The Swedish Supreme Court on the principle of equal treatment and the general clause: CASE T 6154-24

Factual and Procedural Background

ENP-Gruppen AB (“Gruppen”) was formed in 2017 by S.K., J.B. and J.F to provide neuropsychiatric assessments and cognitive behavioural therapy under public procurement contracts. The three founders each held one-third of the shares and served jointly on the company’s board of directors. In 2018, the company entered into a framework agreement with Region Gävleborg, which, while not guaranteeing any particular volume, provided the basis for potentially profitable operations.

Shortly thereafter, J.B. and J.F. incorporated a new company, ENP-Teamet AB (“Teamet”), without the participation of S.K. On 10 July 2018, a general meeting of Gruppen was held, during which J.B. and J.F. voted for to place the company into liquidation. That same day, without compensation and without informing S.K., they transferred the company’s only significant asset, the framework agreement, to their newly formed company. S.K. was not informed and did not learn of this transaction until approximately six months later.

Both the District Court and the Court of Appeal rejected S.K.’s claim for damages under Chapter 29, Section 1 of the Companies Act. However, the Supreme Court reversed.

The General Clause and the Principle of Equal Treatment

The general clause in Chapter 8, Section 41 provides that neither the board nor any other representative of a company may take measures “intended to provide undue benefit to a shareholder or another party to the detriment of the company or any other shareholder.” A corresponding provision applies to decisions taken by the general meeting (Chapter 7, Section 47).

These provisions are aimed at maintaining the principle of equal treatment of shares, which is set out in Chapter 4, Section 1 and mandates that all shares carry equal rights, unless otherwise provided in the articles of association.

The purpose of the general clause is to protect minority shareholders from actions by the majority that, while formally valid, may in substance result in unequal treatment or a transfer of value. The mere possibility of such an effect does not mean it will necessarily occur, nor is it required for the effect to be realised in a specific case for a violation to exist.

An action that effectively aims to transfer economic value to majority shareholders is generally seen as likely to confer an undue advantage, for example, where one shareholder suffers indirect harm through a reduction in share value. However, since the benefit must be undue, not all actions that benefit some while disadvantaging others fall under the scope of the clause. Measures taken in pursuit of a legitimate interest, such as actions intended to benefit the company, are, as a rule, not considered undue.

Assessment of the Transaction – Breach of the General Clause?

In its legal reasoning, the Court took particular care to emphasise the substantive economic reality over formalities. Although Gruppen had resolved to enter liquidation at the time of the transfer (which was not formally implemented until later), and although the framework agreement did not guarantee revenue and did not, in itself, provide a basis for continuing the company’s operations, the Court found that the agreement nonetheless had economic value in its own right.

This conclusion was supported by several factors: the agreement was the company’s sole significant asset, it enabled J.B. and J.F. to operate profitably through their new company, an earlier offer to purchase S.K.’s shares for SEK 200,000 indicated a perceived value in the business, and the fact that J.B. and J.F. invested efforts in transferring the agreement to Teamet also supports the conclusion that the agreement had value.

Further, the transfer occurred without consideration and without informing the third shareholder.

The Court found that the transfer was not only objectively capable of providing an undue benefit to J.B. and J.F., but also that it was executed in a manner indicating an intention to exclude S.K. from its benefits. The Court explicitly held that such a transfer, without compensation and lacking transparency, constituted a violation of Chapter 8, Section 41. In substance, the transaction involved a transfer of value from the company, and thus from all its shareholders, to the personal benefit of two of them.

Damages and Evidentiary Standards

Turning to the issue of damages, the Court reaffirmed that a breach of the general clause may give rise to liability under Chapter 29, Section 1 of the Act, even where the shareholder has suffered only indirect loss (i.e. through a decrease in the value of their shares). The liability arises where the board members have acted intentionally or negligently, and where the plaintiff can show the occurrence and extent of the damage and the causal link to the unlawful act.

S.K’s claim for damages amounted to SEK 2,690,000. In this case, while the Court accepted that S.K. had suffered harm, it held that she had not succeeded in proving the precise economic value of the transferred contract. Notably, S.K. had relied on a valuation based on the financial results of Teamet over two years, but the Court found this to be too speculative, as those results also depended on labour and other inputs not traceable to the contract alone.

Nonetheless, the Court held that there were significant obstacles to obtaining precise evidence and that S.K. had presented the best possible evidence available, including a third-party expert valuation and her own attempts to have the company independently valued prior to the liquidation. Under Chapter 35, Section 5 of the Code of Judicial Procedure, the Court may estimate damages in cases of evidentiary difficulty. Applying this principle, it awarded S.K. SEK 200,000 in damages.

S.K. succeeded in her claim regarding the breach of the general clause and compensation for that breach. However, the damage was determined by the Cour to be significantly lower than the amount she claimed and each party were to bear their own litigation costs in all instances.

Implications of the Ruling

This decision underscores the Swedish Supreme Court’s willingness to enforce the general clauses and minority protection in closely held companies and to provide redress even in complex factual circumstances where damages cannot be precisely established.

It serves as a strong signal that courts will look beyond formal compliance to determine whether actions by the board or majority shareholders amount to a de facto transfer of value in violation of corporate governance norms. However, the Supreme Court’s decision is consistent with earlier case law (such as NJA 2000 p. 404) and essentially reaffirms the prevailing legal position in the Supreme Court.

Finally, the ruling provides a reminder of the fiduciary duties imposed by Swedish company law and the legal risks associated with side-stepping minority shareholders in transactions affecting company value.