Author: Josephine Ringdahl

Kilpatrick Townsend has represented the Precis Digital group in connection with an investment by the new minority shareholder Nalka Invest. The investment was preceded by a cross-border merger of the current Precis Digital group.

Precis Digital is a leading digital marketing agency with strong presence in the Nordics and Great Britain with the ambition to challenge the status quo within digital marketing. Precis Digital has approximately 450 employees divided into nine offices in Sweden, Norway, Denmark, Finland and Great Britain.

Kilpatrick Townsends team comprised of Tobias Öd and Cecilia Qvist, with support from local counsels in Norway, Denmark and Great Britain.

Kilpatrick Townsends corporate team regularly represents investors, founders, buyers and sellers and we have great experience of tech-transactions. We have been entrusted to work with some of Sweden’s most interesting IT and technology startups and their founders.

Kilpatrick Townsend has represented the shareholders of Lägenhetsbyte Sverige AB in a majority sale to Bragnum Invest, the new majority shareholder of the Lägenhetsbyte group.

The Lägenhetsbyte group holds over 90 % of the market related to exchange of tenancy apartments. Lägenhetsbyte also provides technology that enables for property owners to manage applications and control that tenancy apartment exchanges are correctly carried out.

More information (in Swedish) is available here.

Kilpatrick Townsend’s team comprised of Tobias Öd and Cecilia Qvist.

Kilpatrick Townsend’s corporate team regularly represents investors, founders, buyers and sellers and we have great experience of tech-transactions. We have been entrusted to work with some of Sweden’s most interesting IT and technology startups and their founders.

Kilpatrick Townsend’s Stockholm office announced today that, once again, it’s Real Estate, Construction, Public Procurement, and Dispute Resolution practice areas rank among the best in Europe according to the newly announced results of the 2022 Legal 500 EMEA edition. In addition, several lawyers receive high individual rankings. Managing Partner Mattias Wittgren is included in the Legal 500’s “Hall of Fame” for his achievements as a “Leading Individual”. Partner Sylvia Lindén ranks as a “Leading Individual” in Public Procurement and Partner Hanna Sundberg ranks as a “Next Generation Partner” in Real Estate. The results are based on extensive surveys conducted by the well-regarded Legal 500 that, each year, ranks the world’s top law firms by numerous practice areas.

Fredrik Ahlqvist leads the Real Estate Practice that raised its ranking to Tier 2. The team is especially recommended for its eminent advice in connection with large-scale portfolio acquisitions and divestments and represents pension funds, private equity firms, and private property owners on a regular basis. Partner Hanna Sundberg and Fredrik Ahlqvist are highly recommended for handling forward funding and forward purchase deals as well as advising on project developments. In addition, Partner Matti Scheffer is recommended for his expert knowledge and experience of disputes related to tenancy law, leasing and property formation, and zoning plan matters. The Real Estate team receives high praise from clients:

• Professional, knowledgeable and also very nice people.’
• ‘I have worked with Hanna Sundberg on several occasions and have always been very happy with the interaction and advice received. Besides being a very good lawyer, she is also commercially minded, which I appreciate.’
• ‘Knowledgeable, solution oriented and fun!’

The firm’s Construction Practice elevated its ranking to Tier 2. Current mandates for practice co-heads Nicklas Björklund and Mattias Wittgren include large infrastructure projects, complex construction disputes, and housing projects. Clients highly recommend Mattias Wittgren, Nicklas Björklund and Marcus Munk and the team’s Construction Practice for their expertise, professional and business conduct, and their amicability. The Senior Lawyers at the Stockholm office are recommended by clients as the best in Sweden:

