A Duty to File Comes to Sweden: Directors’ Obligations Under the New EU Insolvency Directive

This is the second article in our series on the Directive. The first considered the introduction of regulated pre-pack proceedings. This one turns to Title V, which contains the duty to file, the exceptions to it, and the civil liability that follows if it is not discharged.

The change matters more for Sweden than its brevity suggests. Swedish law already puts real pressure on boards in a financial crisis, but it does so through several separate mechanisms, none of which amounts to a general duty to petition for bankruptcy. What the Directive adds is a single, express obligation with its own trigger and its own clock. How hard it bites will be decided not in Brussels but in the Swedish implementation.

What Article 40 requires. Member States must ensure that the directors of a company which becomes insolvent in accordance with national law have a duty to submit a request for the opening of insolvency proceedings, with the exception of preventive restructuring proceedings. The request must be made within three months of the directors having become aware, or being reasonably expected to have become aware, that the company is insolvent.

Two features of that formulation matter in practice. The first is that the trigger is knowledge rather than insolvency itself, which means that any later dispute will usually be about when the three months began to run rather than about their length. The second is that the Directive does not define insolvency at all. Article 2(2) refers the question to national law, so the Swedish test remains the one in Chapter 1, Section 2 of the Swedish Bankruptcy Act (Sw. konkurslagen): an inability to duly pay debts that is not merely temporary. Article 2(2) leaves the word “directors” to national law in the same way, so Sweden will also have to say who is bound — whether the duty reaches only registered board members and the managing director, or extends to shadow and de facto directors as well. The three months are a ceiling rather than a floor: under Article 4(1) Sweden may legislate a shorter period, but not a longer one.

Which filings discharge the duty? The carve-out for preventive restructuring proceedings does more work than its wording suggests, and the Directive does not define it. Nor does Directive (EU) 2019/1023, which describes preventive restructuring frameworks functionally, as available to debtors “when there is a likelihood of insolvency”. The reference in Article 40 to Annex A of Regulation (EU) 2015/848 does not settle the point either, because Annex A is a single undifferentiated list that deliberately includes preventive procedures alongside classical insolvency proceedings.

For Sweden this leaves a genuine question. A bankruptcy petition (Sw. konkursansökan) plainly discharges the duty. Business reorganisation under the Swedish Business Reorganisation Act (Sw. lagen (2022:964) om företagsrekonstruktion) is harder to place: it was adopted to implement the 2019 Directive, which points towards the carve-out, but it is also available to a debtor already unable to pay its debts, which points away from it. The question is not academic. If business reorganisation falls inside the carve-out, a board that responds to insolvency by filing for reorganisation has not discharged its Article 40 duty at all.

Three ways out — but only if Sweden takes them. Article 41 allows Member States to disapply, discharge or suspend the duty. It may be disapplied for directors who are natural persons personally liable for all of the company’s debt. It may be discharged by notifying the company’s insolvency in a public register before the three months expire, so that creditors can themselves apply. And it may be suspended where the directors take measures designed to avoid damage to creditors that give the general body of creditors protection equivalent to a filing. Each of these is an option for the Member State. None of them applies of its own force.

The third is the most significant, and also the least developed. The threshold is higher than acting responsibly: the benchmark is the counterfactual filing, and the comparator is the creditors as a body rather than any particular creditor. Measures that improve the position of a secured lender or a key supplier, while leaving the general body no better off than a timely bankruptcy would have done, do not meet the test however commercially sensible they may be. Recital 59 offers a single illustration, and a narrow one: measures taken by the owners to restore the company’s solvency. It does not give the opening of a restructuring procedure as an example.

The liability that follows. Article 42 makes directors liable, in accordance with national law, for damage caused to creditors by a failure to discharge the duty. This is a liability in damages rather than an automatic personal liability for the company’s debts, which distinguishes it from the Swedish rules on personal payment liability for capital deficiency.

There is a second head of liability that is easy to overlook. Where a Member State uses the suspension option, Article 42(2) makes directors who take such measures liable for damage that would not otherwise have been caused had insolvency proceedings been requested in time. Directors who take that route therefore do not escape liability; they exchange one basis for another. Article 42(3) then allows Member States to exclude that liability where the directors can show, on objective circumstances, that the measures taken were reasonably likely to secure an equivalent or better outcome for creditors. It is worth being precise about the scope of that defence: it applies to the second head of liability only. A board that simply fails to file cannot answer the claim by arguing that waiting was commercially defensible.

The practical difficulty is the one directors will feel first. Filing too early destroys value and may foreclose a reorganisation that would have worked; waiting too long risks liability. The Swedish insolvency test requires a judgement about the future that is rarely clear-cut at the moment it has to be made, and smaller companies — which have the least access to legal and financial advice — are the ones most likely to respond by filing defensively. The Directive offers them no relief, since there is no size-based exception to the filing duty.

How this sits with Swedish law. The closest existing analogue is representative liability for unpaid taxes (Sw. företrädaransvar) under Chapter 59 of the Swedish Tax Procedures Act, where a representative who fails to take active measures by the date a tax falls due may become personally liable. Functionally that is already a duty to act coupled with a deadline, but it is triggered by a missed tax payment rather than by insolvency, and it protects the State rather than creditors generally. The capital deficiency rules in Chapter 25 of the Swedish Companies Act run on a different axis again: they are triggered by a balance sheet event rather than by insolvency, so a company can be insolvent without crossing the threshold and cross it while still able to pay. Article 40 will not slot neatly into this structure. It will sit alongside it.

Looking ahead. Five choices face the Swedish legislator, and each of them changes what the duty is worth in practice: whether to keep the three months or use Article 4(1) to legislate a shorter period; whether to take the suspension option in Article 41(3); whether to take the corresponding defence in Article 42(3); whether an application for business reorganisation discharges the duty, or only a bankruptcy petition will do; and how widely the word “directors” is to be drawn. The second and third matter most, because together they decide whether the Swedish rule becomes a hard three-month deadline or a standard that rewards responsible conduct. Boards and their advisers should follow the coming inquiry closely. Even before implementation, the direction of travel is clear enough: the moment at which a board realises, or ought to realise, that its company is insolvent will carry consequences it does not carry today, and the contemporaneous documentation of that assessment is likely to matter a great deal.

This article is the second in a series on Directive (EU) 2026/799. The first article, “Regulated Pre-Packs Come to Sweden: Opportunities and Risks Under the New EU Insolvency Directive”, considers the introduction of regulated pre-pack proceedings and is available at refisthlm.se.