Legal Alert!

Cross-border conversions

On 27 November 2019, Directive (2019/2121) of the European Parliament and of the Council amending Directive (2017/1132) regarding cross-border conversions, mergers and divisions was adopted. An investigation into adapting the directive to Swedish law was subsequently initiated and the proposition (2021/22:286) was published on 8 September 2022. The new law is to enter into force on 31 January 2023, with several amendments to the Swedish Companies act, including a new chapter (ch. 24 a) which enables cross-border conversions. The law will be constructed with the regulatory framework for cross-border mergers as a model, and the aim is to enable wider opportunities for limited companies to restructure across national borders within the EU and EEA.

A cross-border conversion means that a Swedish limited company is converted into a foreign legal entity subject to the legislation of another member state within the EEA or vice versa. The conversion does not result in the formation of a new company, nor will the company to be converted be dissolved, but the company’s legal status will change so that it, in the future, will be covered by the legislation of another state within the EEA and that the registered office is transferred to the other state.

The procedure is divided in such a way that the state in which the company is located before the conversion will perform certain checks that must be carried out before issuing a conversion certificate. Thereafter a control of legality is carried out in the state where the company will have its domicile after the conversion to prevent the cross-border procedure from being used for criminal or improper purposes, or to violate workers' rights. It is yet uncertain how comprehensive such control of legality will be, however, for Swedish purposes the SCRO will be obliged to collect information from several other public authorities such as the Police Agency and Tax Agency. Note that, regarding Swedish limited companies that want to be converted into foreign companies, the procedure will in much correspond to the new procedure for cross-border mergers, e.g. a conversion plan should be prepared. The conversion plan shall, among other things, include information on governmental subsidies and grants received by the applying company during the last five-year period.

The rules will come into effect on 31 January 2023, and since much is still uncertain regarding the SCRO’s processing of cross-border conversions, a processing time of at least four months is expected, of which three months refers to a mandatory stand still period for the summoning of unknown creditors However, it can be concluded that the rules on cross-border conversions open up more opportunities for limited companies to restructure across national borders within the EU and EEA than has previously been possible under Swedish law.

If you have any questions, please contact the Legal team

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Johan Fjellstrom
Senior Manager | Legal
+46 70 080 29 52

Rasmus Johansson
Assistant Manager | Legal
+46 70 080 43 60

Anahita Bayat
Associate | Legal
+46 70 080 43 25


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