Thank you for reaching out to LegalBuddy. I’ll start by mentioning the relevant regulations that apply and thereafter give you some pointers.
The principal duties of the Board of Directors in a Company are regulated in the Swedish Companies Act, (aktiebolagslagen). Apart from being responsible for the organization and management of the Company’s affairs as well as the structure and monitoring of the Company’s organization, Board members have a fiduciary duty to act in good faith and in the best interest of the Company and avoid damaging the Company. The fiduciary duty is limited to the boundaries set by applicable rules and regulations, including the Articles of Association and instructions from the general meeting.
The general rule in limited liability companies is that the Board members have no personal liability for the company's debts and obligations. There are certain exceptions to the general rule regulated in the Swedish Companies Act. In addition, there are a few special cases when the CEO fails in their duties that makes a Board Member liable for certain measures. These cases are found in the Swedish Accounting Act, Work Environment Act and the Environmental Code. I won't mention the special cases further here, but you are welcome to book a meeting with us for further information.
If there is reason to believe that the equity of the company is less than half of the registered share capital, the board of directors must immediately prepare a control balance sheet to examine the financial position of the company. In addition, the Board of Directors must have it audited by the company's auditor, call an initial control meeting if the company's equity falls below half of the registered share capital and apply for compulsory liquidation if necessary. If the board of directors fails in its responsibility, all directors are jointly and severally liable.
Unlawful Value Transfers
Distribution of profits and other transfers to shareholders must be justifiable according to the precautionary rule in Chapter 17, Section 3 of the Companies Act, which states that the transfer must seem justified in view of the requirements of the nature, scale and risks of the business as regards the amount of own funds and the company's consolidation requirements, liquidity and position in general. If the company cannot prove that the recipient of the value transfer acted in bad faith, or in case the recipient lacks the ability to repay, a Board member that has acted intentionally or negligently can be liable for the deficiency that has occurred (bristtäckningsansvar).
Board members may be personally liable as representatives of the company if taxes or contributions have not been paid, tax deductions have not been made for employees or an incorrect statement has been made in a VAT return resulting in an overpayment of VAT to the company. However, personal liability requires that the Board member acted intentionally or with gross negligence. If the relevant measures to discharge the company's tax liabilities are taken by a Board member, that person is not considered liable.
In short, there are a few things to be aware of before taking on the role as a member of the Board. Firstly, it is important for you as a Board member to monitor the equity and take promt action if a potential deficiency with regards to the registered share capital occurs. Secondly, keeping an eye on the Company transactions and making sure to distribute profits and value in line with the precautionary rule is important to do as a Board member. Thirdly, you should make sure that there are proper instructions in routines in place with regards to paying taxes.
We hope this gave you some guidance on what to look out for. Please don't hesitate to reach out to us if you have any further questions!
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