A large number of companies have been adversely affected by the coronavirus pandemic, which has resulted in the loss of income, poor liquidity and difficulties in obtaining financing. To mitigate the economic impact of the pandemic, the Swedish Government (the “Government“) has presented a range of new initiatives regarding economic relief and financial aid. One recent regulation adopted by the Government regards a SEK 100 billion government guarantee programme directed primarily at small and medium-sized companies, with the aim of facilitating their access to financing (the “Guarantee Programme“).

The Guarantee Programme in short

The Guarantee Programme is designed to provide support to companies through the demanding short-term effects of the coronavirus pandemic and to ensure that businesses are in a good position to emerge strong when the most difficult period is over and the economy recovers. The Government has given the Swedish National Debt Office (Sw. Riksgälden) (the “Debt Office“) a mandate to provide government guarantees, in a maximum amount of SEK 100 billion, to credit institutions as security for loans to companies that qualify for the Guarantee Programme. The Guarantee Programme is primarily directed at small and medium-sized companies established or conducting their main business in Sweden and which have been financially impacted by the pandemic, but are otherwise viable. Loans provided under the Guarantee Programme must be applied by the borrowing company towards covering costs and/or for making investments and may not exceed SEK 75 million per company unless the Debt Office in a specific case has decided otherwise (in such case the maximum amount is SEK 250 million). Guarantees provided under the Guarantee Programme will generally cover up to seventy (70) per cent of any credit loss arising from a loan covered by the guarantee, provided that certain conditions are met. In return, a guarantee fee as well as an administration fee is payable to the Debt Office. The interest rate on the loans covered by the guarantee needs to comply with certain requirements, e.g. the pricing of the loan shall reflect the diminished risk and lower capital adequacy requirement applicable to the credit institution as a result of the guarantee.

The guarantees provided under the Guarantee Programme will be issued to the credit institutions, which in their turn, will provide loans secured by the guarantees to companies in need. A company that would like to benefit of the Guarantee Programme has to apply for a loan by contacting a credit institution that is participating in the Guarantee Programme. According to information on the Debt Office’s website, so far 69 credit institutions have adhered to the Guarantee Programme.

Potential challenges for credit institutions participating in the Guarantee Programme

In order to participate in the Guarantee Programme a credit institution needs to apply for and enter into a guarantee agreement with the Debt Office. The guarantee agreement in template form is available on the Debt Office’s homepage and governs the relationship between the credit institution and the Debt Office setting out inter alia the requirements for demanding payment under the guarantee as well as other obligations of the credit institution. There are also provisions in the guarantee agreement that prescribe terms and conditions that need to be implemented into the loan agreement between the credit institution and the relevant borrower. From the perspective of the credit institution, most of the conditions in the guarantee agreement are clear and predictable. However, there are certain conditions that could be more difficult for the credit institutions to apply in practise.

In terms of the credit assessment, the credit institution will perform a credit assessment according to its normal routines without any involvement of the Debt Office. However, according to the guarantee agreement, the Debt Office can refuse to make a payment that a credit institution has requested under the guarantee if the loan granted to a company does not constitute a so called eligible credit (Sw. berättigad kredit), which is a loan that complies with certain conditions of the guarantee agreement.

In order to be qualified as an eligible credit, the lender (i.e. the credit institution) shall have carried out a proper credit assessment within the scope of the credit policy of the lender applicable to its customers in general and in accordance with applicable rules and regulations and deemed the borrower long term credit worthy. This must be explicitly evident in each credit decision. Such an assessment could be cumbersome to carry out without any further guidance, and with a risk that it could be questioned by the Debt Office in a potential subsequent review. A regular credit assessment must always be forward-looking but it is not clear what is intended with the long term creditworthiness, does this go beyond an ordinary credit assessment and could it mean that the credit institutions participating in the Guarantee Programme need to adjust their credit assessment routines? This is probably not the intention of the Debt Office, but the wording may cause uncertainty, especially since the Debt Office – in order to establish whether the conditions which trigger the payment obligation under the guarantee are met – is entitled to make a review of whether the relevant credit qualifies as an eligible credit or not. This could ultimately diminish the value of the guarantee and in certain cases have the effect that the credit institution carries the credit risk in its entirety, which is not in line with the purpose of the Guarantee Programme.

