Equity capital markets in Sweden: regulatory overview
A Q&A guide to equity capital markets law in Sweden.
The Q&A gives an overview of main equity markets/exchanges, regulators and legislation, listing requirements, offering structures, advisers, prospectus/offer document, marketing, bookbuilding, underwriting, timetables, stabilisation, tax, continuing obligations and de-listing.
To compare answers across multiple jurisdictions visit the Equity Capital Markets Country Q&A tool
This Q&A is part of the multi-jurisdictional guide to capital markets law. For a full list of jurisdictional Q&As visit www.practicallaw.com/capitalmarkets-mjg.
Main equity markets/exchanges
Main equity markets/exchanges
Sweden offers a range of listing alternatives and venues. The largest exchange in Sweden is Nasdaq Stockholm, which is part of Nasdaq Group, Inc.
Nasdaq Stockholm operates two equity markets:
Main Market. This is the flagship market in the Nordic region and is intended principally for well-established companies. The Main Market is an EU regulated market and, accordingly, its listing requirements are based on the applicable European standards (www.nasdaqomxnordic.com/).
First North. This is a multilateral trading facility (MTF) under EU legislation with lighter requirements and rules than those that apply to the Main Market. First North normally suits small, young or growth companies and is often the first step towards listing on the Main Market (www.nasdaqomxnordic.com/firstnorth).
Alongside Nasdaq Stockholm, NGM Stock Exchange (NGM) is the only other exchange in Sweden. NGM is aimed primarily at small and medium-sized Nordic growth companies.
NGM operates two equity markets:
In addition to the MTFs operated by Nasdaq Stockholm and NGM, Aktietorget operates an MTF (www.aktietorget.se/).
Market activity and deals
During 2014, there was a significant increase in market activity compared to recent years and the trend has continued in 2015. During 2014, 20 companies were listed on Nasdaq Stockholm (compared to eight companies during 2013). Five of these were companies transferring to Nasdaq Stockholm from other exchanges or trading facilities and five were secondary listings.
In addition, 45 companies were listed on Nasdaq First North Stockholm during 2014.
The Swedish Financial Supervisory Authority (SFSA) is Sweden's competent authority for the purposes of Directive 2004/39/EC on markets in financial instruments (MiFID) and operates in four main areas:
One of the SFSA's key roles is to supervise and monitor companies operating in the Swedish financial markets. The SFSA is also authorised to issue regulations and guidelines relating to the Swedish financial markets. Companies offering financial services in Sweden require licences issued by the SFSA.
The principal pieces of legislation through which Sweden has implemented the EC Directives relating to admission to trading on a regulated market and offers of securities to the public are the:
Securities Market Act.
Financial Instruments Trading Act.
In addition, equity offerings must comply with the:
Swedish Companies Act.
SFSA Regulations (2007:17) governing operations on trading venues (Chapter 10).
Rules of the relevant exchange, for example, the Rulebook for Issuers published by Nasdaq Stockholm or the Rules for NGM Equity.
To conduct a listing on the Main Market, securities must be admitted to trading by Nasdaq Stockholm. In addition, the company must produce a prospectus, which must be approved and registered by the SFSA.
Nasdaq Stockholm will only grant an applicant's securities admission to trading if it is satisfied that the applicant meets the listing requirements set out in section 2 of the Rulebook for Issuers (Listing Requirements).
The Listing Requirements require the following:
Incorporation. The company must be duly incorporated or otherwise validly established under the laws of its jurisdiction.
Validity. The company's shares must:
conform to the laws of the company's jurisdiction;
have the necessary statutory or other consents.
Negotiability. The shares must be freely negotiable.
Entire class must be listed. The application for listing must cover all issued shares of the same class.
Suitability. In cases where all Listing Requirements are fulfilled, the exchange can nevertheless refuse an application for listing if it considers that the listing would be detrimental to the securities market or investor interests.
In addition, there are specific requirements with respect to the composition of the management and the board of directors, as well as the applicant's capacity to provide information to the market.
Minimum size requirements
The expected aggregate market value of the shares must be at least EUR1 million.
Trading record and accounts
The company must have published annual accounts for at least three years in accordance with the accounting laws applicable to the company in its jurisdiction (including consolidated accounts for the group, where applicable). In addition, the company and its group's principal line(s) of business and field(s) of operation must be supported by a sufficient operating history.
The company must demonstrate that it possesses a documented earnings capacity on a business group level. Alternatively, a company that does not possess such documented earnings capacity must demonstrate that it has sufficient working capital available for its planned business for at least 12 months after the first day of listing.
Minimum shares in public hands
Conditions for sufficient demand and supply of the company's securities must exist in order to facilitate a reliable price formation process. In particular, the company must have a sufficient number of shareholders and sufficient number of its shares in public hands. The number of shareholders and the possible commissioning of a liquidity provider are both factors taken into account when evaluating sufficient demand and supply.
At least 25% of the shares within the same class being admitted to trading must be in public hands (the exchange may accept a percentage lower than 25% if it is satisfied that the market will operate properly with a lower percentage in view of the large number of shares that are distributed to the public).
Subject to approval by Nasdaq Stockholm, a company with a primary listing on a foreign exchange can apply for secondary listing. In general, the listing requirements are the same for primary and secondary listings, but the exchange can, under certain circumstances, waive one or more of the listing requirements applicable to main listings.
