Company reconstruction and the viability test: step by step means five checkpoints: the application, the court's initial viability assessment, the administrator's investigation, the reconstruction plan with creditor voting, and court confirmation or termination. Each checkpoint has its own deadline and its own document set, and failure at any one converts the case into bankruptcy.
Who this concerns
The question comes up whenever a Swedish limited company (aktiebolag) is short of cash and its board is weighing company reconstruction (företagsrekonstruktion) against an outright bankruptcy filing. It comes up just as often on the other side of the table: a supplier, a bank, or the tax authority holding an unpaid claim needs to work out whether voting for a reconstruction plan leaves them better off than voting it down. For groups with a Swedish subsidiary, the board of a foreign parent faces the same question at one remove, because a negative viability finding against the subsidiary can trigger cross-default clauses and disclosure duties elsewhere in the group, well before any formal bankruptcy is declared.
Each of these readers is really asking the same thing from a different seat: is there a business here that survives once the current debt is restructured, and at what point in the procedure does that question get tested, by whom, and with what consequence if it fails.
For an overview of how reconstruction sits within the wider Swedish insolvency toolkit, see the insolvency and restructuring practice page. What follows here is narrower: the specific viability test that recurs at three separate points in the procedure, and what changes at each of those points if the test is not met.
What the law says
Under Swedish law as it currently stands, reconstruction is not a debt-relief mechanism available to a company that has simply run out of options. It is protection granted on the premise that there is an underlying business, distinct from its current debt load, with a reasonable prospect of continuing to trade once that load is restructured. That premise is exactly what the viability test checks, and it is checked from three different angles as the case moves through the procedure.
At the application stage, the debtor has to set out why the business, stripped of its current liabilities, has a reasonable prospect of continuing. The court does not conduct a full financial investigation at this point. It screens out applications where no such prospect is even asserted, or where the assertion sits at odds with the debtor's own figures on the face of the filing.
Once a rekonstruktör, the court-appointed administrator who runs the case on the court's behalf, is in place, the test is applied far more thoroughly. The administrator investigates the business's actual position, including whether the workforce, the customer base, and the supply arrangements the plan depends on still exist in a form capable of supporting continued trading. That investigation feeds directly into the reconstruction plan and into the administrator's own recommendation to creditors ahead of the vote.
At the plan stage, viability is tested by the people with the most to lose from getting it wrong: the creditors voting on the plan, and the court confirming it. A plan that assumes viability without demonstrating it rarely survives a contested vote, and a court will not confirm a plan it has reason to doubt on that point, whatever the creditor vote produced.
How it works in practice
Between the application and confirmation, the viability question is tested through a fixed sequence of steps. Each step produces either a document, a decision, or both, and each has a competent decision-maker attached to it.
Filing the application
The debtor's board resolves to apply, and the application is filed with the district court together with a statement of the grounds for reconstruction, a picture of current cash position and near-term cash flow, and a list of known creditors. The application has to make the viability case in outline, not just assert that the company is short of cash.
The court's initial screening
The court reviews the application for the two things it can assess without an investigation: whether the debtor is genuinely illiquid or foreseeably about to become so, and whether the stated basis for continued operation is credible on its face. An application that fails either test is refused at this stage, before any administrator is appointed.
Appointment of the rekonstruktör
Once the court opens the case, it appoints an administrator to run the process. The administrator supervises the debtor's continued trading during the protection period, controls what the debtor can and cannot do without consent, and starts building the factual picture the plan will rest on.
The administrator's investigation
This is where the viability test gets real substance. The administrator looks at the business's actual contracts, its key customer and supplier relationships, its workforce situation, and its asset base, to establish whether the assumptions behind the debtor's original application still hold once examined properly. Anything the debtor's application glossed over tends to surface here.
Drafting the reconstruction plan
The plan sets out how creditors will be treated, what the business will look like going forward, and, where relevant, the terms of any debt composition (ackord) on offer to unsecured creditors. The plan has to make the viability case in detail: what changes, why the changed business can service what it owes, and what happens if it cannot.
The creditors' meeting and the vote
Creditors assess viability for themselves before voting, comparing the plan's proposed treatment against what they would likely recover in a straight bankruptcy. Secured and unsecured creditors are treated differently in this comparison, and a plan that undersells the difference between the two rarely gets through cleanly.
Court confirmation or conversion to bankruptcy
The court confirms the plan only if satisfied both on procedure and on the underlying viability case. If the court is not satisfied, or if the process breaks down earlier for other reasons, the case typically converts into bankruptcy rather than simply lapsing.