As regards already existing security that the credit institution has been granted from a borrower and which secures the borrower’s obligations in general, the proceeds of the enforcement of such security shall be shared between the credit institution and the Debt Office according to a certain order of priority set out in the guarantee agreement. This may cause difficulties for the credit institutions in terms of assessing the value of the security for a specific engagement and also cause issues in practice when applying such an order of priority.

According to another clause in the guarantee agreement, the Debt Office appoints the credit institution to handle the collection of debt in respect of the Debt Office’s subrogation right against the company due to the Debt Office’s payment under the guarantee. Since the credit institution will need to collect their part of the debt, it may be a practical approach of handling the process. However, the credit institutions may deem this as an additional administrative burden which may be difficult to be reimbursed for. It is stated that the debt collection may be done according to the normal debt collection routines of the credit institution and without the involvement of the Debt Office. Nevertheless, it may appear uncertain to a credit institution whether the Debt Office actually could have remarks on the handling and the effects thereof.

Further, credit institutions must conclude that a borrower under a loan within the Guarantee Programme does not, as per 31 December 2019, qualify as an undertaking in difficulties. Although this is clearly defined, it is an additional assessment outside the scope of the customary credit assessment that the credit institution must carry out.

The need for emergency economic relief and financial aid to mitigate the economic impact of the coronavirus pandemic is clear and the pressure on the Government to provide such support has been high. Although the Guarantee Programme was meant to result in a risk reduction for credit institutions when providing loans to small and medium-sized companies, there is a risk that the Guarantee Programme may not have the full intended impact due certain specific provisions of the guarantee agreement and the uncertainty of applicable requirements.


Main terms and conditions of the Guarantee Programme

Availability Period: Loans must be granted from 1 April 2020 until and including 30 June 2020. The Debt Office may extend the period with up to three (3) months.

Maturity: A maximum of three (3) years.

Beneficiaries: Small and medium-sized companies in Sweden which have been financially affected by the coronavirus pandemic but are otherwise viable. All industries except for financial companies may benefit from the Guarantee Programme. The company may not qualify as an “undertaking in difficulty” (Sw. “företag i svårigheter”) as defined in the Commission Regulation (EU) No 651/2014 of 17 June 2014.

Loan Amount: The maximum loan amount is SEK 75 million per company, unless a larger loan amount has been approved by the Debt Office. However, the loan amount per company shall in no event exceed SEK 250 million. The aggregate amount of all loans granted to the same company (covered by the guarantee) may not exceed:

  • the higher of twenty-five (25) per cent of the beneficiary’s 2019 annual revenue; or twice its employment costs during 2019;
  • for companies founded after 1 January 2019, the estimated annual salary costs for the first two (2) financial years; or
  • under special circumstances and if the company can show liquidity needs, the guarantee may be extended to cover loans over eighteen (18) months for small and medium-sized companies and twelve (12) months for larger companies.

Interest: The risk reduction and lower capital adequacy requirement as a result of the guarantee shall be reflected in the interest rate offered by the credit institutions. The company may defer paying interest on the loan during the first twelve (12) months.

Amortisation: The company will not be obliged to repay the loan during the first twelve (12) months (or a longer period if agreed between the credit institution and the company). The company may refrain from amortising other existing loans with the same credit institution during the term of the loan.

No dividends: The company may not, throughout the term of a guaranteed loan, pay bonuses or variable remuneration to management, or pay dividends other than what is comparable with regular salary payments.

Guarantee fee: The guarantee fee payable to the Debt Office is risk-based and will be determined based on the company’s risk class, which is set by the credit institution and will generally be calculated as a percentage per annum of the credit amount secured by the guarantee. The guarantee fee is payable by the credit institution yearly in advance.

Payment under the guarantee: Within three (3) months from final maturity or upon the occurrence of an event of default, the credit institution may demand payment under the guarantee from the Debt Office. The Debt Office may refuse payment under the guarantee if, in the opinion of the Debt Office, the loan does not comply with the conditions set out the guarantee agreement to qualify as an eligible credit.

Recourse of guarantee amount: If any amount is paid to the credit institution under the guarantee, the credit institution shall administrate the Debt Offices’ right of recourse against the Company.