Companies are normally granted a waiver from the mandatory auditor review and legal review (a "fast track" process) where their primary listing is on a regulated market (or equivalent) operated by:
London Stock Exchange.
Hong Kong Exchanges and Clearing.
Australian Securities Exchange.
Toronto Stock Exchange
The exchange usually requests a certificate from the market where the company has its primary listing to ensure that the company satisfies the applicable listing requirements on that market.
Listing decisions regarding applications for secondary listings are made by the chief executive officer (CEO) of the exchange.
Minimum size requirements
There are no specific rules for secondary listings. The expected aggregate market value of the shares to be traded in the Swedish market must be at least EUR1 million.
Trading record and accounts
There are no specific rules for secondary listings, as they are the same as for primary listings (see Question 3, Trading record and accounts).
Minimum shares in public hands
There are no specific rules for secondary listings. The company must satisfy the exchange that there will be sufficient liquidity in the Swedish market to facilitate orderly trading and an efficient price formation process based on the requirements described above. The exchange will consider the forecast of liquidity based on an overall assessment of the share distribution of the company (that is, not only on the company's domestic market). If deemed appropriate under the circumstances, the exchange can require that the company use a designated liquidity provider in order to safeguard a sufficient liquidity.
An IPO can include:
An offering of new shares (where the issuer will raise funds).
An offering of existing shares (where existing shareholders make a whole or partial exit).
An offering of a combination of new shares and existing shares.
The offering can be addressed to the public or placed with a selected group of investors (typically institutions), or a combination of a public offering and a placement can be used.
A company can also be admitted to trading without any offering of new or existing shares being made. Such a structure will require that the company already has a sufficient number of shareholders and sufficient number of its shares in public hands (for example, in case of list transfers or secondary listings).
The followings structures (or a combination of both) can be used for a subsequent equity offering:
Rights issue. An offer of new shares on a pre-emptive basis to existing shareholders pro rata to their existing shareholding, normally with trade in subscription rights during the subscription period to enable shareholders who are unwilling or unable to subscribe for shares to divest their subscription rights and realise value.
Placement. A cash issue on a non pre-emptive basis to new investors who do not already own shares in the company. Specific restrictions apply for these kinds of issues.
The main disadvantage of a rights issue as compared to a placement is that the timeline is substantially longer in a rights issue. The timeline in a rights issue, from announcement until closing, normally extends to somewhere around six to seven weeks (at least). This is largely due to two factors:
It is rare for the board of a listed company to have the authorisation to resolve on a rights issue and a shareholders' meeting must therefore often be convened with a notice period of at least three weeks.
The subscription period in a rights issue must be at least two weeks.
The timeline for a rights issue obviously means a delayed raising of the funds, but also that the fundraising is subject to market risk during that timeline. One way to limit the exposure includes a structure where the board is authorised to set the subscription price a few days prior to the shareholders' meeting, which reduces some of the market risk during the shareholders' meeting notice period.
A private placement can enable financing when shareholders are unwilling or unable to provide additional capital and can be completed faster than a rights issue, particularly if the board has a mandate to issue shares and the placement is exempt from prospectus requirements. However, shareholders' pre-emptive rights are strongly protected in Sweden, and it is therefore good market practice as a first choice to elect for a rights issue to existing shareholders.
Procedure for a primary listing
The listing process is initiated by the company scheduling a meeting with the exchange, at which the company is presented by its management and the listing process is discussed. The exchange then appoints an external auditor, who (on the exchange's behalf) makes an assessment as to whether it would be appropriate to list and admit the company's shares to trading on the exchange. The assessment will cover matters including:
Whether there will be sufficient conditions for appropriate trading in the shares.
The company's ability to comply with the Listing Requirements, in particular requirements pertaining to disclosure of financial and other price-sensitive information.
Whether the company's directors and management are fit and proper to direct the company's business and to enable the company to meet its responsibilities towards the exchange and the stock market.
The information provided in the prospectus.
The auditor presents a report of their findings, which is submitted to the exchange together with a recommendation in respect of the listing decision to be made by the exchange. A sub-committee of the board of directors of the exchange (the Listing Committee) is the body that ultimately makes listing decisions on the exchange's behalf. The Listing Committee can upon request make advance rulings regarding the listing requirements (see Question 3, Main requirements).
The company must have prepared and published a prospectus prior to the listing and the relevant authority (normally the SFSA) must have approved the prospectus.
Prior to the listing, the company shall be subject to a legal review, covering at a minimum:
The description of the legal and tax related risks in the prospectus.
The material agreements entered into by the company.
The company's tax situation.
Any corporate formalities that are relevant to the listing.
The general suitability of the members of the board and the management.
The auditor appointed by the exchange must receive a written summary of the material observations arising out of the legal review of the company. The legal review must be conducted by a member of the Swedish Bar Association, except as regards the company’s tax situation.
Procedure for a foreign company
The procedure is the same for a foreign company (see above, Procedure for a primary listing). However, see Question 4, Main requirements on the possibility of using the "fast track" procedure in secondary listings.
