Who should bear the loss in a company in crisis? : An analysis of a future legislation regarding reorganization of companies

The Swedish Company Reorganization Act (SFS 1996:764) has since it came intoforce been subject for a lot of criticism. The law has, among other things, beencriticized for being rather primitive due to the fact that only unsecured creditorsare affected by the proposal for composition, which is the typical outcome of acompany reorganization proceeding. At the same time shareholders are not affectedby the proposal for composition. This results in an undermining of theorder of priority which exists in other insolvency proceedings. The criticism hasled to several government investigations that have examined a possible need ofreform. However, the investigations have not led to new legislation concerningreorganization of companies and the Swedish Company Reorganization Act (SFS1996:764) has now been in place for over 20 years.In June 2019 The Council of the European Union adopted a proposal for aDirective on restructuring and insolvency (EU) 2019/1023. The procedure asenvisaged in the directive has been inspired by the American Chapter 11 planprocedure and the English Scheme of Arrangement. The American and the Englishlegislation differs from the Swedish in many fundamental ways. This raisesquestions on how Sweden will implement the substantive parts of the Directivein the country’s national legislation.In the implementation assignment given to an investigator by the SwedishGovernment lies, among other things, to ensure that shareholders cannot unreasonablyprevent the adoption of restructuring plans that would bring the debtorback to viability. This should be done without disrupting the balance of interestmade in The Swedish Company Act (2005:551).This paper aims to discuss the different questions that the Swedish legislatorhas to answer to be able to implement the directive in a adequately way. Thebiggest question, in this essay, being if shareholders should be affected by theproposal of composition. To be able to answer that question the legislator has toreflect on which interests that exists in a reorganization and which interest thatshould be prioritized in a conflict. Is it the interest of the creditors, debtors orthe national economy?The overall conclusion in this paper indicate that shareholders should be affectedby the proposal of composition and that the legislator should focus onhow to create as effective legislation as possible rather than on which overallinterest that should be prioritized