• ‘The team’s strengths and their attention to detail, the ability to quickly provide responses to aid and support business critical decisions. The skills and innovations sit firmly with the personnel employed with Kilpatrick Townsend at their Stockholm office.’
• ‘Mattias Wittgren is highly skilled in construction law and very pragmatic and business focused. He is also easy to reach and always in a good mood.’
• ‘The practice has a very wide spread of strength, competence and experience. The team they build is always very strong and consists of highly skilled professionals in different legal areas. They have all the competence they need within the company and the seniors are among the best in Sweden. (…) They know from the start what difficulties you may face during both the process to make a business agreement and how to make the contract documents as good as possible.
• ‘Nicklas Björklund is among the best lawyers in Sweden and his team is considered as a winning team, which is a very good thing if you are in a dispute. I notice that their teamwork is excellent and the seniors will get the result that the client hopes for. I think that the seniors are in the top of their sector in Sweden and that they have the best way of organising to get their results.’
• ‘The practice has a very wide spread of strength, competence and experience in a way that most companies don’t have and when you work with a big company you may lose contact within the team. The team they build is always very strong and consists of highly skilled professionals in different legal areas. They have all the competence they need within the company and the seniors are among the best in Sweden.’

The Public Procurement Team, ranked in Tier 3, is led by Sylvia Lindén. Advokat, Senior Associate Jens Nilsson, also a member of the public procurement team, receives an individual ranking in Legal 500 Europe as a “Recommended Lawyer 2022”. The Public Procurement team also gets high recommendations from clients:

• ‘Professional treatment and incredibly committed staff.’
• ‘Sylvia Lindén is extremely professional and very available and attentive to our concerns.’
• ‘The lawyers I worked with were committed to provide solutions to their customers and were very quick in their actions.’

Link to Legal 500 Europe 2022.

Established in 1860, Kilpatrick Townsend is a business law firm with international operations in Sweden, the U.S., Japan, and China.

Since 2001, the Stockholm office has provided consultancy and business law solutions in several legal areas to Swedish and international clients within the private and the public sector.

Chambers Europe 2022 recently ranked the Kilpatrick Townsend Stockholm office’s Real Estate Group among its top three bands of leading law firms for Real Estate. In addition, Fredrik Ahlqvist, the responsible partner for the Real Estate Group, and Sylvia Lindén, the responsible partner for the Public Procurement Group, received individual lawyer rankings. The results are based on extensive surveys conducted by the well-regarded ranking institution Chambers and Partners that, each year, ranks the world’s top law firms by numerous practice areas.

Chambers Europe recognized the Stockholm office’s Real Estate Group as a talented team in its handling of complex transactions for both buyers and sellers and in financing matters. The Real Estate Group brings high expertise in real estate development and joint ventures, while working closely with both the firm’s M&A Team and the experienced Construction and Consultant Law Teams. It also serves an array of clients, including capital assets managers, real estate developers, holding companies, as well as local and international real estate and private equity funds.

Fredrik Ahlqvist ranks in band 3 and the Real Estate Group is highly recommended by its clients notably for its excellent services handling the complex legal issues that our clients face. “They’re quick but still meticulous with sense for details. They have a profound knowledge of the real estate business as a whole, not just concerning the legal aspects of negotiating contracts” and praise their “quality of advice and availability.”

Chambers Europe ranks Sylvia Lindén in band 3. According to clients she “Always delivers excellent advice in time,” and ”She is very easy to work with”. She advises a broad range of suppliers on the full public procurement process, from initial bids to award challenges. Sylvia Lindén focuses her procurement practice in the utilities sector, which includes energy, transport, and infrastructure.

Established in 1860, Kilpatrick Townsend is a business law firm with international operations in Sweden, the U.S., Japan, and China. Since 2001, the Stockholm office has provided consultancy and business law solutions in several legal areas to Swedish and international clients within the private and the public sector.

Kilpatrick Townsend has represented Plick AB in an investment from Norwegian based Schibsted. Plick offers a marketplace and app for pre-owned second hand-clothing and accessories and has more than a half million users. Plick will continue to be operated as a stand-alone entity.

More information (in Swedish) is available here.

Kilpatrick Townsends team comprised Tobias Öd and Cecilia Qvist.

Kilpatrick Townsends corporate team regularly represents investors, founders, buyers and sellers and we have great experience of tech-transactions. We have been entrusted to work with some of Sweden’s most interesting IT and technology startups and their founders.

Kilpatrick Townsend has represented the shareholders of Zedcom AB and Zedcom ISP AB (the companies) in connection with the sale of the companies to Nasdaq First North listed Exsitec.