Companies from foreign jurisdictions can obtain a listing of either shares or depository receipts in Sweden. Shares must be registered with the Swedish central securities depository, Euroclear Sweden, and the cross-border settlement with its foreign equivalent will be carried out automatically. Euroclear Sweden currently has established a technical cross-border infrastructure with the following jurisdictions:
Companies from other foreign jurisdictions will need to consider the possibilities and timing aspects of Euroclear Sweden establishing a new infrastructure with the securities depository of its jurisdiction, or alternatively seek a listing of depository receipts.
Advisers: equity offering
In an equity offering or an IPO, the advisers typically advise on:
The timing and structure of the offering.
The capital structure.
Board and management composition.
The marketing of the offering.
Pricing and valuation issues.
The following advisers are commonly engaged.
The issuer and the investment bank(s) usually engage lawyers in an equity offering.
Issuer's lawyers. Carry out legal due diligence, prepare the necessary corporate documentation, assist in preparing and verifying the prospectus and negotiate the underwriting documentation.
Underwriters' lawyers. Carry out or otherwise advise on certain aspects of legal due diligence, assist in verifying the prospectus and negotiate the underwriting documentation.
In an IPO, while separate lawyers can be engaged by principal selling shareholder(s), it is common that the lawyers engaged by the issuer also advise the selling shareholder(s). Separate lawyers may be engaged by the issuer's management.
Investment banks are usually engaged for the following roles in an equity offering:
Co-ordinator. Renders financial advice to the issuer on the offering in general and co-ordinates the offering (as a global co-ordinator if the offering is launched in multiple markets).
Underwriter. Underwrites the shares issued in the offering.
Bookrunner. Maintains the book of demand for the offered shares.
Further, in an IPO investment banks may be engaged to issue research reports and handle any stabilisation of the offering.
Other advisers include:
Auditors. Participate in the offering/IPO process, particularly with respect to comforts around the prospectus.
Public relations consultants. Give advice on dealing with shareholders, prospective shareholders and the media, particularly in an IPO process.
Equity prospectus/main offering document
The circumstances in which a company will be required to prepare a prospectus under Swedish law are essentially those set out under Article 3 of Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading (as amended by Directive 2010/73/EC) (Prospectus Directive), with the triggers being a "public offer" and "admission to trading".
The SFSA must approve any prospectus before its publication if Sweden is the relevant home member state. The SFSA will grant approval provided the prospectus:
Is internally consistent.
Fulfils all the requirements set out in the Financial Instruments Trading Act and Regulation (EC) 809/2004 implementing Directive 2003/71/EC as regards prospectuses and dissemination of advertisements (as amended by Regulation (EU) No 862/2012) (Prospectus Regulation).
The Financial Instruments Trading Act provides that the SFSA must issue a decision on the approval of a prospectus within ten business days of its receipt of a complete application. However, the SFSA has 20 days from receipt of a complete application to give a decision where:
The offer to the public relates to transferable securities that are issued by an issuer which has not previously offered transferable securities to the public.
The issuer has not previously had transferable securities admitted for trading on a regulated market.
A prospectus must be made public by the issuer when the prospectus has been approved and registered by the SFSA. Publication must occur as soon as possible and not later than either:
The day before the day on which the application period under the offer commences.
The day before the day on which the transferable securities are admitted to trading.
Where shares of a class not previously admitted to trading are offered to the public and are to be admitted to trading, the prospectus must be published not later than six business days before the close of the offer.
Publication of the prospectus is normally made by making it available at the company's and the participating bank(s) website. The SFSA also makes the prospectus available on its website.
The circumstances in which a prospectus is required are qualified by a series of exemptions. The SFSA has no discretion under the Prospectus Directive in this area, and the exemptions are essentially those laid down in Articles 3.2 and 4 of the Prospectus Directive.
Separate exemptions apply in relation to:
Admission to trading.
Key exemptions include where:
The offer is directed solely to qualified investors.
The offer is directed to fewer than 150 natural persons or legal entities who are not qualified investors within an EEA member state.
The offer relates to a purchase of transferable securities for a sum equivalent to not less than EUR100,000 for each investor.
Each of the transferable securities has a nominal value equivalent to not less than EUR100,000.
The aggregate sum which the investors will pay during a 12-month period within the EEA does not exceed the equivalent of EUR2.5 million.
The above exemptions may be combined and foreign issuers can apply them in the same way as domestic issuers.
Further exemptions apply in relation to share exchanges, securities issued as consideration in a takeover bid, shares offered or allotted in a merger or a demerger and distribution of dividends in the form of shares.
As regards the offering of shares to employees, foreign issuers can rely on an exemption in the Financial Instruments Trading Act which mirrors the provisions contained in Article 4.1 of the Prospectus Directive.
Admission to trading
The key exemption from publishing a prospectus where transferrable securities are admitted to trading is where the number of shares for which admission to trading has been sought during the immediately preceding 12-month period is equivalent to not more than 10% of the number of shares of the same class which were admitted to trading on the same regulated marketplace at the commencement of the 12-month period.
Further exemptions apply in relation to:
Securities offered as consideration in a takeover bid.
Shares offered or allotted in a merger or a demerger.
Shares offered or allotted to shareholders free of charge.
Distribution of dividends made in the form of shares.
Securities offered or allotted to present or former employees or board members of a company.
Shares created by conversion or swap of transferable securities or through the exercise of warrants.
