The Corporate Governance

Review

Law Business Research

Editor

Willem J L Calkoen

The Corporate Governance Review

Reproduced with permission from Law Business Research Ltd.

This article was first published in The Corporate Governance Review, (published in June 2011 – editor Willem J L Calkoen).

For further information please email Adam.Sargent@lbresearch.com

The Corporate Governance

Review

EditorWillem J L Calkoen

Law Business Research Ltd

2

PuBLiShER Gideon Roberton

BuSinESS dEvELoPmEnT mAnAGER Adam Sargent

mARKETinG mAnAGER nick Barette

mARKETinG ASSiSTAnT Robin Andrews

EdiToRiAL ASSiSTAnT Lydia Gerges

PRoduCTion mAnAGER Adam myers

PRoduCTion EdiToR davet hyland

SuBEdiToRS Sarah morgan, Caroline Rawson

EdiToR-in-ChiEF Callum Campbell

mAnAGinG diRECToR Richard davey

Published in the united Kingdom by Law Business Research Ltd, London

87 Lancaster Road, London, W11 1QQ, uK© 2011 Law Business Research Ltd

www.TheLawReviews.co.uk© Copyrights in individual chapters vest with the publisher and with the contributors.

no photocopying: copyright licences do not apply.The information provided in this publication is general and may not apply in a specific situation. Legal advice

should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of

may 2011, be advised that this is a developing area. Enquiries concerning reproduction should be sent to Law Business Research, at the address above. Enquiries

concerning editorial content should be directed to the Publisher – gideon.roberton@lbresearch.com

iSBn 978-1-907606-15-1

Printed in Great Britain by

Encompass Print Solutions, derbyshire

Tel: +44 844 2480 112

�

i

ACKnoWLEdGEmEnTS

The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:

A&L GoodBody

AdvoKATFiRmAET STEEnSTRuP SToRdRAnGE dA

ASTERS

BäR & KARRER AG

BREdin PRAT

dLA PiPER honG KonG

GEoRGiAdES & myLonAS – AdvoCATES & LEGAL ConSuLTAnTS

GiLBERT + ToBin

hEnGELER muELLER PARTnERSChAFT von REChTSAnWäLTEn

mAnnhEimER SWARTLinG AdvoKATByRå

miTRAni, CABALLERo, RoSSo ALBA, FRAnCiA, oJAm & Ruiz moREno

nAGy éS TRóCSányi ÜGyvédi iRodA

nAuTAduTiLh

niShimuRA & ASAhi

RAidLA LEJinS & noRCouS

RoSChiER, ATToRnEyS LTd

SLAuGhTER And mAy

ŢuCA zBÂRCEA & ASSoCiATES

uRíA mEnéndEz

viEiRA, REzEndE, BARBoSA E GuERREiRo AdvoGAdoS

WAChTELL, LiPTon, RoSEn & KATz

WERKSmAnS inC

WonGPARTnERShiP LLP

Contents

ii

Editor’s preface ................................................................................................vii

Chapter 1 Argentina ................................................................................. 1Laura Huertas Buraglia and Mercedes Rodríguez Giavarini

Chapter 2 Australia ................................................................................ 21John Williamson-Noble and Tim Gordon

Chapter 3 Belgium ................................................................................. �2Elke Janssens and Virginie Ciers

Chapter 4 Brazil ..................................................................................... 51Marcelo S Barbosa

Chapter 5 Cyprus ................................................................................... 66Yiannos G Georgiades and Rebecca Howarth Seaberg

Chapter 6 Estonia ................................................................................... 80Sven Papp, Helerin Kaldvee and Gerda Liik

Chapter 7 Finland .................................................................................. 94Manne Airaksinen, Paula Linna and Mari Latikka

Chapter 8 France .................................................................................. 105Didier Martin

Chapter 9 Germany .............................................................................. 118Carsten van de Sande

Chapter 10 Hong Kong .......................................................................... 1�1Mabel Lui

Chapter 11 Hungary .............................................................................. 149Ildikó Varga and Viktória Szilágyi

Chapter 12 Ireland ................................................................................. 159Paul White

Chapter 13 Japan .................................................................................... 172Tatsuya Tanigawa and Hiroki Moriyama

ConTEnTS

Contents

iii

Chapter 14 Latvia ................................................................................... 18�Girts Lejins and Janis Bogdasarovs

Chapter 15 Lithuania ............................................................................. 19�Žilvinas Kvietkus

Chapter 16 Luxembourg ........................................................................ 204Geert Raaijmakers

Chapter 17 Netherlands ......................................................................... 220Geert Raaijmakers and Marlies Stek

Chapter 18 Norway ................................................................................ 2�4Odd Erik Johansen and Robert Sveen

Chapter 19 Romania .............................................................................. 248Cristian Radu

Chapter 20 Singapore ............................................................................. 262Annabelle Yip and Joy Tan

Chapter 21 South Africa ........................................................................ 275David Walker and Stimela Mokoena

Chapter 22 Spain .................................................................................... 286Carlos Paredes

Chapter 23 Sweden ................................................................................. 296Hans Petersson and Emma Sandberg Thomsen