Icy Corona winds are sweeping through the formerly frothy Swedish M&A market. Our experts within M&A and insolvency have taken a closer look at the challenges facing those engaging in M&A processes with financially troubled sellers. They conclude that these processes are laced with plenty of complexity and significant pitfalls, which mean that special competencies are required for those participating in and advising on these situations.

Törngren Magnell has extensive experience in the sale and purchase of companies and businesses. Both in the context of traditional auction processes and distressed M&A. Our senior lawyers have extensive experience in bankruptcies, liquidation, reconstructions and other insolvency situations. We are uniquely situated to advise the boards of companies under financial strain, particularly now in the Corona crisis, to take the decisive action necessary to deal with these situations.

Read the article here.

Work with temporarily reduced working hours and salary

On 11 March 2020, the Swedish Government proposed a scheme to enable employers to temporarily apply special provisions on short-term work in 2020, known as work with temporarily reduced working hours and salary (Sw. Korttidsarbete) (“RWH”).

The new temporary proposal entails that during 2020 the State will bear a greater proportion of the costs for the RWH, compared to the permanent state aid system for RWH. The State will bear up to three-quarters of the costs for RWH. The employee and the employer will share the remaining quarter. In this way, employees can reduce working hours but still receive more than 90 percent of salary. The aim is for affected companies to be able to retain their staff and get back to business quickly when the situation turns.

There are three fixed levels for reduced working hours: 20, 40 or 60 percent. The employer’s costs are reduced by 19, 36 and 53 percent respectively. State aid for RWH will only be provided at these three levels. An agreement on RWH during a contractual term shall amount to 20, 40 and 60 percent, respectively, and the salary reduction for each employee will be 4, 6 and 7.5 percent, respectively.

On 14 April 2020, the Swedish Government announced that it will enhance flexibility in the system, so that working hours can be reduced by up to 80 percent, resulting in a 72 percent cost reduction for the employer. At this level, the employee sees a salary decrease of 12 percent. It is proposed that the option for 80 percent RWH will come into force on 1 June and can be applied during May, June and July 2020. The Swedish Parliament is expected to consider the proposal in May.

To qualify, the employer must have experienced temporary and serious financial difficulties due to a factor beyond the employer’s control and which could not reasonably have been foreseen or avoided, and the employer must have used other available measures to reduce the personnel costs.

A further prerequisite for being entitled to aid from the State is that application of RWH is contemplated in collective bargaining agreements or in agreements concluded with the employees. For employers who are not bound by collective bargaining agreements, at least 70 percent of the employees within a business unit covered by the state aid must participate in RWH during the relevant month. The working hours and salary reductions that have been agreed must be the same for all participating employees in the business unit.

The aid applies to all employees who were paid in the three months before the month the application for aid is approved (the so-called comparison month) and to employees for whom the employer was obliged to pay employer contributions during the support month.

The Swedish Agency for Economic and Regional Growth (“ERG”) is the administrative authority and the application has been open since 7 April 2020. However, RWH support can be applied for retroactively from 16 March 2020. An application for preliminary aid must have been received by the ERG within two calendar months from the end of the support month. Otherwise, aid may not be provided for the support month. The rules will be applied throughout 2020.

The Swedish Parliament largely approved the Government’s proposal on 2 April 2020. However, the Finance Committee saw the need for certain changes and clarifications in relation to the Government’s proposal. Therefore, the following parts of the proposal are not yet fully established:

(i) the exemption for employers whose activities are mainly funded by public funds – the Finance Committee proposes that this exemption shall be suspended temporarily;

(ii) the exception for family members – the Finance Committee proposes that the family member exception shall be suspended temporarily;

(iii) the applicability of the law to staffing and consulting companies; and

(iv) clarification on share dividends etc. in companies applying for aid – the Finance Committee considers that it cannot be considered justifiable that employers who receive state aid are able, at the same time, to declare dividends and other similar payment.

Increased State responsibility for sick pay costs and delayed medical certificate requirements

The new sick pay rules entail that the State temporarily assumes the full cost of sick pay for two months. All employers are covered by the rules. The new rules apply from 1 April to 31 May 2020.

All employers are covered by the proposal. Self-employed persons who run limited liability companies are also covered. Self-employed persons who are registered for F-tax (Sw. F-skattsedel) will receive compensation for the qualifying days 1-14. The compensation is paid through a standardised sickness benefit.

