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In the January 1997 briefing we noted that a parliamentary committee was expected to propose amendments to the Companies Act of1975, one of which would permit Swedish companies to repurchase their own shares. This proposal has now been published (SOU 1997: 22).

The proposal represents a wide-ranging revision of the Companies Act, rewriting 12 out of 19 chapters. Its focus is on the capital of stock companies, and the committee's aim has been to propose a number of changes to encourage shareholders to play an active role in stock companies. Another aim is greater flexibility in company capital structures to facilitate the efficient use of the resources of individual companies and Swedish business as a whole.

The proposal covers questions such as formation, pre-emption clauses, share registers and share certificates, increases in share capital, rules on share issues to management, prospectuses, raising cash loans, reductions in share capital, purchase of a company's own shares and redemption of minority shares.

As for the repurchase of shares, the committee points out that the Second Company Directive of the European Community (77/91/EEC) has set certain rules for share purchases, although the committee considers that further restrictions must apply. Companies will be allowed to repurchase and then sell their shares, although public companies cannot repurchase more than 10% of their shares. Repurchase and sale of shares will be subject to resolutions passed by a qualified majority at shareholders' meetings. On the sale of shares, shareholders would have a preferential right to acquire the shares unless a direct placement is made.

To prevent companies using the proposed rules to influence the market, the committee proposes amendments to the regulatory framework for the securities market and stock exchange. The new rules are proposed to enter into force on January 1 1999.

Lars Fredborg

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