Chapter 24 Switzerland .......................................................................... �08Felix R Ehrat and Sibylle Wälti

Chapter 25 Ukraine ................................................................................ �19Vadym Samoilenko, Oles Kvyat, Kateryna Rekiianova and Oleksandr Mozheiko

Chapter 26 United Kingdom ................................................................. ��0Elizabeth Holden

Chapter 27 United States ....................................................................... �42Adam O Emmerich, William Savitt and Brian M Walker

Appendix 1 ABouT ThE AuThoRS .................................................. �55

Appendix 2 ConTRiBuTinG LAW FiRmS’ ConTACT dETAiLS .. �7�

296

Chapter 23

SwedenHans Petersson and Emma Sandberg Thomsen*

* HansPeterssonisapartnerandemmaSandbergThomsenisaseniorassociateatMannheimerSwartlingAdvokatbyrå.

I OVERVIEW OF GOVERNANCE REGIME

i Introduction

Inthisarticlewewillprovideanoverviewofthegovernanceregimeforpubliclimitedliabilitycompaniesadmittedtotradingonaregulatedmarket inSweden.Atpresent,theonlyregulatedmarketswhereacompanycanhaveitssharesadmittedtotradinginSweden are nASdAQ OMX Stockholm (‘nASdAQ OMX Stockholm’) and nGMequity(‘nGM’).

Asastartingpoint,theSwedishmodelofcorporategovernanceisfundamentallythesameasinmostindustrialcountries.However,therearespecificfeaturesthatmirroramarketinwhichafewmajorshareholdersoftenassumeaparticularresponsibilityforacompanyandthat theessenceofSwedishcorporategovernance is that theultimatepowershouldrestwiththeshareholders.

ii Regulation

Corporate governance for Swedish listed companies consists of a combination oflegislation, corporate documents, regulations, statements and generally acceptedpractices.

The main source of corporate legislation is the Swedish Companies Act (‘theCompaniesAct’).OtherregulatorysourcesgoverningcorporategovernanceincludetheSwedishCorporateGovernanceCode(‘theCode’),therulesofeachregulatedmarket,suchasnASdAQOMXStockholm’srulebookforissuers,aswellasstatementsbytheSwedishSecuritiesCouncilonwhatconstitutesgoodpracticeontheSwedishsecuritiesmarket.AnumberofadditionalactsalsoapplysuchastheAnnualAccountsAct,theSwedishSecuritiesMarketAct,theActonnotificationObligationsforCertainHoldings

Sweden

297

of Financial Instruments, theTrading in Financial Instruments Act and the MarketAbuseAct.

TheCompaniesAct contains generalprovisions regarding the governanceof acompany,specifyingthecorporatebodies,thetasksofeachbodyandtheresponsibilitiesoftheindividualsactingforthecompany(i.e.,mattersthatinmanyotherjurisdictionsare regulated through corporate governance codes).Recently theCompaniesActwasamendedtoimplementtheShareholders’Rightsdirective(2007/36/eC).

The Code is issued by the Swedish Corporate Governance Board. The Codeis considered to be a part of good practice on the securities market and as such, allcompaniesadmittedtotradingonaregulatedmarketareboundtoapplytheCode.Itsprovisionsarenotmandatorybutappliesonacomplyorexplainbasis.ThecurrentCodecameintoforceon1February2010.

TheSwedishSecuritiesCouncilisaprivatebodycomprisedofrepresentativesofthebusinesscommunity thatoverseescompliancewithgoodpracticeon theSwedishsecuritiesmarketandoffersguidanceonspecificcorporategovernanceissues.TheSwedishSecuritiesCouncilhasbeenmandatedtofulfiltheirdutiesunderSwedishlaw,theCodeandtherulesofeachregulatedmarket.AlllistedcompaniesareboundtofollowgoodpracticeonthesecuritiesmarketandtheSwedishSecuritiesCouncilinterpretsandissuesstatementsaboutthemeaningofthisconcept.

iii Enforcement

AresolutionadoptedbythegeneralmeetingconflictingwiththeSwedishCompaniesAct,thecompany’sarticlesofassociationortheapplicableannualreportslegislationmaybechallenged incourt and should thechallengebe successful, the resolutionmaybeannulledoramendedbythecourt.

The relevant regulated market may according to their rule books penalisecompaniesbreachinglaw,otherregulations,therulesoftheregulatedmarket,theCodeorgoodmarketpracticeonthesecuritiesmarket.Theregulatedmarketcanresolveuponimposingwarnings,fines,or if theviolation is serious, todelist thecompany’s sharesfromtheregulatedmarketuponsuchviolation.

The Swedish Securities Council may issue statements regarding a company’scompliancewithgoodpracticesontheSwedishstockmarketuponpetitionoron itsowninitiative.

AllcompaniesapplyingtheCodemusteachyearpublishacorporategovernancereport,whichshall includeinformationonthecompany’scompliancewiththeCode,andtotheextentthecompanyhaschosennottocomplywithacertainrule,explainthereasonsforeachcaseofnon-complianceandwhatsolutionhasbeenadoptedinstead.Thereportshallbeapartofthecompany’sannualaccountsormaybeissuedseparatelybutinsuchcasesitshallstillbesubjecttoreviewbythecompany’sauditor.Furthermorethereportshallbepublishedonthecompany’swebsite.