The Government has also proposed that the requirement for medical certificates will be abolished. This means that anyone who is ill will be able to stay home from work for up to 14 days without the need to produce a medical certificate. Employers and the Social Insurance Office do not need any medical certificate to pay sick pay during the first 14 days. The rules apply retroactively from 13 March 2020.

The Swedish Parliament approved this proposal on 2 April 2020.

Temporarily reduced employer fees and deductibles

The Swedish Government has proposed a temporary reduction in employers’ fees and, for sole proprietors and natural persons who are partners in general partnerships, deductibles. This aims to limit the financial consequences for individual companies as a result of the spread of the corona virus, as many companies will suffer a sudden loss of income while remaining liable for wage costs.

The proposal covers all companies with employees and entails that employers will only need to pay pension contribution on the remuneration paid during the period 1 March to 30 June 2020. This reduction applies to up to 30 employees, and up to a salary sum of SEK 25,000. The part of the salary that exceeds SEK 25,000 is not covered by the temporary reduction. This means that the employer receives financial relief of a maximum of SEK 5,300 per employee per month.

For sole proprietors and natural persons who are partners in general partnerships, the proposal means that they will only pay pension contributions for income received during the period 1 January 2020 to 31 December 2020. The reduction in deductibles and general payroll taxes applies to a contribution basis of up to SEK 100,000. The rules entered into force on 6 April 2020.

The Swedish Parliament approved this proposal on 2 April 2020.

Postponement of tax payments due to covid-19

On 16 March 2020, the Swedish Government presented proposals for a number of budget measures in response to the new coronavirus, covid-19. Among other things, on application to the Swedish Tax Agency, companies may be permitted to postpone tax payments due to their tax account. Relevant tax payments are the deducted provisional tax on salaries, employers’ fees and VAT.

The period of postponement shall be limited to a maximum of 12 months and shall relate to a maximum of three months’ payments of provisional tax, employers’ fees and VAT each. For VAT that is reported quarterly, postponement may be granted for a maximum of one accounting period. For VAT that is reported yearly, postponement may be allowed for a maximum of one tax year.

The measure entered into force on 30 March 2020, with retroactive effect from 1 January 2020. Postponement of VAT that is reported yearly entered into force on 6 April but applies to VAT reported from 27 December 2019 through 17 January 2021.

If postponement is granted for already paid taxes and/or fees, an amount corresponding to this tax and / or fee will be credited to the taxpayer’s tax account. This may mean that the taxpayer receives a surplus in his tax account which can be paid out. The postponed amount must be repaid no later than the due date (according to a certain provision of the Tax Procedure Act) falling closest to the expiry of the postponement period.

The postponement shall be granted unless there are special reasons against it. This means that the Swedish Tax Agency will make an assessment in each case. Companies with poor compliance history, and those with larger tax liabilities, will not be granted postponement.


An interest rate corresponding to the base rate, currently 1.25 percent, will apply from the day following the original due date of the postponed amount up to the postponed due date. In addition, a postponement fee of 0.3 percent on the granted postponed amount will be charged per calendar month, from the month after the postponement is granted up to the month when the postponed amount shall be paid at latest. The cost rate and the postponement fee together correspond to a deductible interest rate in a limited company of 6.6 percent. The postponement fee shall be paid no later than the due date for the postponed amount.

Personal payment responsibility

According to Chapter 59 Section 12 of the Tax Procedure Act, representatives of a company may become subject to personal payment liability (so-called “representative responsibility”) if they fail, either intentionally or through gross negligence, to pay taxes or fees due. The obligation to pay is related to the time at which the tax or fee should originally have been paid.

However, the Tax Agency has published a legal guidance stating that, in this situation, the Tax Agency does not intend to seek redress for unpaid taxes and fees covered by the regulations under the representative responsibility provision, except where companies have obviously abused the opportunity in violation of the purpose of the postponement provisions.

The Swedish Parliament largely approved the proposal on 2 April 2020. The Finance Committee believes however that the overall rate for postponed tax payment of around 6.6 percent is too high and that the Swedish Government should urgently return with a proposal to reduce the overall interest rate.