As is the case in all jurisdictions in which the Prospectus Directive and Prospectus Regulations apply, the overriding obligation of disclosure in a prospectus is to provide "all information regarding the issuer and the transferable securities that is necessary to enable an investor to make an informed assessment of the assets and liabilities, financial position, results, and future prospects of the issuer and of any guarantor, as well as of the transferable securities". Furthermore, the information must be written in such a way that it is easy to understand and analyse.
The "necessary information" must be prepared having regard to the particular nature of the transferable securities and their issuer. More detailed provisions regarding the information that must be included in a prospectus are set out in the Prospectus Regulation.
Although one might expect the final price or the number of transferable securities to qualify as part of the "necessary information", applicants are permitted to omit these details from a prospectus (for example, where the company intends to approach retail investors to discover the level of interest in a particular issue before determining these elements). However, in these circumstances, the prospectus must instead contain information regarding the criteria or conditions which will be applied to fix the price (or, if applicable, the ceiling price) and the number of transferable securities to be offered. If it does not present this information, investors who have accepted offers to purchase or subscribe will be entitled to withdraw their acceptances within five business days of publication of the final fixed price and number of transferable securities.
In certain cases, the SFSA (like other financial regulators in Europe) has the power to grant derogations from the duty of disclosure. The SFSA can do this where it finds that either:
Publication of the information would be seriously detrimental to the issuer and the omission of the information would not mislead the public.
The information is of minor importance and would not influence the assessment of the financial position and prospects of the issuer, offeror or any guarantor.
The SFSA can also allow issuers to omit information required under the Prospectus Regulation in cases where it determines that the information is not relevant to the issuer's line of business or legal form or to those transferable securities to which the prospectus relates (where possible, the prospectus will contain comparable information).
A prospectus must include audited financial information covering the last three financial years (a shorter period is allowed where the issuer has not been in operation for three years). A proportionate disclosure regime applies to small and medium-sized enterprises and companies with reduced market capitalisation (audited financial information covering the last two financial years), as well as to rights issues (audited financial information covering the last financial year). Special rules also apply to issuers with complex financial history. If the issuer has published interim financial statements since the date of its last audited financial statements, those statements must be included in the prospectus. If the prospectus is dated more than nine months after the end of the last audited financial year, the prospectus must contain interim financial information covering at least six months of the current financial year.
While there are no formal Swedish rules governing the contents of other main offering documents, investors will typically expect at least the same level of disclosure as in a prospectus.
Swedish companies whose securities are listed on a regulated market must prepare consolidated accounts in accordance with the International Financial Reporting Standards (IFRS). Other companies can voluntarily apply the IFRS to consolidated accounts or can instead apply the Swedish GAAP (which are largely based on the IFRS).
Historical financial information included in a prospectus must be prepared in accordance with the IFRS or, if the IFRS is not applicable, the national GAAP for EU/EEA issuers. Consequently, there are typically no special considerations for EU/EEA issuers. For issuers outside the EU/EEA, historical financial information must be prepared in accordance with the IFRS or a third country's national GAAP, provided that the national GAAP is equivalent to the IFRS (including, for example, the US and Chinese GAAP). However, if the standards are not equivalent to the IFRS, the historical financial information must be presented in the form of restated financial statements. In any event, the historical financial information must be presented in a form consistent with the issuer's next annual financial statements, which must be considered, for example, where the issuer is in the process of an IFRS transition.
A working capital statement is required in any prospectus. It should be either a clean statement that there is sufficient working capital for the issuer's current requirements (meaning a minimum of 12 months from the date of the prospectus) or a negative statement together with a description of how the issuer intends to provide the necessary additional working capital.
A supplemental prospectus will be required if a significant new factor arises before the end of the offer period (or the first trading day).
As a general rule, the prospectus should be prepared in Swedish. However, a prospectus can be prepared in English in certain circumstances (for example, if the issuer is incorporated outside the EEA and has a primary listing in a regulated market outside the EEA). The SFSA can require that the summary of the prospectus be translated into Swedish.
The prospectus is normally prepared by the issuer's legal counsel and the engaged investment bank(s).
The responsibility of preparing a prospectus normally rests with the issuer. Non-compliance with that responsibility can result in the SFSA imposing a fee on the issuer in the range between SEK50,000 and SEK10 million.
The issuer's board is responsible for the contents of the prospectus and must give assurances that it has taken all reasonable care to ensure that the information in the prospectus is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. Only members of the board of Swedish limited liability companies have statutory prospectus liability under Swedish law. Shareholder litigation is unusual and case law on the matter is very scarce.
If any director or officer of the issuer is the seller of shares in the offering, they can potentially be held liable in their capacity as seller as a result of the "contractual relations" between the buyer and the seller. Otherwise, in order for directors or officers of the issuer to be held liable under general tort rules on damages in non-contractual relations, the damages must be caused by a criminal offence (for example, undue market influence or fraud).
It is uncertain under Swedish law whether an issuer can be held liable to pay damages to its shareholders if the claim is related to the subscription or acquisition of securities issued by the company.
According to a legislative proposal published in March 2013, it has been proposed that those who have prepared a prospectus (usually the issuer) or who have made an offer through a prospectus (such as major shareholders), as well as board members of the issuer and certain persons who have participated in the preparation of the document (such as auditors) shall be liable for the contents of that document. The liability requires negligence or wilful misconduct. The amended legislation is proposed to also apply to offer documents. However, it is at present unclear if and when the proposal will result in any legislative changes.