Ultimately, the judgement on a company’s compliance with the corporategovernancerules intheCodewillbemadebythestakeholders inthecapitalmarket.Acompanythatdeviatesfromgoodmarketpracticeonthesecuritiesmarketwilldrawattentionfromthebusinesspressanditmaycausethecompanybadwill.

Sweden

298

II CORPORATE LEADERSHIP

i Governancestructure

TheSwedishcorporategovernancemodelisbasedonahierarchicalgovernancestructurewhereeachbodycanissuedirectivestoasubordinatedbodyandtoacertainextenttakeover the subordinated body’s decision-making authority. The different bodies are theshareholders’meeting,theboardofdirectorsandthemanagingdirector.

Theshareholders’meetingisthehighestdecision-makingbodyofthecompanyandthisalsoreflectstheshareholders’strongpositioninSwedishcorporategovernance.InSwedishlistedcompaniestherearetraditionallyoneorseveralmajorityowners,afactthathasinfluencedSwedishcorporategovernance.

Swedenhasaone-tierboardstructure.Swedishlawdoesnotincludeprovisionsforaseparatecontrollingbodyorsupervisoryboard.Theboardofdirectorsisresponsibleforthecompany’sorganisationandthemanagementofthecompany’saffairs.AlimitednumberofissuesareaccordingtotheSwedishCompaniesActreservedtobeexclusivelydealtwithbytheboard,butotherthanthat,theshareholders,throughtheshareholders’meeting,canresolveonanycompanymatter,includingissuinginstructionstotheboard.However,suchpowersarerarelyusedinlistedcompanies.

Swedish boards are almost always non-executive. Instead, the executive powerrestswiththemanagingdirector,whoisappointedbytheboard.

ii Boardstructureandpractices

Election of board membersA nomination committee is established by the shareholders’ meeting (directly orindirectly).Thetasksofthenominationcommitteeistoproposeboardmembersandtheirremunerationaswellasauditorsandtheirremuneration.TheCodestipulatesthatthenominationcommitteeshallhaveatleastthreemembersandthecommitteeprimarilyconsistsofrepresentativesofmajorshareholders.Furthermore,theCodestipulatesrulesonhowthenominationcommitteeshallproceedwiththeworktoproposetheboardmembers.Thenamesofthemembersofthenominationcommitteeshallbepublishedonthecompany’swebsiteatleastsixmonthsbeforetheannualgeneralmeetingtogetherwithinformationonhowtheshareholderscanreachthenominationcommittee.

The board members are elected at the annual general meeting. The Codestipulatesthattheboardmembersshallbeelectedforoneyearatatime–untilthenextannualgeneralmeeting.Theminimumrequirementforpubliccompaniesisthreeboardmembers,althoughtheboardofalistedcompanytypicallyislarger.

As stated earlier, Swedish boards are usually non-executive and there are rulesaiming to enhance the board’s independence. Only one person of the company’smanagementmaybe aboardmember (apossibility that isused in abouthalf of thelistedcompanies,usuallybyappointingthemanagingdirectorasaboardmember)andthemajority of the boardmembersmust be independent from the company and itsmanagement.OtherrequirementsontheboardincludethatatleasthalfofthemembersmustberesidentwithintheeeAandfurthermorethatatleasttwooftheindependentboard members must also be independent from the company’s major shareholders.Themajorityshareholdersoftenhavethepossibilitytocontroloratleasthaveagreat

Sweden

299

influenceovertheboardespeciallysincethemajorityshareholdermostlikelyalsohavearepresentativeappointedinthenominationcommittee.

Atleastonememberoftheboard(morespecificallytheauditcommitteeoftheboard)musthaveexperienceofaccountingandauditing.TheCodealsosetsoutthattheboardistohaveacompositionappropriatetothecompany’soperations,phaseofdevelopmentandotherrelevantcircumstances.

There are no legal requirements for diversity, although there is a continuousdebate on how to reach a more equal gender distribution on the boards of Swedishcompanies.TheSwedishGovernmentishesitanttoputforwardanyproposalsonthematter.AccordingtotheCode,acompanyshallstriveforequalgenderdistributionontheboard.Atpresent,approximately26percentofthetotalnumberofboardmembersinthecompanieslistedonnASdAQOMXStockholmlargecaparewomen.

Responsibilities of the boardTheboardisheadedbyachairman,whoshallbeappointedbytheshareholders’meetingtocomplywiththeCode.Themanagingdirector,ifaboardmember,maynotbeelectedchairman.Thechairmanof theboard is responsible fororganisingandmanagingtheworkoftheboard,ensuringthattheboardisregularlyupdatedanddevelopingtheboardmembers’knowledgeof thecompanyand itsoperationsandensuring that theboardfulfilsitsobligationsunderSwedishlaw.Morespecificdutiesarealsodefinedinlaw,forexamplethatthechairmanmustensurethatboardmeetingsareheldwhennecessary.Pursuant to theCode, thechairman is responsible for contactswith the shareholdersregardingownershipissuesandcommunicatesshareholders’viewstotheboard.