Discount for rental costs in exposed industries

On 25 March 2020, the Swedish Government submitted a proposal for support measures aimed at lowering rental costs for companies in vulnerable sectors, such as the grocery and hotel and restaurant industries. As of 17 April, there is a regulation in place and a summary of the sectors proposed to be covered by the rental subsidy based on the Swedish Tax Agency’s SNI codes has been published: www.regeringen.se.

The proposal is that landlords who agree to lower rents during the months of April, May and June can receive support from the State. The State will bear 50 percent of the rent reduction up to 25 percent of the fixed rent. Utility costs, e.g. electricity, heat and water, are not covered by the support measures. The support must be able to be applied for by the landlords afterwards via the county administrative boards, provided that an agreement on rental discount is concluded before 30 June. An application for support must have been submitted to the county administrative board no later than 31 August 2020. The regulation has been approved by the European Commission and entered into force on 17 April. Further details regarding the regulation can be found here.


The on-going spread of Covid-19, the so-called coronavirus, is affecting a growing number of people and businesses, and society at large. Uncertainties surrounding the proliferation of the virus and the measures being taken by various governments to contain it are creating shockwaves through trade and industry generally, as well as for individual businesses. One challenge in particular is that some contractual parties are finding it increasingly difficult, sometimes even impossible, to hold up their end of the bargain.

Force majeure and unforeseen circumstances

Under Swedish law, agreements are generally enforceable in accordance with their terms. However, it is not uncommon for commercial contracts to be subject to express (or implied) exceptions or limitations, which might regulate certain unforeseen events. A so-called force majeure clause usually provides that, in the event of certain extraordinary circumstances, one party or the other (or both) may be released (either permanently or temporarily) from full performance of the exact terms of the agreement. Such circumstances must normally be outside of the control of the party relying upon the clause and not have been reasonably foreseeable when entering into the contract. Typical circumstances include war, revolution, natural disasters and similar phenomena. Industrial action, such as strikes and lock-outs, and trade restrictions instituted by nation states are also commonly included. To constitute force majeure, the circumstances (and/or their consequences for contractual performance) must generally be unavoidable, notwithstanding all reasonable efforts taken by the relevant party.

The exact scope of a force majeure clause varies considerably between agreements. Each must be considered on its own terms, against the background of what the parties intended on signing. It should also be noted that where one of the parties is a governmental body, such as a municipality, which is obligated by law to take necessary actions in a crisis situation, such agreements often include particular limitations on what circumstances can constitute force majeure.

Force majeure clauses often apply only for a restricted period of time, normally only so long as the relevant circumstance pertains. This amounts to a right to postpone contractual performance. In such case, it’s not uncommon that the other party has a right to terminate the agreement if the force majeure event endures. The party who cannot perform may also be entitled to terminate in some cases.

It should be apparent that both the relevant circumstances that trigger a force majeure clause and the implications thereof can vary considerably between contracts. Moreover, notice provisions concerning force majeure claims are often quite strict, and rights can be lost if not exercised exactly in accordance with the agreement.

Can the coronavirus outbreak constitute force majeure?

The question on many of our clients’ minds right now is whether the ongoing spread of the coronavirus and the effects on society at large (or their agreements in particular) can constitute force majeure. As mentioned, this depends on the circumstances in each individual contractual relationship and there is unfortunately no easy or straightforward answer.

Some circumstances commonly included in a force majeure clause may increase the likelihood of it being triggered. If a clause refers to “epidemics,” “quarantines” or other similar circumstances, this suggests that parties intended that the current situation regarding the coronavirus should constitute a force majeure for the purposes of the agreement. Whether the clause is actually triggered will depend also on how the coronavirus actually affects a party’s ability to perform in accordance with the contract. Typically, the force majeure circumstance must be the sole or predominant obstacle to performance.

Some indirect effects of the coronavirus, such as making contractual performance more expensive and more difficult, might not necessarily constitute force majeure. In addition, voluntary measures instituted by a party, such as cancelling or modifying performance in some specific way for the protection of its employees, will likely not give grounds to invoke a force majeure clause. On the other hand, a government decision that makes contractual performance impossible might constitute force majeure, assuming it was unforeseeable at the point of entry into the agreement.

