Vol 6 (2009) - Issue 3

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Saab's Reorganisation in Sweden

On 20 February 2009, Saab Automobile AB (‘Saab’) filed for and was granted reorganisation by the District Court in Vänersborg, Sweden. This is without comparison the biggest case of reorganisation in Sweden. The filing was, of course, preceded by a longer period of preparations and negotiations with, inter alia, the owners, General Motors (‘GM’) and the Swedish Government, the latter in part through media.

Until 1996 enterprises in Sweden had, as an only alternative to formal bankruptcy proceedings, the option to seek restructuring through compositions with their creditors, either informally – requiring consent of all those involved – or through a voting procedure under the supervision of a court.

The Company Reorganisation Act (Swedish: Lag om företagsrekonstruktion) was adopted in September 1996, together with supplementary amendments to other laws, with the objective to improve the chances for survival for a company in difficulties. So far the results have been meagre. But as the recession deepens, the numbers of filed petitions for reorganisation has increased.

Rules for reorganisation

An undertaking in financial difficulties may seek temporary relief by filing a petition for reorganisation at the district court. The court will grant reorganisation provided that the petition contains sufficient information to assess that the company has a reasonable chance of survival. If granting the petition, the court will also appoint an Administrator to safeguard that the company complies with the rules, which include equal treatment of creditors. The company may not, without the consent of the Administrator, pay or secure old debts, assume new obligations or sell or lease or pledge vital assets. The Administrator is not a legal representative of the company.

A creditors meeting shall normally be held within three weeks. In the meantime the company and the Administrator shall provide information to the creditors, including an analysis of the reason for the difficulties and a description of how the company can be reorganised. At the meeting, the creditors may have their say on the feasibility of the proposed reorganisation and also decide to appoint a committee, which the Administrator is obliged to consult on important issues.

Reorganisation lasts for an initial period of three months, but can be prolonged by three-month periods up to a total of twelve months. During this time a Reorganisation Plan must be made and implemented. Reorganisation ceases, inter alia, upon the request of the debtor, if the debtor files for bankruptcy or upon the request of the Administrator or a creditor if the court deems that the purpose of reorganisation will not be obtained.

During the reorganisation, the company is protected against bankruptcy or seizures of property.

Old debts

As long as the reorganisation proceeds, payment of all debts which under a bankruptcy would not have priority – whether invoiced or just accrued – can be neglected. Ordinarily these creditors will be asked to consent to a composition whereby the debts are reduced or at least that payment of the debts are re-scheduled. The most common composition leads to a reduction of the claims to 25%, but it can be permitted, as an example, to have creditors receive full payment up to a certain level, whereby those claims will not participate in the vote and the voters are reduced to a manageable number.

Current and future deals

During the reorganisation a creditor with unsecured old claims may not terminate any contracts on the grounds of default in payment of those debts, if the debtor, with the consent of the Administrator, opposes and upon request can procure reasonable security for future payments.