The companies offer services within business systems (visma.net), server hosting and offers complete IT-solutions. The purchase price of SEK 65 million consists of SEK 42,5 million of cash consideration, a SEK 7,5 million promissory note and approximately SEK 15 million to be paid with shares in Exsitec Holding AB in a new issue of shares by means of debt set-off to the selling shareholder.

Kilpatrick Townsends team comprised of Tobias Öd and Cecilia Qvist.

Kilpatrick Townsends corporate team regularly represents investors, buyers, sellers and we have great experience of tech-transactions. We have been entrusted to work with some of Sweden’s most interesting IT and technology startups and their founders.

On May 28 2020, the European Court of Justice (CJEU) provided preliminary rulings in Case C-796/18 Informatikgesellschaft für Software-Entwicklung (ISE) mbH ./. Stadt Köln, and on June 4, in Case C-429/19 Remondis GmbH ./. Abfallzweckverband Rhein-Mosel-Eifel.

Both cases concerned the frequently debated issue of public contracts between contracting authorities; and in particular, the interpretation of the exemption in Article 12(4) in Directive 2014/24/EU on public procurement (the “Directive”), referred to as the “Hamburg exemption.” The exemption means that contracting authorities can enter into cooperation agreements with each other without carrying out a public procurement procedure.

Thus, under certain conditions, the Directive allows contracting authorities to cooperate with each other, using each other’s capacity to perform public service tasks they are required to perform, instead of procuring a contract with a supplier.

The main question in the preliminary rulings was to determine when a co-operation agreement falls outside the scope of the Directive.

The cases are thus of particular importance as guidance for contracting authorities that wish to enter into cooperation agreements without having to apply the procedures in accordance with the Directive. 

The main proceedings in the national court

Case C-796/18 concerned a cooperation between the federal state of Berlin and the city of Cologne. The state had purchased software used for managing operations within the fire brigade which it, through an agreement, allowed the city to use free of charge. The contracting authorities also entered into a cooperation agreement which allowed the other party to take part in any future development of the software.

Case C-429/19 concerned the management of residual waste in a waste facility. Two German districts and one city jointly controlled a union, which was tasked with carrying out the duties of the districts and the city to recycle and dispose of waste. The union itself did not have the capacity to handle the waste and therefore subcontracted 80 percent of the waste to private companies and the remaining 20 percent to a third district with its own responsibility for waste management within its territory.

The preliminary rulings of the CJEU

In Case C-796/18, the CJEU began by clarifying that the contract in question needs to be a public one in order for the exemption from the rules on public procurement to be applicable. The CJEU found that a public contract exists when an agreement is mutually binding, which was considered to be the case in the main proceedings because the parties had undertaken to share software development with each other. The Directive furthermore requires that the cooperation concerns public services. The CJEU found that cooperation regarding activities that are subordinate to public services can also be covered if the activities contribute to the performance of the public services. Lastly, the CJEU clarified that, to benefit from the exemption, the cooperation between contracting authorities may not lead to a private company making a profit.

In Case C-429/19, the CJEU found that the contract in question was intended solely for one authority to provide the other with a paid service. In order for it to be a cooperation within the meaning of the Directive, it is necessary for all parties to participate in the provision of the public services that are the subject of the cooperation.

It can therefore not be considered a cooperation when one of the contracting parties’ only contribution is to reimburse costs. In such cases, the public contract is not exempt from the procurement rules.

Analysis

As elaborated by the CJEU and the Directive, the exemption is available solely to organizations that fall within the definition of “contracting authority” in the Directive. Suppliers may thus not be parties to such agreements. The agreement must relate to a cooperation designed to achieve the contracting authorities’ common goals, and must also relate to public services. Further, the cooperation must only be governed by considerations related to the public interest. The cooperation can hence not relate to commercial activities. The participating authorities’ cooperation activity may not exceed 20 percent of the activity in the relevant market

In the current rulings, the CJEU clarifies that both of the contracting authorities need to contribute, not just by paying costs, in order for the contract to come under the exemption in the Directive. Of particular interest is that the CJEU highlights that activities that are support services to public services also can be the subject of a cooperation as long as they contribute to the actual performance of the public services.

