Amendments to the Swedish Companies Act affecting e.g. listed companies
On 3 September 2020, certain amendments to the Swedish Companies Act (Sw. aktiebolagslagen) will enter into force. The most important amendments concern new rules regarding record date for shareholders’ meetings in Swedish CSD companies (companies whose share registers are kept by Euroclear Sweden AB) and the introduction of an exemption for certain transfers of shares or other financial instruments under the so-called Lex Leo, which is applicable to all Swedish public limited liability companies.
Amendments to the rules on record date for shareholders’ meetings
The record date is the specified date prior to the shareholders’ meeting in a CSD company at which a shareholder must be recorded as a shareholder in the company in order to be able to participate in the shareholders’ meeting and exercise its voting rights. The new rules on record date imply that the record date will fall six banking days (instead of five weekdays as stipulated in the current rules) before the shareholders’ meeting. Further, nominee registered shareholders will be given the opportunity to register their shares in their own names in the share register for another two banking days after the record date (instead of before the record date as stipulated in the current rules), i.e. not later than four banking days before the shareholders’ meeting. The new rules on record date do not entail any amendments to the rules on last day for notification of attendance at a shareholders’ meeting.
Amendments to Lex Leo
The so-called Lex Leo deals with issues and transfers of shares, warrants and convertible bonds to board members, employees and their related parties (“Leo Persons”) in public limited liability companies and subsidiaries of public limited liability companies. According to Lex Leo, any resolution to make such issue or transfer must be approved at a shareholders’ meeting in the group parent (being a public limited liability company) with a majority requirement of 90 percent of the votes cast and shares represented at the meeting. For listed companies, statements of the Swedish Securities Council (Sw. Aktiemarknadsnämnden) have extended the area in which Lex Leo should be applied from the perspective of good practice on the Swedish stock market.
Lex Leo has been criticized for giving portfolio companies of listed investment companies competitive disadvantages when it comes to the ability to attract and maintain key personnel by offering attractive incentives, and for making management buy-outs of subsidiaries of listed companies difficult. In light of this, a new rule will be introduced implying that the special decision-making procedure of Lex Leo does not need to be complied with in case of transfers of securities having a value of less than one percent of the group’s total value.
The new exemption only covers transfers of existing securities and not issues of new securities. This means that transfers of shares, warrants or convertible bonds in a subsidiary of a listed company can be made e.g. as part of an incentive program or other restructuring within the group without applying Lex Leo, as long as the value of the transferred instruments corresponds to less than one percent of the group’s total value. The Swedish Securities Council has confirmed in a statement (AMN 2020:30) that from the perspective of good practice on the Swedish stock market the new exemption can be utilized also when a subsidiary issues new shares to another group company which immediately thereafter transfers the shares to Leo Persons. However, it is still uncertain whether it would be considered compliant with good practice on the Swedish stock market to utilize the exemption in case of transfers of shares, warrants or convertible bonds in a listed company (as opposed to transfers of such financial instruments in a subsidiary of a listed company) to Leo Persons. The uncertainty in this regard will have to be clarified by the Swedish Securities Council.
In addition to the amendments to the rules on record date for shareholders’ meetings and Lex Leo, some additional amendments will be implemented in the Swedish Companies Act in order to adapt it to the EU Shareholder Rights Directive II. These amendments aim to make it easier for listed companies to identify the shareholders in the company and make it easier for the shareholders to exercise their rights. The new rules mainly concern the transfer of information between the company and its shareholders and are also applicable to so-called intermediaries (legal entities that hold or administer shares or keep securities accounts).