Theboardhasawidediscretiontoregulateitsownaffairs,typicallythroughtherules of procedure that the board is required to adopt each year. The board has thediscretiontodecidetheappropriatemethodforcallingboardmeetings.However,itisarequirementundertheCompaniesActthatboardresolutionsmustgenerallyonlybetakenwheretheboardmembershavereceivedsufficientinformationtoallowthemtomakeaninformeddecisionabouttherelevantresolutionandallboardmembers(wherepossible)havebeengiventheopportunitytoparticipateinthemeeting.TheCompaniesActdoesnotimposeanyminimumnumberofboardmeetingstobeheldeachyearbutinsteadtheboard’srulesofproceduremustsetoutthefrequencyofboardmeetingsanditisthechairman’sresponsibilitytoensurethatboardmeetingsareheldwhennecessary.Inaddition,eachboardmemberandthemanagingdirectorcanrequestaboardmeetingtobeheld.

Thecompanyisrepresentedbytheboardinitsentiretyand,inrelationtotheday-to-daymanagementofthecompany,byitsmanagingdirector.documentsthatshallbesignedbytheboardmustbesignedbynotlessthanone-halfofthetotalnumberofboardmembers.However,theboardmayauthoriseaboardmember,themanagingdirectoror any other person to individually or jointly represent the company as a signatory.Usually,inadditiontotheboardmembers,anumberofmembersofthemanagementareappointedasspecialcompanysignatoriestobeableto,twojointly,signforthecompany.Itshouldbenotedthatapersonappointedbytheboardasasignatorybynomeansareauthorisedtotakeanydecisionsonbehalfofthecompany,butaremerelyauthorisedtoimplementandsignforresolutionstaken.

Sweden

300

Theboardmembersholdfiduciarypositionsinrelationtothecompanyandmustthereforeexerciseduecareandactinwhattheyconsidertobetheinterestofthecompany.Theyare required tocomplywith theCompaniesActandotherapplicable rulesandregulationsandwiththecompany’sarticlesofassociation.Furthermore,theboardmustnottakeactionsthatwouldharmthecompany.UndertheCompaniesAct,theboardmustnottakeactionsthatarelikelytoresultinanundueadvantagetoashareholderoranyotherperson,tothedisadvantageofthecompanyoranothershareholder.

TheCompaniesAct setout anumberof situationswhere aboardmemberorthemanagingdirector are subject to conflict of interestdue to apersonal interest inthematter.Verybriefly, theCompaniesActdoesnotpermit aboardmemberor themanagingdirectortoparticipateorresolveonmattersregardingsuchpersonenteringintocontractswiththecompanyorinsituationswheretheyhaveapersonalinterestinacontractthatthecompanyisenteringinto.

Ifaboardmemberorthemanagingdirectorintentionallyornegligentlycausesthe companydamage,heor shemaybe liable fordamages.Boardmembers and themanagingdirectormayalsobeliabletothirdparties,includingindividualshareholders,creditors and employees, if the relevant board member or the managing directorintentionallyornegligentlybreachestheCompaniesAct,certainotherregulationsorthearticlesofassociation.

Employee representation on the boardemployeesofcompanieswithonaverageatleast25employeesduringthepastfinancialyear are entitled to appoint two board members and two alternate board members.employeesofcompanieswithonaverageatleast1,000employeesduringthepastfinancialyearmayappointthreeboardmembersandthreealternatesiftherelevantcompanyhasdifferentlinesofbusiness.Thenumberofemployeedirectorsmaynotexceedthetotalnumberofnon-employeedirectors.Theemployeedirectorsareappointedbythelocalunionsthatareboundbyacollectivebargainingagreementwiththerelevantcompany.employeedirectorsgenerallyhavethesamepowersanddutiesasnon-employeedirectors,subjecttocertainadditionalconflictofinterestrules.

Remuneration of the board membersAccording to the Companies Act, the shareholders’ meeting shall determine theremuneration of each member of the board and shall also establish guidelines forremunerationtotheexecutivemanagement.AccordingtotheCode,itistheresponsibilityofthenominationcommitteetogiveaproposalonremunerationofeachboardmemberand also the auditors. normally, remuneration of board members consists of a fixedannual fee.Under theCode,non-executivemembersof theboardarenotallowedtoparticipate in incentiveprogrammesdesigned for theexecutivemanagementorotheremployeesandremunerationofboardmembersmaynotincludeshareoptions.

Board committeesA listed company must have an audit committee and a remuneration committee.Membersof theauditcommitteemaynotbeemployedby thecompanyandat leastonemembermustbeindependentinrelationtothecompanyanditsmanagementaswellastomajorshareholdersandhaveexperienceinaccountingorauditing.Members

Sweden

301

oftheremunerationcommitteemustbeindependentinrelationtothecompanyanditsmanagement.However,theboardinitsentiretymayperformthetasksoftheremunerationcommitteeandtheauditcommitteeaslongastherequirementsofindependenceandexperiencearefulfilled.