These two cases serve to further clarify and define what a public contract is. The CJEU emphasizes that a public contract can exist even in cases where there are no obligations to pay for the service or product, as long as the contract is mutually binding for both parties. The CJEU also points out that cooperation between contracting authorities must not lead to a private company making a profit. This highlights that contracting authorities not only have to comply with the rules of the Directive, but also must take into consideration the rules of competition law. Before entering into a cooperation, the authorities should therefore consider the effects that their proposed cooperation may have on competition.

Thus, the preliminary rulings bring important insights to what is required for a cooperation agreement to fall within the scope of Article 12(4) in the Directive; and brings more clarity regarding the scope and conditions for the application of the Hamburg exemption.

On 1^st of January 2021, new regulations go into effect to facilitate the assignment of a special examiner or a minority shareholders’ auditor to protect minority shareholders’ rights. Shareholders will also obtain a greater freedom to decide on the form of arbitration in buy-out disputes. New regulations also go into effect with regard to unrestricted and restricted share premium reserves, which may facilitate bonus issues.[1]

Special examiners and minority auditors without a general meeting

The Companies Act and the Economic Associations Act include regulations which aim to prevent the majority shareholders from abusing their power vis á vis the minority shareholders. In brief, these regulations give a minority of shareholders, who suspect abuse of power, the right to demand the appointment of a “special examiner”. A minority of shareholders can also demand that a “minority auditor” is appointed.

Current legislation requires that a general meeting is held before a special examiner can be appointed. In short, the requirement means that holders of not less than one tenth of the total number of shares in a company, or holders of not less than a third of the shares represented at the general meeting, must support the demand at the general meeting. Thereafter, a shareholder can apply to the Swedish Companies Registration Office to have a special examiner appointed. Corresponding regulations apply to economic associations and their members.

The requirement that a general meeting must be held before an appointment can be made may delay the appointment of a special examiner, especially if a majority opposes the appointment and votes to postpone the matter from the agenda of the general meeting.

With the proposed changes, a general meeting will no longer be required. An application for a special examiner can be submitted directly to the Swedish Companies Registration Office, provided that holders of at least one tenth of the total number of shares support the request. Corresponding rules will apply to economic associations and their members.

Just as today, the main rule will be that the reviewed company/association is liable for the special examiner’s compensation. However, the proposed new rules also state that the person/persons who made the application may be jointly liable for the compensation if the examination was “obviously unnecessary” and such person/persons realized or should have realized this. This rule will not apply to public companies (Sw. publika aktiebolag).

Another new aspect of the regulation is that the special examiner, in addition to the already existing rules on conflicts of interest, must be independent in relation to the company and the shareholders (or the association and its members). It remains to be seen how the Swedish Company Registration Office will implement this requirement.

In addition to the above, the new regulations clarify the rules on examinations of subsidiaries when a special examiner is appointed in the parent company. The regulations also clarify the time span that can be examined and that it is the company/association itself that is responsible for providing information to the examiner, rather than the board members or the CEO personally.

The new regulations include corresponding rules with regard to minority auditors. I.e., it will be possible to submit an application directly to the Swedish Company Registration Office without the requirement of a general meeting.

More flexibility concerning arbitrations in buy-out disputes

Pursuant to the Companies Act, a shareholder who owns more than nine tenths of the total number shares in a company has the right to acquire the remaining shares from the other shareholders. In turn, a shareholder whose shares can be bought pursuant to this rule, has a right to demand that the majority shareholder acquires the minority shares. These regulations are also subject to certain changes. Among other things, shareholders are given the right to decide the number of arbitrators in an arbitration in the event of a buy-out dispute. The shareholders will also be allowed to agree on how arbitrators are appointed.

New share issues – the premium can be split between the unrestricted and restricted share premium reserve

When forming a new company and when new shares are issued, current regulations imply that any portion of the payment for the new share, which exceeds the quota value of the share, shall be accounted for as the share premium reserve. Today, the share premium reserve is an unrestricted fund. The new proposed regulations will allow the founders/shareholders to choose how to split any premium between restricted equity and unrestricted equity. Consequently, two types of share premium reserves will be allowed – one unrestricted and one restricted. Funds in the restricted share premium reserve may be used for so-called bonus issues. The restricted share premium reserve may be reduced in the same way as the reserve fund.

