Bankruptcy Administration
Stockholm attorneys with you all the way
When a corporate restructuring is not viable and all alternatives and options have been exhausted, the company must be placed into bankruptcy
When is bankruptcy appropriate?
A prerequisite for being placed into bankruptcy is that the debtor is insolvent—meaning they are unable to pay their debts as they fall due, and this inability to pay is not merely temporary. The application is submitted to the local District Court by either the company itself or by a creditor.
Preserving value and rescuing the business
A bankruptcy does not necessarily mean that all value is lost. Through prompt action, the bankruptcy trustee can often continue to operate the business during a transitional period, sell off inventory through existing sales channels, or carry out a collective transfer of the business operations. This creates the conditions to both save jobs and maximize the dividend to creditors.
Critical stages in the bankruptcy process
The value of the company’s assets is often higher if the business is transferred as a going concern. Through established customer and supplier relationships, an ongoing business can command a significantly higher value than separate assets. The bankruptcy administrator may therefore choose to continue operating the business in order to complete projects or find a buyer for the entire business.
If there are no conditions for transferring the business as a whole, the assets are sold separately. The sale is usually conducted via a public auction through an established auction firm, or by private treaty if the property has a limited market or requires a specific circle of buyers.
An insolvency situation may entail personal payment liability for taxes, fees and debts incurred after the company’s equity has been depleted. A bankruptcy application filed in time limits personal liability. It is therefore crucial to act before taxes fall due and to comply with the Swedish Companies Act’s rules on a balance sheet for capital deficiency and liquidation.
The bankruptcy administrator prepares an administrator’s report setting out the reasons for the insolvency, the quality of the accounting records, and any suspicions of breaches of company law. The investigation also examines whether there were transactions prior to the bankruptcy (such as payments, gifts or set-offs) that may be recovered to the bankruptcy estate.
When the winding-up is complete, the assets are distributed to the creditors. If a distribution is made to unsecured creditors, a formal claims verification procedure is carried out at the District Court, where the claims are examined before the bankruptcy is closed.
Peter Eriksson, Partner at Carler
“The opportunity to rescue a business facing financial difficulties is greater the earlier we are engaged in the process.”
Three important things to keep in mind when bankruptcy is looming
1. Act before taxes and fees fall due
By filing for bankruptcy in time, you avoid being held personally liable for the company’s unpaid taxes and fees.
2. Maintain good order in the accounting records
Complete and up-to-date accounting records facilitate the bankruptcy investigation and reduce the risk of protracted investigations into personal liability for representatives.
3. Avoid improper transactions prior to bankruptcy
Payments or transfers of assets to individual creditors shortly before bankruptcy risk being recovered and may give rise to legal disputes.
Summary of the effects of bankruptcy
- Immediate halt to seizures and individual claims from creditors.
- Independent crisis management takes over responsibility for the company’s assets and liquidation.
- The state wage guarantee secures employees’ salaries during the liquidation phase.
- Opportunity to transfer the business in its entirety to save jobs and assets.
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