Marketing equity offerings
The structure of marketing efforts can vary on a case-by-case basis. The following methods can be used:
Pre-marketing. Engaged investment banks contact prospective institutional investors offering them details on the issuer with the purpose of creating interest.
Road shows. Institutional investors are invited to attend presentations by the issuer's management.
One-on-one meetings and conference calls. Certain prospective institutional investors may ask for one-on-one meetings with the issuer's management.
Media advertising. Scope and form varies in each case.
The Financial Instruments Trading Act includes provisions concerning advertisements for public offers and admissions to trading on a regulated market. In addition to the more straightforward rules that the information in advertisements must not be inaccurate or misleading and must conform to the information provided in the prospectus, advertisements must also state clearly that a prospectus has been (or will be) published and where the prospectus is (or will be) available. Furthermore, the advertisement must be formatted and presented so that it is clear that it is an advertisement.
Notably, even where the offering is exempt from the requirement to prepare a prospectus, all significant information in connection with the offering that is provided to any investor must be provided to all investors to whom the offer is directed.
Grounds for potential liability
Swedish law does not contain any specific rules on liability for research reports. The normal principles concerning liability must therefore be applied.
If a contractual relationship exists between the issuer of the research report and the equity investor, the investor can bring a claim against the issuer of the research report under normal contractual principles.
If no contractual relationship exists between the issuer of the research report and the equity investor, liability will normally require that the damage to the investor has been caused as a result of the issuer of the research report committing a criminal offence. Criminal offences which can potentially form the basis for liability are fraud and market manipulation.
Specific rules on liability for damages exist where financial advice is given to consumers.
Limitation of liability
To minimise potential claims for liability, investment banks can typically consider:
Avoiding the widespread distribution of the research reports.
Ensuring that the research reports include proper disclaimers.
Avoiding the inclusion of forward looking statements in the research reports.
In IPOs and other securities offerings (which are not rights issues), it is common to use a bookbuilding procedure when placing the securities with investors.
In IPOs, the prospectus typically includes a price range within which the final price will be set. The SFSA approved prospectus is distributed with that price range and the final price is set after closing of the bookbuilding procedure, which often extends to about two weeks. Retail investors apply on an application form and may be asked to state the maximum share price they are willing to subscribe for in the offering.
Following closing of the bookbuilding procedure the issuer, in consultation with the investment bank, sets the final price and decides on the allocation of securities among those investors who have submitted application forms. A pricing statement containing the final price is then announced.
In circumstances where the final price is not set out in the prospectus, the prospectus must instead contain information regarding the criteria or conditions which will be applied to fix the price. If it does not present that information, investors who have accepted offers to purchase or subscribe will be entitled to withdraw their acceptances within five business days of publication of the final fixed price.
Underwriting: equity offering
The structure of an underwriting typically results in the investment banks undertaking to subscribe for the securities themselves where they fail to provide subscribers for the offered securities.
The obligation of the underwriting banks to subscribe for the offered securities is set out in an underwriting agreement. The obligation is made subject to a number of conditions, for example:
The truth and accuracy of the representations and warranties given by the issuer.
That the offering is made within the envisaged time frame.
That the offered securities are approved for listing.
The underwriting agreement normally also contains an indemnity in favour of the underwriters.
The fees payable to the underwriters vary. A customary price range is usually between 2% and 5% of the underwritten amount.
Timetable: equity offerings
The timetable for an equity offering varies depending on the nature of the offering and the corporate consents required. Whilst a placement may be completed within a very short time frame (at least where no prospectus or shareholder approval is required), a rights offering normally takes at least six to seven weeks to complete and often longer (depending on the extent of due diligence and prospectus work to be carried out). The timetable for an IPO (from commencement of the process until completion of the offer and listing of the shares) normally extends to at least five months.
An indicative timetable for a Swedish IPO typically includes the following steps, where "T" means first day of trading:
T minus 6 months. Appointment of legal and financial advisers which commence due diligence of the issuer. Meeting with the stock exchange is held and the stock exchange appoints an auditor. Any restructuring of the issuer group is carried out. An assessment of the company's capacity for preparing financial reports and issuing press releases is made.
T minus 5 months. Commencement of the prospectus drafting.
T minus 4 months. Appointment of the board which satisfies the listing requirements (in order for the board to participate in the preparation of at least one, preferably two, interim reports prior to the IPO).
T minus 3 months. Adoption of corporate governance structures and policies which satisfy the requirements of a listed company.
T minus 2 months. IPO due diligence report dispatched to the auditor appointed by the exchange, who submits their report to the Listing Committee of the exchange. Draft prospectus is submitted to the SFSA for review.
T minus 1 month. Listing Committee meeting of the exchange to resolve on whether to approve the listing. IPO decision point.
T minus 2 weeks. SFSA approval and publication of prospectus. Announcement of IPO price range. Signing of placing agreement. Commencement of bookbuilding procedure and management road show.
T. Pricing announced and first day of trading.
T plus 2 business days. Settlement.
T plus 30 calendar days. End of stabilisation period.