Board responsibilities in takeoversTakeovers are governed by the Swedish Takeover Act (implementing the Takeoverdirective(2004/25/eC))andtherulebookof therelevantregulatedmarket.Swedenhasforalongtimeadheredtotheprincipleofboardneutralityinthefaceofatakeoverbid. Under theTakeover Act, once the target board or the managing director of thetarget has good reason to assume that an offer is about to be made (or an offer hasalreadybeenmade),thetargetmustnottakeanyactionthatwouldbeliabletofrustratethemakingorthesuccessfuloutcomeoftheoffer,unlesstheactionisapprovedbythegeneralmeetingof the target.what constitutes ‘frustrating actions’ is notdefined indetailbuttheoverridingconsiderationiswhethertheactionwouldbelikelytofrustratethemakingorcompletionofthebid.TheSwedishSecuritiesCouncilhasstatedthatanactionwillnotqualifyasafrustratingactionunless it isrelativelyfar-reachingandofmaterialsignificance,andfurthermorethatitwouldgenerallybeopentothetargetboardtoargueagainstacceptingtheoffer;toseekawhiteknightandexploreotheralternatives;andtoannouncefinancialinformationandforecastsnotpreviouslydisclosed.Thetargetisnotunderanyobligationtotakeactionsfacilitatingthebidder’sofferoritseffortstoobtainregulatoryapprovals.

iii Executivemanagement

GeneralTheexecutivepowerrestswiththemanagingdirector,whoisappointedbytheboard.Themanagingdirector is responsible for attending to theday-to-daymanagementofthecompany.Theboardwilldefinetheauthorityofthemanagingdirectorinwritteninstructions.Themanagingdirectorwillnormally appoint theother seniormanagersthatformstheexecutivemanagementforalistedcompany.

Remuneration of the executive managementBased on the guidelines from the shareholders’ meeting, the board shall resolve onremuneration to the executive management including the managing director. Theremunerationcommitteeoftheboardisresponsibleforpreparingtheboard’sdecisionon issues concerning principles for remuneration, remunerations and other terms ofemploymentfortheexecutivemanagementaswellasformonitoringandevaluatingsuchprogrammesandguidelines.

Remuneration to the executive management can consist of a fixed salary, avariableremuneration,share-andshareprice-relatedincentiveprogrammes,pensions,and other financial benefits. The Code stipulates that variable remuneration shall belinked to predetermined and measurable performance criteria. The Code stipulatesthatanycompensationforexecutivesinconnectionwithterminationofemployment,suchassalaryduringthenoticeperiodandseverancepay,maynotexceedanamountequivalenttotheindividual’sfixedsalaryfortwoyears.Theadoptionofmanagement

Sweden

302

andemployeeincentiveschemesbasedonsharesorsharerelatedinstrumentsgenerallyrequiresshareholderapprovalbynotlessthan90percentofboththevotesandofthesharesrepresentedattherelevantshareholdermeeting.

III DISCLOSURE

i General

The foundation of corporate governance is transparency and disclosure, allowingshareholdersaccesstorelevantinformationsothattheycanassesswhetherornottheyarebeingsatisfiedwiththewaythattheircompany’saffairsarebeingconducted.Theboardofdirectors is responsible fordisclosureand transparency. Inorder toproperlydischargethisresponsibilityandtobeabletosatisfythecompany’scontinuousdisclosureobligations,itiscommonpracticefortheboardtoadoptacontinuousdisclosurepolicythatsetsouttherelevantcompany’sprocedurestoensurecompliancewithitsdisclosureobligations.

disclosurerequirementsarefoundthroughoutthecorporategovernanceregime,forexample in theCompaniesAct, theAnnualAccountsAct, theCodeandtherulebooksoftheregulatedmarkets.

ii Internalcontrolandfinancialreporting

Itistheresponsibilityoftheboard’sauditcommitteetomonitortheefficiencyofthecompany’sinternalcontrol,internalauditandriskmanagement.PursuanttotheCode,the board is required to establish an appropriate system to monitor the company’scompliancewith lawsandregulations.Thecorporategovernancereportmustcontaininformationregardingthemostimportantelementsofthecompany’ssystemforinternalcontrolandriskmanagementinconnectionwithfinancialreportingandadescriptionofthesystemsforinternalcontrolofthecompany’sfinancialreporting.

iii TheCorporateGovernanceReport

Theboard shall according to theAnnualAccountsAct eachyearpublisha corporategovernancereportthatshallbeincludedintheannualaccountsorissuedseparately.AlllistedcompaniesarealsorequiredbytheCodetohaveasectionofitswebsitedevotedtocorporategovernancematters,whereinter aliathecorporategovernancereportshallbepublished.

