a non-hierarchical management approach based on knowledge-sharing and delegation of responsibility to the individual. This empowerment of staff and reliance on consensus is credited as a key driver of business innovation and a source of workplace inclusion and staff commitment. Sweden has a long tradition of flat organizational structures and an informal decision-making process that has fostered a unique way of working in informal collaborative teams. Terms of employment Swedish standard employment contracts are normally valid until further notice, but may include an initial trial period a so-called probationary period in the contract. The maximum probationary period is six months, but there is a substanstial scope for fixed term contracts. Contracts are governed by statutory rules and, in most cases, a collective agreement between the employer (or the employer association to which the employer may belong) and relevant trade unions. The rules are in place to provide certainty for employers and to protect the employee. Collective agreements generally cover issues like working hours, holidays, termination of employment and supplementary pension benefits. Termination of employment must be based on just cause. This can be established either for reasons of redundancy or on personal grounds. Personal grounds are reasons relating to the individual (including repeated negligence, poor-performance and difficulty cooperating). However, the employer is required to make an active effort to resolve the problem, for instance by issuing warnings or transferring the employee within the company. Redundancy comprises reasons not specific to the individual, and includes financial considerations, business restructuring or the closing of a position. Working hours Swedes work on average a greater number of hours compared to the rest of Europe. The statutory basic working week is 40 hours. Overtime is limited to 48 hours over a four-week period and 200 hours per year. This does not apply to those in managerial positions, people working from home and some other categories. Exemptions can also be arranged through union agreements, and workplaces are often flexible about working hours, particularly in smaller companies. Holidays and time off Employees are entitled to a minimum five weeks paid annual leave after their first 12 months of employment. Summer vacations have been traditionally taken in July, but in recent years there has been a growing trend to take holidays during other months of the year. Sweden has 13 public holidays. Most are connected to religious (Lutheran) feasts. In chronological order they are: New Year s Day, Epiphany, Good Friday, Easter Day, Easter Monday, Labor Day, Ascension Day, Whit Sunday, National Day, Midsummer s Day, All Saint s Day, Christmas Day and Boxing Day.

20 Fact sheet XXXXXXXXX Running a business - XXXXXXXXXX 1/X 18 tion against employees and job applicants. It applies to hiring procedures, decisions on promotion or selections for training leading to promotion, changes by employers in pay or employment conditions, and redundancy and contract terminations. WORK ENVIRONMENT RULES The Work Environment Act outlines the regulations for maintaining a safe work environment. The employer has the main responsibility for work environment and employees are required to follow safety instructions. Technology, work organization and job content must be designed in such a way that they do not subject the employee to physical or mental strain that can lead to ill-health or accidents. The Swedish Work Environment Authority (Arbetsmiljöverket) issues detailed regulations on the environment. Some are available in English on the agency s website. Social security and pensions Pensions, healthcare and unemployment insurance in Sweden are funded by a statutory national basic pension and insurance system supplemented by occupational-based agreements. The individual employee can also choose to top this up with private insurance. National basic pension and insurance Employers pay statutory employer contributions on their employees behalf, consisting of charges for pensions, health insurance and other social benefits. Employer contributions amount to percent of gross salary. Exemptions from employer statutory social security contributions are available if a foreign-based company without a permanent place of business sends a foreign employee to Sweden for a short period of time. swedish business culture in a nutshell Highly international corporate environment High productivity Technology oriented Talent for innovation Strong emphasis on compromise and consensus Non-hierarchical Little time between exchange of pleasantries and start of business discussions Punctuality important Work dress code conservative but casual For foreign experts a reduction in employer contributions is available as part of the tax relief scheme for key foreign employees. Occupational-based pension and insurance plan Many employers also pay into occupational-based insurance and pension plans on their employees behalf. Occupationalbased schemes are an important part of the pension and insurance system, helping employers to attract and retain skilled employees. Two main types of occupational pension and insurance plan are used in private industry to supplement basic statutory protection: collectively agreed insurance and non-collective insurance. Private pension plans The individual employee can choose to top up his or her provision with private insurance. Sick and parental leave - largely covered by social insurance system No sickness allowance is payable for the first day off work. If an employee is absent from work due to illness the employer pays 80 percent of salary for days From day 15 and onward, the social insurance system takes over and pays a sickness allowance of 80 percent of salary, up to a maximum annual amount (SEK 330,000 in 2012). Both mothers and fathers are entitled to draw parental allowance. Parents are together entitled to 480 days of leave from work per child, starting from birth. Sixty days are reserved for each parent, but outside of this the parents are free to decide how to arrange their leave. The parental allowance is 80 percent of salary, up to a fixed maximum, paid by the state social insurance system. Fathers may also take ten days leave in conjunction with the child s birth. Parents are also entitled to leave from work to care for sick children, up to a maximum of 120 days per child per year. This leave is paid for by the state insurance system in the same way as parental allowances. environmental regulatory frameworks Businesses are specifically urged to take steps to reduce emissions, minimize their use of hazardous chemicals, promote more efficient energy use and improve waste management. Strong legislative and regulatory frameworks are in place to ensure that companies meet their responsibilities. Companies must always contact relevant authorities at an