Market manipulation is a criminal offence. Price stabilisation is a form of market manipulation and in order for it to be permitted it must comply with Regulation (EC) 2273/2003 implementing Directive 2003/6/EC as regards exemptions for buy-back programmes and stabilisation of financial instruments (Buyback and Stabilisation Regulation).
The Buyback and Stabilisation Regulation provides that in an IPO the stabilisation efforts must not be initiated prior to the first day of trading and must not go on beyond 30 calendar days after the first day of trading.
A number of disclosure requirements for a prospectus, reporting requirements and announcement obligations with respect to stabilisation are set out Appendix 3 to Prospectuses Regulation and in the Buyback and Stabilisation Regulation respectively.
In terms of quantum requirements, the Buyback and Stabilisation Regulation provides that a position resulting from the exercise of an over-allotment facility by an investment firm or credit institution which is not covered by a "green shoe" option cannot exceed 5% of the original offer and the "green shoe" option cannot amount to more than 15% of the original offer.
Tax: equity issues
No specific tax issues (for example, stamp duty or transaction taxes) arise relating to the issuance of new shares in Sweden.
Holders of listed and unlisted shares are subject to different tax rules. The general summary below outlines the main differences, but it is not exhaustive and only covers holders who are individuals or limited liability companies.
For Swedish tax resident individuals, income on capital (for example, dividends and capital gains on listed shares) is subject to a 30% flat tax rate. Capital gains and dividends on unlisted shares are taxed at an effective tax rate of 25% (as only 5/6 of such gains are taxable).
The tax basis for all shares of the same class and type is calculated together in accordance with the average cost method. Upon the sale of listed shares the tax basis may alternatively be determined according to the standard method as 20% of the sales proceeds after deducting sales costs.
Capital losses on listed shares are fully deductible against taxable capital gains on shares and other listed equity-related securities realised in the same year. 70% of capital losses on shares that cannot be offset in this way are deductible against other capital income.
Capital losses on unlisted shares are deductible to 5/6 (approximately 83.3%) against taxable capital gains on shares and listed equity-related securities. 70% of the capital losses that cannot be offset in this way are tax deductible to 5/6 (resulting in such losses in practice being deductible to approximately 58.3%) against other capital income.
Limited liability companies
For a limited liability company, all income, including taxable capital gains and dividends, is taxed as business income, currently at a flat rate of 22%. Dividends and capital gains on unlisted shares held as capital assets are generally tax exempt for corporate shareholders under the Swedish participation exemption regime. As a consequence, losses on those shares are not tax deductible.
However, dividends and capital gains on listed shares are generally subject to tax unless certain voting and holding period requirements are met. Capital gains and dividends on listed shares are tax exempt provided all the following criteria are met:
The shares are held as capital assets.
The shareholding constitutes at least 10% (by voting power) of the company or relates to the business of the shareholder or its affiliates.
A 12-month holding period has been observed.
Deductible capital losses on listed shares and other equity-related securities can only be deducted against taxable capital gains on those securities. Companies within the same group can also, if certain requirements are fulfilled, offset losses against such gains within the group.
Shareholders who are not tax resident in Sweden
Swedish withholding tax is normally payable for shareholders not tax resident in Sweden who receive dividends from a Swedish limited liability company. The domestic withholding tax rate is 30%. However, the tax rate is generally reduced under applicable double tax treaties to avoid double taxation between Sweden and certain other countries. Under domestic law, foreign corporate shareholders are generally not subject to withholding tax on dividends on unlisted shares.
Key continuing obligations applicable to listed companies relate to:
Disclosure of price sensitive information.
Disclosure of transactions by board members, management and so on.
Ban on transactions prior to publishing of regular interim reports.
Maintaining an internal insider list.
Disclosure of transactions by major shareholders.
Swedish Code of Corporate Governance.
Disclosure of price sensitive information
A listed company must disclose information about decisions or other facts and circumstances that are "price sensitive". Whether information is "price sensitive" must be evaluated on a case-by-case basis, taking into account, among other things:
The expected extent or importance of the decision, fact or circumstance compared to the company's activities as a whole.
The relevance of the information as regards the main determinants of the price of the company's securities.
All other market variables that may affect the price of the securities.
Since the overriding principle is that all market participants should have simultaneous access to any price sensitive information about the company, all price sensitive information concerning the company must be disclosed by press release as soon as possible (delayed disclosure is only permitted in certain circumstances), and the company must ensure that the information is treated confidentially and that no unauthorised party is given that information prior to public disclosure.
Selective disclosure of price sensitive information is only permitted in special cases (for example, information to major shareholders or contemplated shareholders in conjunction with an analysis prior to a planned new share issue, or to advisors retained by the company for work on prospectuses prior to a planned share issue or other major transaction, or to contemplated bidders or target companies in conjunction with negotiations regarding takeover bids, or to rating institutions prior to credit ratings or to lenders prior to significant credit decisions).
In addition to the general requirement to disclose decisions, facts and circumstances that are price sensitive, certain decisions require immediate disclosure under specific provisions of the rules of Nasdaq Stockholm. Such decisions include:
Resolutions adopted by shareholders' meetings (provided they are not considered as insignificant).
Resolutions to increase the share capital (provided they are not considered as insignificant).
Changes to the board, the management, or the auditors.
The implementation of share based incentive programmes.
Transactions between the company and any related party (provided they are not part of the daily operations or of minor importance).