Thecorporategovernancereportshallsetoutinformationon,inter alia:a whichprinciplesforcorporategovernancehavebeenapplied,beyondthosewhich

followfromlaworotherstatutoryinstrumentsandwhereinformationregardingtheseprinciplesisavailable;

b themost importantelementsof thecompany’ssystemfor internalcontrolandriskmanagementinconjunctionwiththefinancialreporting;

c directorindirectshareholdinginthecompany,whichrepresentsatleast10percentofthevotinginterestsforallsharesinthecompany;

d anyauthorisationgrantedbythegeneralmeetingtotheboardtoresolvethatthecompanyshallissuenewsharesoracquiretreasuryshares;

Sweden

303

e thecompositionofthecompany’snominationcommittee.Ifanymemberofthecommitteehasbeenappointedbyaparticularowner, thenameofsuchownershallalsostated;

f certaininformationregardingtheboardmembers;g thedivisionofworkamongmembersoftheboardandhowtheworkoftheboard

wasconductedduringthemost recentfinancialyear, includingthenumberofboardmeetingsheldandeachmember’sattendanceatboardmeetings;

h thecomposition,tasksanddecision-makingauthorityofanyboardcommittees,andeachmember’sattendanceattherespectivecommittee’smeetings;

i certain information regarding the managing director (age, work experience,significantprofessionalcommitmentsetc.);and

j any infringement of the stock exchange rules applicable to the company, orany breach of good practice on the securities market reported by the relevantexchange’sdisciplinarycommitteeortheSwedishSecuritiesCouncilduringthemostrecentfinancialyear.

ThecorporategovernancereportshallalsoincludeinformationonwhatrequirementsoftheCodefromwhichthecompanydeviates,thereasonsforeachcaseofdeviationandwhatsolutionhasbeenadoptedinstead.

iv Theauditor

Inalistedcompanytheauditormayonlybeappointedforamaximumperiodofsevenconsecutiveyears.

Thecompany’sstatutoryexternalauditorisappointedbythegeneralmeetingandisobligedtoreporttotheshareholders.Theexternalauditor’sworkmaynotbegovernedorinfluencedbytheboardorthemanagement.Inadditiontotheexaminationofthecompany’s annual report and accounts, the auditor will review and form an opiniononthemanagementbytheboardandthemanagingdirector.Theauditorisobligedtoreportanyactsoromissionsbyanyboardmemberorthemanagingdirector,whichmayresultinliabilityfordamages.

The audit committee, being a board committee, is the main contact with theauditorsandmust,withoutimpactingontheresponsibilityandtasksoftheboard,stayinformedoftheauditoftheannualreportandthegroupaccounts,reviewandmonitortheimpartialityandindependenceoftheauditor,andprovideassistanceinconnectionwith the preparation of proposals regarding the appointment of an auditor for thecompany.

IV CORPORATE RESPONSIBILITY

The financial crises made the necessity of risk awareness clear. Although Swedishcompaniesingeneraldidquitewellthroughoutthecrises,thiswasnottrueforcertainfinancialinstitutions.TheSwedishFinancialSupervisoryAuthority(‘theSFSA’)isnowmorecloselymonitoringfinancialinstitutionsandtheirhandlingofrisks.

AccordingtotheCompaniesAct, theboard is responsible for theorganisationandmanagementofthecompany’saffairsandshallregularlyassessthecompany’sand

Sweden

304

thegroup’sfinancialposition.Furthermore,theboardshallensurethatthecompany’sorganisation is structured in such a manner that accounting, management of fundsand the company’s finances in general are monitored in a satisfactory manner. Theresponsibilitylieswiththeboardasagroupandwherecertaindutiesaredelegatedtooneormoremembersortootherpersons,theboardshallactwithcareandregularlymonitorthatthedelegationcanbemaintained.

Onriskmanagement,theCodefurtherspecifiestheresponsibilitiesoftheboardofdirectorsasfollows:a ensuringthatthereisaneffectivesystemforfollow-upandcontrolofthecompany’s

operations;b ensuringthatthereisasatisfactoryprocessformonitoringthecompany’scompliance

withlawsandotherregulationsrelevanttothecompany’soperations;c definingnecessaryguidelinestogovernthecompany’sethicalconduct;andd ensuring that the company’s external communications are characterised by

openness,andthattheyareaccurate,reliableandrelevant.

during2010,HQBankAB(‘HQBank’),awholly-ownedsubsidiaryofHQAB(publ)(‘HQ’)haditslicencerevokedbytheSFSAwhoalsoappliedforacompulsoryliquidationofthecompany.Theresolutionwaspassedduetodeficienciesinthecompany’stradingdepartment.AnumberofshareholdersandthepresentboardinHQarenowinvestigatingthepossibilitytoclaimdamagesfromformerboardmembers.

Under theCode, theboardofdirectors is expected to ensure that appropriateethicalguidelinesconcerningthecompany’sbusinessareadopted.Inpractice,manyofthemajorstock-marketcompanieshavebeenbothactingandreportingoncorporatesocialresponsibilityissuesforsometime.However,therehasbeenanincreasedfocusonsuchissuesandalsoonthecompany’sadherencetoadoptedethicalguidelinesoverthelastfewyears.

V SHAREHOLDERS

i Shareholderrightsandpowers

Traditionally,shareholdersholdastrongpositioninSwedishcompanies.Thisisconfirmedin the Companies Act according to which the shareholders’ meeting is the highestdecision-makingbodyof thecompany.At the shareholders’meeting the shareholdersparticipate in the supervisionandcontrolof thecompany.Theshareholders’meetingapprovesthecompany’sannualaccounts,includinganydistributionofprofits,electionanddismissalofindividualdirectorsoftheboard.Thereareanumberofissueswherearesolutionmustbepassedbytheshareholders’meetingsuchasinter aliaamendmentsofthecompany’sarticlesofassociationandchangesofthecompany’ssharecapital,mergersandde-mergersofthecompany.Somedecisionsmayalsobetakenbytheboardonlyifauthorisedbytheshareholders’meeting,forexample,issuesofnewshares,convertiblesorwarrantsandbuy-backofownshares.