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[1] Prop. 2019/20:194

The Swedish Anti-Corruption Institute has revised the Code to Prevent Corruption in Business (“the Code” or “the Business Code” as it is also referred to). The revised Code applies since 14 August 2020.

Although the provisions on bribery in the Criminal Code were reformed in 2012, the provisions are still centered around the wording “undue advantage”, a concept that can be difficult to define in practice. The Code serves as a self-regulation and supplements the Criminal Code in the sense that it provides an overall view of an ethically justifiable way of dealing with various situations. The Code is also meant to serve as a tool to prevent corruption.

Companies that comply with the Code shall adopt preventive measures against corruption, e.g. by statements from the management and by regular risk analysis, internal rules and systems for reporting (whistleblowing). These measures are further explained in the first part of the Code. The second part of the Code covers the definition on the term “benefit” (undue benefit or undue advantage). It also contains guidance and practical examples on how a business should evaluate whether a benefit is permitted or non-permitted. The Code distinguishes between three types of situations. First, situations concerning the exercise of public authority and public procurement. Second, situations where the recipient is in the public sector and/or in publicly-financed activities when there is no exercise of public authority or public procurement. In this respect, “public sector” means activities financed by taxes and charges carried out by a public body and by corporations owned by the state, municipalities or regions. “Publicly-financed activities” means activities in which the state, a municipality or a region provides financial compensation for the operation itself. Examples of publicly-financed activities include private health care, education and social care. Thirdly, situations where the recipient is in the private sector.

The third part of the Code deals with intermediaries. The bribery legislation requires companies to carry out adequate due diligence on persons and organizations that represent the company. If the due diligence is inadequate, liability for so called negligent financing of bribery may arise. The Code requires companies to have systems for due diligence of intermediaries, including systems for risk assessment, control and evaluation of intermediaries.

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The Code can be found here https://www.institutetmotmutor.se/english/

Stockholm (June 25^th) – Kilpatrick Townsend is pleased to announce the election of Tobias Öd as partner in the Stockholm office effective July 1^st, 2020.

Tobias Öd joined Kilpatrick Townsend from another business law firm in 2017. Tobias possesses broad legal experience within private M&A, fund raisings, incentive programs, joint ventures, complex commercial agreements and employment law. He regularly represents startups as well as larger corporations in matters of investments, acquisitions, and complex commercial negotiations. Tobias also represents employers in labor disputes and in negotiations with unions.

”We are very pleased to announce Tobias as a partner,” said Stockholm Managing Partner Mattias Wittgren. “Tobias is a highly talented lawyer combining his legal expertise in M&A and corporate law, commercial agreements and labor law, with a great network and a tremendous commitment to our clients. His strive and engagement for developing our firm makes him an indispensable asset to our team as well as being a true role model for our younger lawyers.”

”It is with great joy and humility that I take on the new role as partner,” said Tobias Öd. “We have a brilliant team of highly skilled and experienced colleagues at the firm. I am looking forward to continuing the development of our firm with the addition of my legal expertise, complementing the firm’s already well reputable practice within real estate transactions, dispute resolution and public procurement.”

About Kilpatrick Townsend

Established in 1860, Kilpatrick Townsend is a business law firm with international operations in Sweden, the U.S., Japan, and China. Since 2001, the Stockholm office has provided consultancy and business law solutions in several legal areas to Swedish and international clients within the private and the public sector.

In 2015, the municipality of Vallentuna sold real estate to a company. The purchase agreement contained a condition that required the municipality to produce a bill of sale after the purchase price was paid (Sw. köpebrevsklausul). The company failed to timely pay the purchase price, and as a result, the municipality rescinded the contract. The notification of the rescission was sent by registered mail. After the notification was sent, but before the company received it, the company paid the purchase price.