What to check
- Whether the board resolution behind the filing is properly documented and dated before the application itself
- Whether the cash-flow picture underlying the application matches the company's actual bank position on the day of filing
- Whether key contracts contain termination-on-reconstruction clauses that would undercut the viability narrative the moment they are triggered
- Whether secured creditors' claims are correctly classified, since misclassification undermines both the plan and any vote built on it
- Whether the administrator's investigation actually covers the specific assets, contracts, or customer relationships the recovery plan depends on
- Whether deadlines for objecting to the administrator's report or to the plan itself have been correctly calendared by everyone with an interest
Does an ongoing reconstruction affect a dispute over the price mechanism in a share purchase agreement?
Not directly. A dispute over a price adjustment clause in a share purchase agreement is decided under the forum the parties chose in that agreement, whether a court or arbitration, regardless of either party's reconstruction status. What changes is enforcement: any award against a company in reconstruction is affected by the same protection that shields other creditors during the process. The forum question itself is set out separately in the analysis of price mechanisms and court authority in share purchase agreements.
Should a creditor keep pursuing enforcement once a reconstruction has opened?
Once a court opens reconstruction, individual enforcement against the debtor's assets is generally put on hold for the duration of the protection, so continuing to chase separate enforcement rarely improves a creditor's position and can waste the cost of running that process in parallel. The more useful comparison, covered in the economics of settlement versus enforcement, is between voting for a viable plan and holding out for a later, possibly smaller, dividend in a subsequent bankruptcy.
Does a besiktning play any role in a reconstruction case?
A besiktning is a formal, documented inspection of a physical asset, most often property or equipment, used to record its condition at a given point in time. It is not part of the statutory reconstruction procedure itself, but an administrator investigating whether a business can keep trading will often rely on exactly this kind of documented inspection to confirm that the assets behind the viability narrative are what the debtor's application says they are. The term is explained in full in the glossary entry on besiktning.
The numbers
None of the deadlines in this procedure are fixed by a single calendar rule that applies the same way to every case. Under Swedish law as it currently stands, the length of the initial protection period, the scope for extending it, and the deadline for creditors to object to a plan are all set by the court in view of the specific case, including how quickly the administrator can complete the investigation and how contested the creditor body turns out to be.
What is fixed is the sequence, not the calendar. The viability question has to be answered, in some form, before the court will open the case, again before the administrator will recommend a plan, and again before creditors are asked to vote on one. Anyone relying on a published estimate of how long that sequence normally takes should treat it as illustrative only. The actual figure for a given company depends on the court handling the case, the completeness of the documents filed with the application, and how quickly the administrator can verify the assumptions the plan is built on.
Where it usually goes wrong
The viability test stops working as a predictor the moment its underlying assumption, that the business is separable from its current debt, breaks down. Three situations recur often enough to be worth naming.
The first is a plan that looks viable only because a parent company or a sister company has agreed, informally, to keep supporting the debtor. Unless that support is documented as a binding commitment that survives the debtor's reconstruction, the administrator and the court will test viability on the debtor's own operations alone, and an undocumented promise from a foreign parent carries no weight in that assessment.
The second is a debtor whose secured creditors hold collateral worth more than their claim. Disputes at that point are rarely about the business's underlying viability at all. They are about whether the security interest was perfected and ranks the way the debtor's plan assumes it does, and that fight can derail an otherwise sound plan long before viability itself is even reached as an issue.
The third involves cross-border claims. Where the debtor has a foreign counterparty, a foreign parent, or assets sitting outside Sweden, the viability test itself does not change, but what it produces for a foreign creditor can look different once set-off is brought into the picture. A foreign counterparty holding a claim against the debtor may prefer to set that claim off against a debt it owes the debtor rather than file into the plan at all, and whether that route is available follows a separate line of analysis, covered in set-off against an insolvent Swedish counterparty from a foreign party's position. Getting that wrong changes the real recovery a foreign creditor should expect from an otherwise viable plan.
Finally, wage guarantee claims and tax claims sit ahead of most ordinary unsecured debt in the practical arithmetic of a plan, even where the formal viability finding does not distinguish between creditor classes at the point it is made. A business that looks viable on a straightforward debt-to-cash-flow basis can still fail the practical test once those priority claims are accounted for in full.
What to do next
This gets a board, a creditor, or a foreign parent to the point where the viability question can be framed correctly for a given case, not to the point where it can be answered for that company. Answering it requires reading the actual application, the administrator's report, or the plan against the business's real cash position and contracts, which is where a documents-first review has to start.
A related question worth reading before that review is what happens when supervision of an already-confirmed plan fails partway through, covered in the cost and likely outcome of supervision failure in a reconstruction plan. Where the question is specific to a live filing, an assessment of the prospect based on the actual documents is the next step: get in touch.