A company may have shares with multiple voting rights. According to theCompaniesAct,thedifferenceinvotescanbe1:10.However,ifthecompanybeforethe

Sweden

305

enteringintoforceofthepresentCompaniesActalreadyhadlargerdifferencesinvotingratio,itcankeepsuchdifferencesandalsoissuenewshareswithsuchdifferences.

To balance the power of major shareholders, the Companies Act provides forprotectionofminority shareholders.As a startingpoint, a company is under a strictobligation to treat all shareholders equally.All sharesprovide equal rights,unless thearticlesofassociationallowshareswithdifferentrights.Inaddition,thereareanumberof matters where stronger majority requirements than simple majority (which is thegeneral ruleat the shareholders’meeting) is required for the shareholders’meeting toadoptaproposal.Shareholdersholdingone-10thofthesharesmay,inter alia,demandthat a shareholders’meetingbe convened, resolve ondistributionofdividendsofuptoone-halfoftheprofitsinthecompany,andresolvetoappointaspecialexaminerorminorityauditor.

Shouldashareholderwishtotakeactionagainstacorporatedecision,therearedifferentalternativesavailable(oracombinationthereof ).AresolutionadoptedbythegeneralmeetingconflictingwiththeSwedishCompaniesAct,thecompany’sarticlesofassociationortheapplicableannualreportslegislationmaybechallengedincourtbyashareholderandshouldthechallengebesuccessful,theresolutionmaybeannulledoramendedbythecourt.Itisveryunusualforchallengesofresolutionsinlistedcompanies.Furthermore,therelevantregulatedmarketmayaccordingtotheirrulebookspenalisecompaniesbreachinglaw,otherregulations,therulesoftheregulatedmarketandgoodmarketpracticeon the securitiesmarket if reportedbya shareholder (or ifotherwisedrawnto theattentionof the regulatedmarket).A shareholdermayalsopetition theSwedishSecuritiesCouncil,whomayissuestatementsregardingacompany’scompliancewithgoodpracticesontheSwedishstockmarket.

ii Shareholders’dutiesandresponsibilities

ShareholdersdonothaveanystatutoryfiduciarydutiesunderSwedishlawandthereforenogeneral obligation to act in thebest interestof the company.nevertheless,underSwedishlaw,ashareholdercanbesubjecttoclaimsinrelationtodamagecausedtothecompany,ashareholderorathirdparty,asaconsequenceofparticipating,intentionallyorthroughgrossnegligence,inanyviolationoftheSwedishCompaniesAct,thecompany’sarticlesof associationor the applicable annual reports legislation.Also, a shareholdermaynotvoteinrespectoflegalproceedingsagainsthimorher,orhisorherdischargefromliabilityfordamagesorotherobligationstowardsthecompany.

Therearenoparticulardutiesrestingwithcontrollingshareholdersorinstitutionalinvestors from a corporate governance perspective, but controlling shareholdersneverthelessoftentakeanactiveroleinthecorporategovernanceofthecompany.

Asregardsinstitutionalinvestors,therearenoguidelinesissuedingeneralbutitcanbenotedthattheSwedishInvestmentFundAssociationhasissued‘GuidelinesforInvestmentFundManagers asShareholders’ tobe appliedby itsmembers. It followsfrom the recommendations that eachmember should issue anownershippolicy thatshallbepublic.Therearealsootherinvestors,suchastheSwedishpensionfunds,thathaveissuedownershippolicies.

Sweden

306

iii Shareholderactivism

withoneorafewmajorityownersinmostoftheSwedishlistedcompanies,therearefewexampleswhereshareholdersotherthanthemajorityownershavetriedtoinfluencethecompaniesinwhichtheyownshares.duringthelastdecade,thishastoacertainextentchanged,probablyfollowingtheinfluencefromtheUSandtheUK,butalsoduetotheinternationalisationofthefinancialmarket.However, therearenorulesorguidelineswithrespecttoshareholderactivism.examplesofshareholderactivismincludeinvestorsacquiringenoughsharestobeelectedtothenominationcommitteeandthusbeinginapositiontoinfluencetheelectionoftheboardandmanagement.

Historically,shareholdershaveonlyhadthepossibilitytoattendtheshareholders’meeting in person or by proxy. with the Shareholders’ Rights directive now beingimplementedintotheCompaniesAct,newpossibilitieshavearisenforinter aliapostalvoting. It remains to be seen whether this will change the landscape for shareholderactivisminSweden.