The company filed a declaratory injunction suit against the municipality and claimed that the company  should be deemed the legal owner of the real estate. The district court found that the municipality was the legal owner of the real estate, and the court of appeals upheld that decision. The company appealed to the Supreme Court, which granted certiorari regarding: (1) whether the municipality was required to send a notification of rescission; and (2) whether the notification of rescission the municipality sent was sufficiently clear and timely made.

The Supreme Court found that the bill of sale clause should be regarded as a  rescission clause (Sw. hävningsförbehåll) rather than as a reversion clause (Sw. återgångsklausul). As a result, a notification of the rescission is required when a seller wants out of the contract due to the buyer’s delayed payment. However, the notification of rescission is sent at the buyer´s risk if the notification is sent “in an appropriate manner.” The Supreme Court found that the notification in question was sufficiently clear and that it was appropriate to send it by registered mail to the company’s address as stated in the company register. Thus, the company was deemed notified of the rescission the day after the notification was sent. At that time, the purchase price had not yet been paid. Accordingly, the notification of rescission was timely and the municipality remained the legal owner of the real estate.

The Supreme Court’s decision issued on April 17, 2020, case number T 1305-19.

Kilpatrick Townsend’s team included Matti Scheffer and Johan Wedsberg.

On 27 November 2019, the European Court of Justice (“CJEU”) issued a decision in Tedeschi Srl and Others v C.M. Service Srl and Università degli Studi di Roma La Sapienza, Case 402/18 ECLI:EU:C:2019:1023. The case is one in a series of cases the court has recently decided concerning a supplier’s use of subcontractors for the performance of procured contracts.[1]

The dispute, which was originally heard in the national Italian Supreme Administrative court, related to a procurement of cleaning services for the University of Sapienza in Rome. The plaintiff claimed that the award decision was illegal under Italian procurement law since the awarded suppliers intended to outsource to subcontractors more than 30 % of the contract’s total value and the compensation to the subcontractors was more than 20 % lower than the tender price.

The Italian Supreme Administrative Court, which found Italian law’s relationship to the EU procurement directive ambiguous, stayed the proceedings and asked for a preliminary ruling by the CJEU regarding the following questions (summarized by us):

• Does EU law preclude national legislation according to which the proportion of the contract that the tenderer is allowed to subcontract is limited to 30 %?
• Does EU law preclude national legislation that limits how much less subcontractors are paid (e.g. 20 %) compared to the prices resulting from the tender procedure?

The preliminary ruling from the CJEU confirms that it is not possible for the Member States to impose general restrictions on the proportion of a contract that may be executed by subcontractors. Furthermore, the CJEU confirmed that it is not possible to impose general conditions on the percentage of compensation that the supplier may pay its subcontractors compared to the prices that the supplier offers vis-à-vis the contracting authority.

Thus, the CJEU confirms again that there is a strong presumption that a supplier should be free to use subcontractors to perform procured contracts. We believe that this ruling is in line with the underlying objective of the EU directives, i.e., opening up the award of procurement contracts to competition and promoting the participation of SMEs in procurement.

There is no legislation in Swedish law that limits the use of subcontractors as in Italian law. But in our view, the ruling of the CJEU should be interpreted more broadly to mean that Swedish contracting authorities may not impose requirements or restrictions similar to those found in the Italian legislation litigated in this case.

Even though contracting authorities cannot go so far as to set fixed limits on what volume may be subcontracted, or interfere with a supplier’s margins in relation to its subcontractors, contracting authorities can still request information from the supplier on the proportion that it intends to outsource to subcontractors.

Previous rulings from the CJEU hold that it may be possible for contracting authorities to limit a supplier’s ability to subcontract the performance of what is regarded as the “main parts” of a contract.[2] However, such limitations requires at least that the procurement has been structured in such a way that the authority has not been able to control the subcontractor’s capacity during the tender phase. The current ruling of the CJEU in the La Sapienza case does not overrule this precedent.

Finally, it should be noted that the interpretation of the CJEU in this case concerns the older classic sector directive (Directive 2004/18/EC). However, due to the absence of material differences, we argue that the conclusions apply also for Article 27(2) regarding the interpretation of the new classic sector (Directive 2014/18 / EU).

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References:

[1] See e.g C‑406/14 Wrocław – Miasto na prawach powiatu, EU:C:2016:562, Case C‑63/18, Vitali EU:C:2019:787, Case C‑298/15, Borta EU:C:2017:266.