Acquisitions or disposals of companies (provided they may have an impact on the share price).
Further, a company listed on Nasdaq Stockholm must prepare and disclose financial reports under accounting legislation and regulations applicable to the company. The company must disclose one year-end report and interim reports quarterly. The year-end report and the interim reports must be disclosed within two months from the expiry of the reporting period and must at least include the information required by IAS 34 "Interim financial reporting". The reports must state whether or not the company's auditors have conducted a review.
If a listed company intends to disclose information that is assumed to have a highly significant effect on the price of the securities, the company must notify the exchange prior to disclosure.
Disclosure of transactions by board members, management and so on
Board members, the CEO, the auditors, members of the management and major shareholders (holding 10% or more) (insiders), among others, must within five business days of the transaction date notify the SFSA of changes in their holdings in the listed company (shares and other share-related securities), as well as changes in the holdings of their related persons.
A listed company must continuously update and notify the SFSA of any changes to the list of company insiders.
See Question 24.
Ban on transactions prior to publishing of regular interim reports
As a general rule, board members, the CEO and the auditors (as well as related parties to those persons) cannot trade in the shares of the company 30 days prior to the publishing of regular interim reports. The same applies to the listed company's trading in its own shares.
Maintaining an insider list
A listed company is required to maintain an internal list of persons working for them who have access to inside/price sensitive information relating to the company (referred to as a logbook). The list does not have to be made public, but must be presented to the SFSA upon request.
Disclosure of transactions by major shareholders
A person whose holdings, in terms of votes or shares, attain, exceed or fall below 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.67% or 90% of all the votes or shares in a listed company is required to notify the SFSA and the relevant company. Financial instruments that confer a right to acquire shares that are already issued by the company must be included for the purpose of the calculation (certain aggregation rules may also apply).
Swedish Code of Corporate Governance
The Swedish Code of Corporate Governance (Code) is applicable to all companies listed in Sweden (however, see Question 22 as regards non-Swedish companies). The Code includes provisions regarding, among other things:
The tasks of the board.
The size and composition of the board.
The tasks of directors and the chairman.
The provisions are subject to the principle of "comply or explain", meaning that a company can choose to deviate from a provision provided that it explains the reasons for doing this.
In general, the continuing obligations also apply to foreign companies. Disclosures should normally be made in Swedish. However, disclosures may be made in English in certain circumstances (for example, if the company is incorporated outside the EEA and has a primary listing in a regulated market outside the EEA).
As a consequence of the requirement that all market participants shall have simultaneous access to any price sensitive information, when a company discloses information as a result of the requirements of another regulated market or trading venue, it is required to simultaneously disclose that information under the rules of Nasdaq Stockholm, even where that information would not normally be subject to any disclosure requirement under Swedish rules. As regards other ongoing disclosure requirements under the rules of Nasdaq Stockholm, it is possible to seek an exemption from the exchange (for example, due to a conflict between the rules and the requirements in the company's jurisdiction). One example would be where the rules in the company's jurisdiction admit that quarterly reports can be published later than within two months from the end of the reporting period.
No exemption is available from the ongoing obligations relating to:
The disclosure of transactions by board members, management and major shareholders.
The ban on transactions prior to the publishing of regular interim reports.
The maintaining of an internal insider list.
As regards corporate governance, non-Swedish companies whose shares are admitted to trading on a regulated market in Sweden will be required to apply either the Swedish Code or the corporate governance code in force in the jurisdiction where the company has its registered office or its primary listing. If the latter is chosen, the company must include a statement in its corporate governance report describing the important aspects in which the company's conduct deviates from the Swedish Code.
Market abuse and insider dealing
Restrictions on market abuse/insider dealing
Rules relating to the prohibition on insider dealing, unlawful disclosure of inside information and market manipulation are set out in the Market Abuse Act.
The Market Abuse Act prohibits any person who has received inside information from, on his own behalf or on behalf of any third party, acquiring or selling the financial instruments to which the information relates and advising or in any other manner causing any third party to acquire or sell financial instruments to which the information relates through trading on the securities market. Furthermore, dealings that do not constitute or cause trading on the securities market are prohibited if those dealings relate to financial instruments:
Which are admitted to trading on a regulated market (or for which an application for admission has been submitted).
Whose value is dependent upon a financial instrument that is admitted to trading on a regulated market (or for which an application for admission has been submitted).
The prohibition also extends to negligence and attempt.
There are a number of exemptions to the rule, for example, that financial instruments may be acquired where the inside information is expected to have a negative impact on the price of the instrument and vice versa.
The Market Abuse Act also prohibits any person from intentionally disclosing information that they realise, or should have realised, constitutes inside information, unless the disclosure occurs as a normal part of the performance of a service, activities or obligations, or where the information is placed into the public domain concurrently with its disclosure.
Furthermore, the Market Abuse Act prohibits any person, either in conjunction with trading on the securities market or otherwise, from acting in a manner that they realise, or should have realised, is likely to manipulate the market price or other terms and conditions in respect of trading in financial instruments, or otherwise mislead purchasers or sellers of those instruments.
Exemptions from the rules relating to insider dealing, unlawful disclosure of inside information and market manipulation are available for trading in own shares in buy-back programmes and stabilisation of financial instruments, provided that trading is conducted in accordance with The Buyback and Stabilisation Regulation (see Question 19).
