The purchase of a Swedish business can take a number of different forms. There are essentially three vehicles for taking control of a business in Sweden via: i) the acquisition of shares; ii) acquisition of assets; or iii) a merger. The most common form of acquisition, especially for the acquisition of a larger business, is the purchase of shares. Transfers of assets are frequently used where only part of a business is transferred and are sometimes preferred in respect of the sale of small businesses. Asset deals may also be negotiated where a buyer wishes to avoid taking on certain identified liabilities and the seller's position is such that it feels obliged to accept an asset deal. Mergers are rarely, if ever, used for acquisitions, but are used more frequently for internal reorganization purposes.

In recent years, auction processes have become increasingly common, as competition for target companies has increased. In the auction context, bid process letters are used and bidders are typically instructed to submit an indicative offer initially. Bidders that proceed to the next phase may thereafter be instructed to submit a final offer, after having had the opportunity to conduct further due diligence. This final offer may be binding, but always subject to negotiation of the final sale and purchase agreement.

In the non-auction context, it is common for the parties to agree on a letter of intent or similar nonbinding arrangement setting out key terms of the transaction, prior to spending time and resources on entering into a binding agreement.

The Cross-Border Directive applies to mergers of limited liability companies formed in accordance with the law of a member state and having their registered office, central administration or principal place of business within the Community, provided at least two of them are governed by laws of different member states.

Swedish limited liability companies may merge only with companies with legal residence within the European Economic Area (EEA). In practice, companies registered within the EEA will almost always be regarded as having their legal residence in the EEA.

Under the Companies Act, a merger may take place in either of the following circumstances:

• Between an acquiring company on the one hand and one or more transferring companies on the other hand, where the acquiring company remains in existence (absorption).
• Between two or more transferring companies that form a new, acquiring company, where none of the existing companies remain in existence (combination).

The Companies Act also contains rules on the demerger of companies. Under these rules, a demerger may be effected by either of the following:

• The acquisition of all rights and obligations of the company being divided by one or more companies, after which the company being divided is dissolved without prior liquidation proceedings.
• One or several companies acquiring the rights and obligations from the company being divided without dissolving it.

In both cases, consideration will be paid to the shareholders of the company being demerged, either in the form of cash or in the form of shares. At least half of the consideration should generally consist of shares.

Cross-border demergers are also permitted pursuant to the Companies Act, whereby a Swedish limited liability company fully or partially dissolves into two or more entities. At least one of the entities must have their legal residence outside of Sweden but within the EEA.

The Companies Act provides for two forms of limited liability companies: private and public. The majority of limited liability companies in Sweden are private. In order to be listed on a regulated market a limited liability company must be public. However, not all public limited liability companies are publicly traded and held, and such entities can accordingly also be the target entity in a private M&A transaction.

A private limited liability company is not allowed to offer its shares to the public, and may, at most direct a subscription or sale offer to 200 persons. In contrast, a public limited liability company is allowed to offer its shares to the public. The minimum share capital for private and public companies is SEK 25,000 and SEK 500,000, respectively.

For both types of companies, shareholders' liability is limited to the amount paid (if any) for shares that they own.

Swedish private limited liability companies are managed by a board of directors and, frequently, a managing director. The managing director may also be the chairman of the board of directors. The managing director is responsible for the day-to-day management of the company. The board of a private limited liability company must consist of at least one director. If the board consists of one or two directors, at least one deputy director must be appointed. By comparison, the board of directors of public limited liability companies must consist of at least three directors, whereby at least two directors must be appointed by the shareholders. In addition, a public limited liability company must appoint a managing director to be responsible for the company's day-to-day management. The chairman and the managing director may not be the same person.

For all limited liability companies, i.e. both private and public, the managing director and at least half the number of directors and deputies, if any, must be resident in the EEA, i.e., the EU member states, Norway, Iceland and Liechtenstein. The Companies Registration Office may grant an exemption to the residency requirement.

No.

Shares in a Swedish company constitute personal property. As a result,, the Sales of Goods Act (1990:931) is, prima facie, applicable to their sale and purchase. However, it is not entirely clear to what extent the Sales of Goods Act is preempted by the Act on Debt Instruments (1936:81). The issue is relevant because if the Sales of Goods Act applies, then (in the absence of express agreement between the parties) a number of provisions of the Sales of Goods Act detailed below would be applicable to a sale of shares. If not, then the Act on Debt Instruments provides that the seller is not responsible for the solvency of the transferred goods unless it has been warranted or represented by them.

Case law indicates that the Sales of Goods Act applies if all the company's shares (or a majority of them) are sold, while the Act on Debt Instruments is applicable if only a small portion of shares is sold. It is not clear, however, what proportion of shares in terms of percentages is involved and when one act takes over from the other. Buyers of shares, therefore, normally require warranties and representations from the seller.

It is possible for the parties to agree to optout of the Sales of Goods Act and this option is used in most cases.

In the case of an acquisition of assets, the Sales of Goods Act will, however, apply. This act establishes strict requirements and, accordingly, buyers should seek extensive indemnifications and sellers should be wary of giving extensive representations and warranties. The Sales of Goods Act regulates the relationship between seller and buyer. The act contains provisions concerning the determination of price, place of delivery of the goods and the time for the performance of the purchase contract, any right of retention of goods or withholding of payment, the risk of loss of the goods, the yield on the goods, delays on the part of the seller or the buyer, defects and deficiencies in the goods, interest payable on the price and insolvency rules. Furthermore, the act regulates the rejection of goods, the repudiation of contracts of purchase and title to the goods. However, the act is not mandatory and is usually excluded by agreement between the parties.