Company reconstruction and the viability test: timeline and cost turn on one court decision, whether the business can be restored to solvency. Under Swedish law as it currently stands, a court opens reconstruction only once it accepts the business is not beyond saving; the schedule and cost that follow track the debtor's documentation and the court's calendar, not a fixed timetable.
Who this concerns
The question surfaces at two different moments. The first is before filing, when a board is watching cash run down and weighing whether a court will accept that the business has a future worth protecting. The second is after filing, when a creditor, an adviser or the appointed reconstructor is deciding how much cooperation the process deserves and how long it is realistic to expect it to run. Both groups are asking the same thing in different words: will this pass the viability test, and at what cost in time and fees.
This material is written for management, in-house counsel and creditors dealing with a Swedish-registered debtor, and it sits inside Sweden's insolvency and restructuring practice rather than as a standalone procedural note. It assumes the reader already knows the business is in difficulty; the point here is what happens once that difficulty is put in front of a court.
A board that files without having tested viability internally first is not saving time. It is handing that judgment to a court on a first look at documents the reconstructor will scrutinise within days regardless.
What the law says
Company reconstruction (företagsrekonstruktion) is a court-supervised procedure available to a business in financial difficulty that has not yet reached the point where rescue is pointless. Under Swedish law as it currently stands, the process opens on the debtor's own application, or on a creditor's application made with the debtor's consent, and it runs alongside the debtor's existing board and management rather than replacing them. Sweden uses a debtor-in-possession model: an independent reconstructor is appointed to supervise, negotiate and draft a plan, but day-to-day management stays with the people who ran the business before filing, subject to the reconstructor's oversight.
The court's decision to open the procedure, and later to confirm any composition negotiated inside it, turns on the same underlying question each time: whether the operation, once relieved of the debt currently choking it, has a genuine prospect of continuing as a going concern. That is the viability test referred to throughout this material. It is not a formality attached to the filing. An application assessed as hopeless is refused outright, and a procedure that later turns out to rest on an unviable business is closed and converted into a bankruptcy petition rather than allowed to drift.
Nothing here should be read as citing a specific statutory provision; the mechanics described are the general shape of the procedure, and any figure that matters to a live filing needs checking against the debtor's own case file, not against this page.
How it works in practice
Filing the application
The application goes to the district court with jurisdiction over the debtor's registered seat. It is accompanied by a description of the financial difficulty, a cash position, and a list of known creditors and their claims. A board resolution authorising the filing normally sits alongside it. The court does not open the procedure automatically on receipt; it forms an initial view of whether the case is arguable before appointing anyone to look deeper.
The viability test itself
The test is applied twice, not once. On filing, the court asks whether reconstruction is not manifestly hopeless, a lower bar than a full viability finding. As the reconstructor's plan takes shape, the question is asked again and more rigorously: does the plan, if implemented, leave a business capable of trading and paying its way going forward. A business with a structural problem, a product nobody wants any more rather than a temporary cash squeeze, tends to fail the second test even when it passed the first.
Appointing the reconstructor
The court appoints an independent professional to supervise the process. The reconstructor reviews the debtor's books, assesses whether management can be trusted to keep running the business, and drafts the reconstruction plan that will eventually go to creditors for a vote. Management is not removed unless the reconstructor concludes it cannot be trusted with continued control, in which case the reconstructor can ask the court to intervene further.
Creditor claims and the information duty
Once the procedure opens, creditors are notified and asked to submit their claims. The reconstructor uses this information to build the list that later votes on any composition. Creditors who miss the window to register a claim risk being excluded from that vote, even though the underlying debt is not extinguished. This is one of the few points in the procedure where a missed step has a consequence that cannot easily be undone later.
Negotiating and confirming a composition
Where the plan involves writing down debt, a formal composition (offentligt ackord) is put to creditors. It needs a qualified majority among those voting, calculated by both number and value of claims, before the court will confirm it. Secured creditors are not bound by a composition on their secured claim in the same way unsecured creditors are; a plan that treats the two groups as interchangeable rarely survives the vote.
Foreign creditors, foreign assets and a parent company abroad
The procedure itself does not change shape because a creditor sits outside Sweden or because the debtor's ultimate assets are held through a foreign parent. What changes is practical: notices have to reach that creditor in a form that will stand up if challenged, claims may need translation, and any eventual composition is only as useful as it is enforceable where the assets actually are. A debtor with a foreign parent also needs to check what the reconstruction filing itself triggers under that parent's own guarantee or cross-default terms, separately from anything the Swedish court decides.