Penalties for market abuse/insider dealing
Non-compliance with the rules is a criminal offence with a term of imprisonment of up to four years. Where the offence is considered to be minor, monetary penalties can be awarded.
A company can request that its shares be de-listed. The exchange will make a decision on the matter and must approve the request, which becomes effective at such time as is agreed between the exchange and the company.
Generally, the exchange requires four weeks' notice for a company to be de-listed, but if there is extensive trading and a large number of shareholders, the exchange can decide to postpone the de-listing for up to six months. In the case of a public offer, the exchange can accept two weeks' notice for de-listing, if the applicant holds 90% or more of the shares in the company, the trading is sporadic and the applicant has initiated proceedings in respect of compulsory redemption. The exchange will make an assessment of an appropriate de-listing date in each individual case.
The exchange can decide to compulsorily de-list the shares of a company in the following circumstances:
An application for bankruptcy, winding-up or equivalent motion has been filed by the company or a third party to a court or other public authority.
The company does not satisfy all listing requirements, assuming that:
the company has not remedied the situation within a time decided by the exchange, although under normal circumstances not longer than six months;
there are no other available means to remedy the situation and restore the situation; and
the non-satisfaction is deemed to be significant (in these cases decisions to de-list a company are made by the Disciplinary Committee of the exchange).
The company has failed to pay any listing fee when due.
Market Abuse Directive amendment
Certain legislative changes are expected to be implemented in July 2016 as a result of the Market Abuse Directive (2014/57/EU) and at the same time the new Market Abuse Regulation (596/2014) will become effective. Among other things, the following can be expected:
A more extensive definition of prohibited transactions, including also transactions in emission allowances and transactions outside the securities markets where the instruments are traded on an MTF or an OTF.
An explicit prohibition to withdraw or change an order already made.
A reduction of the period within which insider trading is to be reported (from five to three trading days).
Amendments as regards the "black-out period", that is, the prohibition on trading during the 30 days prior to the publication of an interim report, to the effect that the prohibition will be expanded to apply to all persons holding insider positions, but will no longer apply to the company's trading in its own shares.
In June 2014, Directive 2014/65/EC on markets in financial instruments (MiFID II) and Regulation 600/2014 on markets in financial instruments were published. These amendments to MiFID are significant and include, among other things, that:
An MTF will be able to be registered as a growth market for small and medium sized enterprises.
The concept of a new trading venue, an organised trading facility (OTF), is introduced.
The scope of regulated services is broadened.
The requirements for corporate governance and investor protection for authorised firms are increased.
A new trading transparency regime for non-equity markets is introduced.
New passport rules for investment firms from countries outside the EEA providing services to professional investors will be introduced.
The new rules are to be applied from January 2017.
Transparency Directive amendment
In October 2013 Directive 2013/50/EU was approved, amending Directive 2004/109/EC on transparency requirements for securities admitted to trading on a regulated market (Transparency Directive). Important amendments that are expected include the removal of the obligation to issue interim reports and changes to the rules on disclosure of transactions by major shareholders such that the requirements extend to also cover financial instruments that carry an economic interest in the underlying share regardless of whether or not the instruments grant a right to physical settlement. The implementation into Swedish law is proposed to become effective in November 2015.
Description. The official website of the Swedish parliament (Riksdag) publishes all laws and ordinances in force, in the original Swedish language.
Government Offices of Sweden
Description. The official website of the Government Offices of Sweden publishes unofficial translations of certain laws and ordinances, translated by Swedish ministries and government agencies in Sweden.
The Swedish Financial Supervisory Authority
Description. The official website of the Swedish Financial Supervisory Authority publishes the regulatory code adopted by the Swedish Financial Supervisory Authority.
Emil Boström, Partner
Professional qualifications. Sweden, 2002, admitted to the Swedish Bar Association in 2009
Areas of practice. Public M&A; equity capital markets
- Advising Providence Equity Partners, Carlyle Group and Com Hem on the dual track structured sale of Com Hem to BC Partners.
- Advising the Swedish government on its SEK19 billion, SEK19.5 billion and SEK 21.6 billion sales of shares in Nordea Bank.
- Advising Industrivärden on its EUR500 million and EUR550 million convertible bond issues.
- Advising Biovitrum on its rights issue and issue in-kind in connection with its SEK3.5 billion acquisition of Swedish Orphan.
Languages. English, Swedish
Professional associations/memberships. Swedish Bar Association.
Publications. Swedish section, European Securities Law (Oxford University Press, 2010).
Nina Svensson, Partner
Professional qualifications. Sweden, 2000, admitted to the Swedish Bar Association in 2008
Areas of practice. Public M&A; equity capital markets
- Advising the Canadian-based mining company SEMAFO Inc on its secondary listing of common shares on Nasdaq Stockholm.
- Advising 3i on the dual track structured divestment of Nordic healthcare group Ambea to Triton.
- Advising SAS AB on its SEK6,000 million rights issue.
- Advising Lindab AB on its listing of common shares on Nasdaq Stockholm.
Languages. Swedish, English, French
Professional associations/memberships. Swedish Bar Association.
Publications. Swedish section, The International Comparative Legal Guide to Mergers and Acquisitions (Global Legal Group, editions 2008-2012).