Sweden: Proposed legislation on cross-border divisions, conversions and mergers between EU member states

Proposed legislation providing new rules for cross-border divisions, conversions and mergers between EU member states

Proposed legislation providing new rules for cross-border divisions

The government submitted to the national parliament (Riksdag) proposed legislation providing new rules for cross-border divisions, conversions and mergers between EU member states. The changes are proposed to become effective 31 January 2023.

The KPMG member firm in Sweden prepared a series of three articles to discuss the proposed legislation, the first one of which focuses on cross-border conversions.

Cross-border conversions

A cross-border conversion means that a company of a certain nationality is converted into a company of another nationality, for example a foreign company is converted into a Swedish limited liability company or vice versa. Both private and public limited liability companies may convert, but limited liability companies with special profit distribution restrictions, and Swedish forms of association other than limited liability companies, cannot. The minimum requirement for a cross-border conversion is that the company moves its registered office to the destination member state. The head office or other operational activities can remain in the member state of origin, although that may raise questions about registering a branch.

Conversion of a company does not mean that the company is dissolved in the member state of origin or that a new company is formed in the member state of destination. Instead, it is the same company that lives on, but in a different form of association and in another member state. After completion of the conversion, the converted company is subject to the legislation of the destination member state, including its equivalent to the Limited Liability Companies Act.

Read an October 2022 report (Swedish) prepared by the KPMG member firm in Sweden

 

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