What to check before filing
- Current cash position and how many weeks of runway remain at today's burn rate
- A signed board resolution authorising the application
- A complete creditor list with amounts, priority and security status against each claim
- Outstanding tax and payroll liabilities, which rank ahead of most ordinary claims
- Any enforcement action, attachment or garnishment already under way against the business
- Contracts containing termination-on-insolvency or ipso facto clauses that could trigger on filing
- Whether key contracts sit under foreign law or a foreign forum clause that will not simply defer to the Swedish court
Frequently asked questions
#### Does filing for reconstruction stop a creditor from exercising set-off?
Not automatically, and this is a common miscalculation at the point of filing. Whether a creditor can still net a claim against amounts it owes the debtor depends on the timing and mutuality of the obligations, not on the fact that a reconstruction has opened. The mechanics of when set-off against an insolvent counterparty still works, and when it does not, sit outside the reconstruction filing itself and need checking separately.
#### What happens if a material creditor or the debtor's assets are outside Sweden?
The Swedish procedure still runs to the same rules; what changes is service on that creditor and how enforceable any composition is once it reaches assets abroad. Where the concern runs the other way, locating and reaching a debtor's own assets held outside Sweden, the practical steps for tracing a debtor's assets abroad are a separate exercise from the reconstruction filing and use different competent authorities.
#### Can a supplier rely on force majeure to walk away once reconstruction opens?
Opening a reconstruction is not itself a force majeure event, and a counterparty cannot treat the filing as automatically excusing its own performance. Whether a genuine change of circumstances entitles a party to suspend or terminate a contract is a separate contractual question, and which court has jurisdiction over that dispute depends on the contract terms, not on the reconstruction proceeding.
The numbers
Neither the length of supervision nor the fees involved run to a default clock, and any figure quoted without reference to the specific case file is a guess dressed up as fact. What can be said reliably is what drives each of them.
Duration is set initially by the court and extended on application, not by a fixed period that applies regardless of circumstance. How many extensions are granted turns on demonstrated progress: whether the reconstructor reports that negotiations are moving, whether creditors are engaging, and whether the court's own calendar allows the hearings the process needs. A case with clean books and a small, cooperative creditor group moves through hearings faster than one where claims are disputed or documentation has to be rebuilt from scratch.
Cost is driven primarily by the reconstructor's time, and that time tracks three things: the number of creditors who need engaging, the quality of the debtor's existing bookkeeping, and whether the eventual plan is contested rather than agreed. A business that arrives with an accurate cash-flow forecast and a clean creditor ledger spends less of the reconstructor's time reconstructing basic facts and more of it negotiating. A business that arrives without those facts pays for the reconstructor to establish them before negotiation can even start.
Where it usually goes wrong
Boards tend to file too late, once cash is already exhausted rather than merely tight. At that point there is often nothing left for a viability test to protect: the court is not being asked whether the business can be saved, it is being asked to formalise a failure that has already happened.
A second recurring error is treating reconstruction as a private negotiation with a court's blessing attached, rather than as a supervised process with real disclosure obligations. Management that resists the reconstructor's requests for full financial transparency undermines its own credibility at the exact moment the court is deciding whether that management can be trusted to keep running the business.
A third is assuming a composition binds every creditor on the same terms. Secured creditors are not carried along on their secured claim the way unsecured creditors are on theirs, and a plan built as if they were tends to unravel at the vote rather than at implementation.
Finally, the viability test itself is sometimes misread as a hurdle to clear once, at filing. It is applied again, more rigorously, once the plan is drafted. A business whose problem is structural rather than a temporary cash squeeze, a market that has genuinely disappeared rather than a bad quarter, tends to fail that second look even after clearing the first.
What to do next
Everything above can be worked through with internal finance and legal teams: the cash position, the creditor list, the security register, the contracts that terminate on insolvency. Where self-directed work stops is the point where someone has to read that specific documentation and say, on the facts as they actually stand, whether a court would likely find the business passes the viability test today. That reading is the substance of an assessment, and it is worth having before filing rather than after a reconstructor has already formed a first impression.
Where part of the concern involves payments the business made in the months before a filing might happen, it is worth understanding separately how a reconstructor or a later trustee can revisit them: see recovering payments made before insolvency for how that risk is assessed. To have the specific facts of a filing reviewed, book an assessment.