[2] C 406/14 Wrocław – Miasto na prawach powiatu, EU:C:2016:562.

The Swedish government recently presented a proposal to reduce the minimum permitted share capital in private limited companies from SEK 50,000 to SEK 25,000, effective January 1, 2020.

Share capital requirements of a certain minimum size should ensure that, at least from an accounting perspective, there is a margin between the company’s assets and liabilities. There are several rules in the Swedish Companies Act that aim to ensure that this margin does not decrease by e.g., shareholder dividends. At the same time, the proposal points out that the minimum requirement is, in practice, a weak protection for the creditors, and that the share capital should rather work as a barrier against dishonest businesses.

The share capital is part of the limited company’s equity, which is divided into restricted and non-restricted equity. The share capital, together with any restricted funds, constitute the restricted equity, while other equity is considered non-restricted equity. The value of the company’s assets will amount to at least the value of the company’s liabilities, provisions, and share capital plus any other restricted equity. In these instances, the restricted equity is said to be “covered”. If there seems to be a capital deficiency, the deficiency must either be cured, or the company must be liquidated. A board of directors must act as soon as there is reason to believe that the company’s equity is less than half of the registered share capital. Otherwise, the board of directors, and in some cases the shareholders, risk personal liability.

The size of a company’s share capital is determined when the company is formed. The share capital can later be increased or decreased, but it must always amount to the minimum requirement, which today is SEK 50,000. According to the proposal, the limit will be lowered to SEK 25,000. About 95 percent of the companies are formed with the lowest permitted share capital. By comparison, in many EU countries, it is possible to form companies without share capital or with a share capital of EUR 1.^[1]

A company that has a higher share capital than the minimum requirement can, under certain conditions, reduce the share capital and repay the excess amount to the company’s shareholders. The decision must be made at a general meeting of shareholders, and must be registered with the Swedish Companies Registration Office. Sometimes the general meeting must decide on new articles of association at the same time. The company also must apply for a permit from the Swedish Companies Registration Office to implement the decision (i.e., to pay out the money to the shareholders). Before the Swedish Companies Registration Office gives permission, the Swedish Companies Registration Office issues a notice to the company’s creditors. The notice states that anyone who does not want the company to reduce the share capital must notify the Swedish Companies Registration Office (usually within two months). The Swedish Companies Registration Office also sends a notification to the Swedish Tax Agency. If no creditor notifies the Swedish Companies Registration Office in time, the company may implement the reduction of the share capital.

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[1] Lagrådsremiss – Lägre kapitalkrav för privata aktiebolag (Eng. Lower capital requirement for private limited companies), September 5, 2019.

On May 2, the European Court of Justice (CJEU) ruled in Case C-309-18 Lavorgna Srl ./. Comune di Montelanico, Comune di Supino, Comune di Sgurgola, and Comune di Trivigliano. The case clarified how a contracting authority should proceed when tenderers (contract bidding and award procedures) lack information required under national procurement law per Directive 2014/24/EU.

The CJEU ruling concerned the interaction between what is stipulated in the procurement documentation and what is required in national procurement law. The CJEU also discussed the possibility of requesting clarifications and data supplements of solicitation that have not been explicitly requested in the procurement documentation.

The National Court’s Main Proceedings

The case involved a coordinated service procurement carried out by several Italian municipalities. The procurement documentation did not contain labor costs in the tender documents to allow the bidders to fully develop their pricing/bids. Instead, bidders were asked to supplement the tenders with the labor costs before the contract award.

The municipalities decided to award the contract to the undertaking (bidder) Gea. The undertaking Lavorgna, ranked second, reviewed the award decision and argued that Gea should have been excluded from the procurement due to its failure to state labor costs.

The CJEU Ruling

The CJEU argued that it appeared that under Italian procurement law, implemented by the directive, tenderers that failed to submit labor costs as part of its bid/tender, were to be excluded from the procurement. In the procurement documentation in this case, however, the tender (1) required that the bidders/tenderers include this pricing; and (2) it also stipulated that the national procurement legislation would apply to issues not addressed explicitly therein.