Ashareholdermaybringproceedingsagainstthecompanyinordertosetasideoramendaresolutionintheeventaresolutionofashareholder’smeetinghasnotbeenadoptedindueorderorotherwisecontravenestheCompaniesAct,theapplicableannualreportslegislationorthearticlesofassociation.Forlistedcompanies,itisveryunusualthatsuchproceedingsarebrought.

iv Contactwithshareholders

AccordingtotheCompaniesAct,theboardmustconvenetheannualgeneralmeetingbypublishinganoticenoearlierthansixweeksandnolaterthanfourweeksbeforethegeneralmeeting.Thenoticemustcontainaproposedagendaandthegeneralmeetingmaynotpassaresolutiononanitemnotsetoutinthenotice.Themaincontentsofanyitemonwhichaproposalhasbeensubmittedbytheboardmustalsobeincludedinthenotice.Otherproposals (e.g.,byanominationcommitteeor individual shareholders)mustalsobesetoutinthenoticetotheextenttheyareknownbythecompanyintimeforinclusioninthenotice.

disclosure requirements can be found in the different sources of corporategovernanceregulation.TheCompaniesActstipulatesforinformationtobeprovidedinrelationtoshareholders’meetings,whiletherulebooksoftheregulatedmarketscallfordisclosureof‘pricesensitive’information.Accordingtotherulebooksoftheregulatedmarkets, it is possible to in special cases, and very restrictively, disclose informationselectively. examples that are mentioned are information to major shareholder orcontemplatedshareholdersinconjunctionwithananalysispriortoaplannednewshareissueandinrelationtonegotiationsregardingtakeoverbids.Thecompanymustinformthe recipient that the information received is confidential and that the recipient hasbecomean‘insider’byvirtueofthereceiptoftheinformationandthereforeisprohibitedfromexploitingtheinformationforhis,heroranother’sprofit.

Pursuant to the Code, the chairman is responsible for contacts with theshareholders regardingownership issuesandcommunicates shareholders’views to theboard.Inrelationtothisitshouldbenotedthatthechairmanofcoursecannotgiveanindividualshareholderinformationthatwouldbeconsideredinsiderinformation.

Sweden

307

VI OUTLOOK

The financial crises brought the legislators’ attention to corporate governance issuesand there are initiatives being takenoneUaswell asnational level. InSweden, thefocushasbeenonthefinancial sectorwith forexample theSFSAhaving issuedrulesonremunerationtomanagementandemployees inthefinancial sector.Furthermore,SFSA,whoshallapproveboardmembersoffinancialinstitutions,haveintheaftermathofthewithdrawnpermitforHQBank,refusedtoacceptaformerboardmemberfromHQtotakeupasimilarfunctioninanotherfinancialinstitution(thedecisionhavebeenappealedtothecourt).

OnaneUlevel,corporategovernanceisofcourseontheagenda,andinitiativeshavebeentakenforfurtherregulation.TheSwedishCorporateGovernanceBoardhasissuedastatementrecommendingtheSwedishgovernmentandotheractorstodefendtheSwedishmodelwithself-governance.

AlsoonaneUlevel, the issueongenderequalityonboardshasbeenbroughtup.TheSwedishgovernmenthassofarbeennegativetolegislationinthatrespectbutiflegislationispassedbytheeU,Swedenwillofcoursehavetoimplementsuchrules.

Finally, thefinancialcriseshavedrawntheattention to thecompetenceof theboards,especiallyinthefinancialsector.Ithasbecomeclearthattoomanybankboardslackeddirectorswithrealexpertiseinbanking,orunderstandingofrisk.withamorecomplexfinancialmarket,thecompetencerequirementshavebecomehigherandhigher.This is likely toeven furtherenhance the importanceof thework in thenominationcommittees.

355

Appendix 1

about the authors

HAns Petersson

Mannheimer Swartling Advokatbyråhans Petersson is a partner in the public M&a and eCM practice group based in the Malmö office and a member of the board of Mannheimer swartling. he has extensive experience of and regularly advises on securities and company law, and works regularly on corporate governance issues for listed companies. hans Petersson specialises in public company transactions, including public and private M&a, IPos and capital market transactions such as stock exchange listings and the raising of capital. he graduated with a law degree from the university of Lund in 1992. after service in the swedish courts, he joined Mannheimer swartling in 1994 and became a partner in 2001.

emmA sAndberg tHomsen

Mannheimer Swartling Advokatbyråemma sandberg Thomsen is a senior associate and has been working in the public M&a and eCM practice group at Mannheimer swartling since 2005, based in the helsingborg office. she has wide experience in securities and company law as well as corporate governance issues for listed companies and public company transactions. emma sandberg Thomsen graduated from Lund university in 2005 and was during 2009 seconded to one of the financing departments of slaughter and May working mainly with debt capital markets transactions.

mAnnHeimer swArtling AdvokAtbyrå

Norrlandsgatan 21box 1711se-111 87 stockholmsweden tel: +46 8 595 060 00Fax: +46 8 595 060 01

About the Authors

356

Östra hamngatan 16, floor 7box 2235403 14 Gothenburgsweden tel: +46 31 355 16 00 Fax: +46 31 355 16 01

södergatan 22box 4291203 14 Malmösweden tel: +46 40 698 58 00 Fax: +46 40 698 58 01

södra storgatan 7box 1384251 13 helsingborgswedentel: +46 42 489 22 00 Fax: +46 42 489 22 01

www.mannheimerswartling.se