If there is no force majeure clause in an agreement, or if such clause is deemed not to be applicable in a given situation, a party at risk of breach may be able to rely on Swedish statute which may imply certain terms. For example, the Swedish Sale of Goods Act (e.g. §27, 1990:931) may limit sellers’ liability for delays in delivery that are due to unforeseen events outside of their control (which provision may also apply by analogy to contracts involving delivery of services).

Additionally, it is a general principle of the Swedish Contracts Act (§36, 1915:218) that any party may apply to court for a contractual provision that proves to be unjust in the circumstances to be moderated or adjusted. The “unjustness” relied upon may include a circumstance arising after the entry into the agreement that prevents due performance.

Moreover, it is always possible for the parties to an agreement to renegotiate its terms and conditions to modify the agreement as they see fit. This option may be especially apt to settle issues in long-term commercial relationships.

Obligations when force majeure events arise

In the case of force majeure, both the innocent party and the party potentially in breach are generally obligated to take measures to mitigate losses, for example by purchasing goods through another distributor or adapting to the situation in some other way. If the coronavirus outbreak causes difficulties for a party to perform an agreement it should at first explore what, if anything, the parties can do together, or separately, to minimize losses, both individually and collectively.

You should consult your lawyers as soon as possible. Some agreements stipulate formal notification requirements that must be satisfied in order to rely upon a force majeure clause. The other party should also be mindful to take legal advice as necessary, and clearly state any objections to such claims.

The parties should also check their respective insurance policies to determine whether any compensation for contingent loss might be available in this situation and whether any notification requirements apply. It is also wise to archive all potential evidence for or against the notification of circumstances that constitute force majeure, for example correspondence with distributors, government agencies, customers and relevant news articles etc. in the event of a future dispute. This includes documenting all evidence of correspondence with the other party and any measures taken in mitigation.

Where a party cannot perform all of its obligations under an agreement, it should do so to the extent possible, despite the circumstances that constitute force majeure (although a buyer/payer should think carefully before making any payment for goods/services at risk). The progress of events should be followed closely enough that the fulfillment of obligations under the agreement can resume as soon as possible; consult the agreement to see whether there are any formal requirements necessary for this to happen. Also observe any relevant timeframe within which the other party may terminate the agreement due to continued reliance on the force majeure clause.

Legal consequences of force majeure/unforeseen circumstances

Finally, it is important to remember that contractual obligations do not generally cease unilaterally due to force majeure. If the supplier cannot deliver (or would be justified in not doing so), the customer’s payment obligation will also fall away. Force majeure must be seen, rather, as a form of cancellation or termination right, without liability for damages for the party who is able to rely upon it.

We would always advise our clients to take specific advice on any extraordinary circumstances that might prevent contractual performance, and now particularly those relating to the coronavirus, before seeking to rely upon a force majeure clause, or otherwise seeking to avoid or vary obligations to perform under general legal principles. The same applies for customers whose suppliers seek to avoid their obligations in this way.

The current situation

We stand in the midst a social crisis, and it is natural to worry, both for your own well-being as well as that of others, and for the economy and society at large.

At Törngren Magnell, we feel a great sense of responsibility for the services and the legal advice we provide, especially in times of crisis. We remain available through all of our regular channels of communication and our office is open for business, even as our associates and counsel are working remotely (in accordance with the recommendations of the Swedish Public Health Agency, in order to help minimize the spread of the coronavirus).

If you are in the process of negotiating agreements containing force majeure-clauses, you should pay particular attention to the fact that the parties’ knowledge of the current situation is likely to affect the applicability of the clause. This is especially important when using boilerplate-clauses. For this reason, we would recommend developing a customized clause stipulating specific risk allocation in relation to coronavirus implications.

Törngren Magnell can respond quickly and sensitively to provide legal advice on the implications and enforceability of any existing commercial agreements in the face of the unprecedented legal and commercial situation in Sweden. We can help you renegotiate current agreements or draft new ones and help manage disputes as they may arise.

Kristoffer Stråth, Managing Partner

For the avoidance of doubt, please note that this overview concerns contracts governed under Swedish law. Any views and opinions provided are of a general nature and cannot be taken as legal advice in relation to any particular circumstances. Relevant contractual clauses, factual circumstances and governing judicial principles are given by way of example only, and explicit grounds would be required for them to be applicable in each case.