Against this background, the CJEU considered the fact that all reasonably informed and normally diligent bidders could, in principle, have gained knowledge of the rules and provided labor costs in their tenders. The CJEU held that the principle of equal treatment and transparency (what is termed in the U.S. as “full and open competition” on a “level playing field”) did not require the contracting authority to explicitly state that labor costs should be submitted in the tender. Put differently, a contracting authority must not repeat what was stated in the national legislation in the procurement documentation.

However, uncertainties remained regarding the tenderers’ ability to “act right” in their tenders. CJEU noted that, in the present case, there was no physical space to provide information on labor costs. In addition, it appeared that the tenderers were not allowed to submit documents that were not specifically requested. Therefore, the CJEU held that it was for the national court to consider whether it was physically possible for the tenderers to provide the labor costs in accordance with the law. If not, the CJEU said that the municipalities could allow the tenderers to remedy any non-compliance with the national legislation.

Analysis

Article 18 in Directive 2014/24/EU requires member states to take appropriate measures to ensure that bidders comply with applicable environmental, social, and labor law obligations under EU law, national law, collective agreements, or in international environmental, social, and labor law provisions. In addition, Article 56(3) enables contracting authorities to request bidders to supplement and clarify their tenders within an appropriate deadline.

Directive 2014/24 is a so-called minimum directive that allows member states to adapt their own rules when implementing the law, if it complies with the directive’s objectives.

The CJEU ruling confirmed that member states with national legislation choosing to adopt more detailed provisions than required by the directive, must uphold them. Provisions stipulated in the statute that are sufficiently clear and may lead to the exclusion of a bidder, will hence apply automatically. Such provisions are given priority over more general writings in the procurement documentation.

The ruling further confirmed that the contracting authority did not need to explicitly state what was stated in the statute’s exclusion provision in its procurement documents. A general reference to the grounds of exclusion was, according to the CJEU, sufficient in view of the principles of legal certainty, transparency, and proportionality.

In sum, the CJEU held that an obligation clearly stated in the national procurement legislation need not be explicit in the procurement documentation, as long as it was explicitly referenced. Furthermore, it was possible for the contracting authority to request documents from the bidders, provided that the provision’s framework on clarifications and supplements allows it.

Hence, for a bidder, it is not enough to follow what is explicitly stated in the procurement documentation when submitting a tender. In order to avoid exclusion, the bidder must also ensure that it is aware of the national procurement legislation, and that the bid complies with all such requirements as well.

Kilpatrick Townsend’s Stockholm office ranked high by both Chambers Europe and Legal 500 for 2019, based on extensive surveys conducted by the well-regarded ranking institutions.

Chambers Europe recognized the Stockholm office’s Real Estate Group, led by Partner Fredrik Ahlqvist, as a talented team in its handling of complex transactions for both buyers and sellers and in financing matters. The Real Estate Group brings high expertise in real estate development and joint ventures, while working closely with both the firm’s M&A and Contract Law Teams. It also serves an array of clients, including capital assets managers, real estate developers, holding companies, as well as local and international real estate and private equity funds. Mr. Ahlqvist was also recommended by clients for being “really thorough, extremely available, and very business-oriented.”

Chambers Europe also listed Partner and Procurement Team leader Sylvia Lindén as “up and coming,” and she was recommended by the clients for her high availability and her useful and valuable advice. Sylvia Lindén focuses her procurement practice in the supply sector, which includes energy, transport, and infrastructure.

According to Legal 500’s latest rankings of the Swedish law firms, the Stockholm office ranked high in Real Estate Law, Construction & Consultant Law, Public Procurement & Commercial Agreements, Company Acquisitions, and Transactions. Legal 500 further praised Partners and Construction & Consultant Law co-leaders Mattias Wittgren and Nicklas Björklund for their “strong knowledge of construction law.” Mr. Björklund was especially recommended for his ability to find creative business law solutions, while Mr. Wittgren was listed as one of 2019’s “leading individuals.” Partner Marcus Munk was also recommended for his notable construction expertise.

Chambers Europe 2019

Legal 500 EMEA 2019