European Restructuring Monitor (ERM)
Eurofound's ERM database on restructuring-related legal regulations provides information on regulations in the Member States of the European Union and Norway which are explicitly or implicitly linked to anticipating and managing change.
The Bankruptcy act (1987:672), chap. 10, All chapters in the Company reorganisation act (2022:964)
The Bankruptcy act (1987:672) defines insolvency as a situation where the debtor is not able to duly pay his or her debts, and this inability is not of a temporary nature. Both natural and legal persons who are insolvent can be declared bankrupt. Both natural and legal persons are also able to enter into voluntary arrangements with creditors with the intention of reducing their debts and in this way avoiding bankruptcy.
In addition to bankruptcy, legal persons can apply for reorganisation, which is regulated in the Company reorganisation act (2022:964), while natural persons can only apply for debt restructuring. Reorganisation is an option for companies which are under a severe financial strain, but for which continuing operations is still considered a feasible option. Either the debtor, that is the company, or a creditor can apply for reorganisation proceedings. An administrator is appointed by the court to review the company's situation, to determine whether continuing operations is a viable option, and to determine whether an agreement could be reached between the debtor and the creditors.
The administrator supervises the company during the reorganisation period and must give the debtor permission for certain activities, such as payment of debts or transfer of any substantial assets. The debtor retains the rights of disposition of his/her assets under the reorganisation procedure. However, the disposition of assets cannot be used to pay debts, to make new commitments or to transfer ownership of assets of substantial importance without the administrator's consent. No distribution to creditors may take place while the procedure is ongoing. The goal of the reorganisation proceedings is to come to an agreement with the creditors on how much of the outstanding debts it would be feasible for the debtor to pay while avoiding bankruptcy. An agreement can be reached both through voluntary and compulsory means. If a voluntary settlement is not achieved, the court can enforce a public settlement.
Reorganisation proceedings take place over a three-month period, after which the proceedings can be extended for another three months at a time. However, reorganisation proceedings are limited to a maximum period of one year. As long as proceedings are ongoing, the debtor cannot be declared bankrupt. However, if there is a reason to believe that the creditors' rights are being threatened to a substantial degree, this may warrant declaring the debtor bankrupt in the midst of reorganisation proceedings.
Workers employed by an employer undergoing business restructuring are sometimes eligible for wage guarantee. The maximum amount per employee for 2021 amounts to around €18,600 (SEK 190,400). The administrator determines if the company is able to pay wages. If it is, employees are not entitled to wage guarantee.
The new Company reorganisation act (2022:964) was instituted in order to comply with the EU Directive on restructuring and insolvency. In order to avoid, among other things, that company reorganisation is decided without justification, the new law contains a stricter requirement that the company must have viability. The court is to examine the application for company reorganisation on the basis of a viability test, which focuses partly on the prospects of achieving a successful company reorganisation and partly on the possibility for the company to survive even after the reorganisation has been carried out.
In practical terms, this means that greater demands are placed on the content of the application for company reorganisation, which, in order to be granted, should contain, among other things, circumstances that mean that the viability of the business can be secured, a description of how the reorganisation will succeed and concrete proposals on how the company will overcome its financial problems.
The application should also show that the company applying for reorganisation can pay at least 25% of the total amount of its debts (if the reorganisation requires a debt settlement with the creditors to be successful). The company must also be able to prove that its accounts are in order.
Another new feature is that the reorganisation company can terminate certain contracts (but not employment contracts) with three months' notice. In this way, the reorganisation company can "get out" of unprofitable contracts with long contractual periods, e.g., in cases where there is a need to close parts of the business, which may mean that some existing contracts become redundant.
Additionally, the new law also means that not only a financial settlement, but also the other measures needed to address a company's financial problems can be set out in a reorganisation plan with binding effect. Examples of reorganisation measures that can be included in a reorganisation plan are debt settlement, which can also include non-priority creditors (as opposed to composition under the previous law, which only included non-priority creditors), conversion of a creditor's debt into shares and increase or decrease of the share capital. The plan may also propose measures to change the board of directors or the managing director.
The Swedish Agency for Growth Policy Analysis publishes monthly statistics on the number of bankruptcies in Sweden. In September 2023, insolvency proceedings were initiated for 651 companies in Sweden (increased by 22% from September 2022). The number of employees in the companies affected amounted to 1 347 in September 2023 (increased from 1 070 from September 2022). During the period January to September 2023, a total of 6,101 companies with 13,670 employees went bankrupt. In the corresponding period in 2022, a total of 4,516 companies with 11,342 employees went bankrupt. (Tillväxtanalys, 2023).
During 2020, 310 Swedish companies with around 9,200 employees were granted reorganisation (increased by 50% from the previous year) (Ekonomifakta, 2021). Between 2011 and 2015, 1,045 companies applied for reorganisation proceedings, of which 48% were successful, meaning that the company was not declared bankrupt and was instead reorganised (Creditsafe, 2019).
Due to the EU Directive on restructuring and insolvency, an inquiry was commissioned in 2021 in order to analyse how Swedish law on company reorganisation relates to the provisions in the Directive and to propose the amendments that are necessary or otherwise appropriate so as to implement the Directive in Swedish law. The proposal includes substantial changes to the regulations that govern how company restructuring is carried out. The principal new feature is that not only the financial settlement but also necessary measures to address a company’s financial problems can be confirmed in a restructuring plan, whereby they become binding. A series of additional changes are also proposed concerning, for example, who is to have access to the procedure, what rules are to apply to debtor contracts during the procedure, and what requirements are to be placed on administrators. The proposed changes are deemed so extensive that the inquiry thinks the current company restructuring act should be repealed and replaced by a new act. The proposal has been sent out for consultation. If it is adapted into a legal proposal that passes through the Parliament, the new law would enter into force on 22 July 2022.
Eurofound (2016), Sweden: Rescue procedures in insolvency, Restructuring legislation database, Dublin, https://apps.eurofound.europa.eu/legislationdb/rescue-procedures-in-insolvency/sweden
Between the end of 2022 and the first half of 2023, almost 300,000 employees working for ‘big tech’ companies were laid off across the world, making headlines for months in global media. This development has been a shock, considering the high numbers of jobs in well-known tech corporations with a reputation for offering good working conditions and well-paid positions.
The retail banking sector is fertile ground for studying the impacts of digitalisation on work and employment. Financial services are increasingly provided online, without the intermediary of customer-facing institutions. Many banks in the sector have been undergoing serial restructuring since the global financial crisis, and it is one of the few service sectors with stagnant or declining employment.
Since 2011, the Restructuring support instruments database of the EU PolicyWatch has been collecting information on measures that assist companies and workers to anticipate and manage restructuring. This article looks at measures in the database aimed at supporting employees and employers during the COVID-19 pandemic (2020–2022).
Eurofound’s European Restructuring Monitor database reveals the impact of the energy crisis on employment in the EU. Following Russia’s invasion of Ukraine in February 2022, energy prices have hit record highs. The European Commission imposed sanctions and limitations on the import of oil and gas from Russia, which has reacted by reneging on supply commitments to many Member States.
