Company reconstruction and the viability test: what to do in the first ten days is the question every board of a distressed Swedish company must answer before the administrator forms a view on survival prospects. The board assembles a reconciled cash position, separates secured from unsecured exposure, and sets out why continued trading is credible, not a delay of the inevitable.
Who this concerns
The viability test lands on the board first, not on the administrator. A board that resolves to apply for reconstruction, or receives notice that a major creditor has applied instead, becomes the party whose conduct over the following ten days the administrator, the court, and every creditor with an exposure will read closely.
This sits inside the wider mechanics of Swedish insolvency and restructuring practice, and it applies whether the distress is one bad quarter or the end of a longer decline. What differs by situation is how much of the ten days is spent producing figures that already existed in usable form, and how much is spent reconstructing them from scratch under pressure.
That distinction is not academic. A board arriving at day one with monthly management accounts and no daily cash tracking is, in practice, starting the clock later than a board that has been running weekly cash forecasts for months. The first ten days do not create discipline that was not already there; they expose whether it existed.
Where the parent company, the principal creditors or the assets carrying security sit outside Sweden, the same ten days carry a second layer of work. A domestic stay on enforcement does not automatically bind a foreign secured creditor or halt steps against assets held abroad, and settling what does and does not reach across the border is first-week work, not something to discover on day nine.
What the law says
Under Swedish law as it currently stands, company reconstruction, företagsrekonstruktion, is not a form of insolvency. It is an alternative route, open to a company that cannot pay its debts as they fall due but is not manifestly beyond saving. The threshold is forward-looking rather than a record of past performance: whether there is a reasonable basis to conclude the business, or the sound part of it, can be carried forward in a way that leaves creditors better off than an immediate liquidation would.
The same threshold explains why reconstruction is unavailable to a company that is simply out of options rather than out of cash: if there is no plausible route back to solvency, opening the proceeding only delays the point at which creditors learn the outcome, and an administrator's report will say so directly.
Practitioners refer to that threshold informally as the viability test, bärkraftsprövning. It is applied twice in the same case: briefly, when the court decides whether to open the proceeding at all, largely on the strength of the application itself, and then more searchingly, once the administrator has had time to examine the books. That second reading decides whether the case continues or lapses into liquidation.
Management stays in place and keeps trading, subject to the administrator's oversight and, for anything outside the ordinary course, the administrator's consent. What changes from day one is who the board answers to: not only its shareholders, but a court-appointed officer whose report determines whether creditors are asked to accept a plan, or asked to accept that none is on offer.
How it works in practice
Day one: the filing and its immediate effect
The application triggers a stay on individual enforcement by unsecured creditors, and board authority to run the business continues alongside the administrator's oversight. Employees, key suppliers and the principal bank should hear about the filing from the board, in a controlled sequence, before hearing about it elsewhere.
Days two to four: building the cash position
A cash position built from memory does not survive the administrator's first read. What holds up is a reconciled figure from actual bank data: committed but undrawn facilities, receivables genuinely likely to collect in the relevant window, and payables that cannot be deferred without creating a bigger problem than the filing was meant to solve.
Mapping secured against unsecured exposure
Every facility needs to be set against what it is actually secured over, whether that security was properly perfected, and whether the holder has any right of set-off against sums it owes the company. A creditor secured over the one asset the business needs to keep trading has a different incentive to every unsecured creditor, and any plan has to account for that from the outset.
What the administrator asks for in the first week
A short-term cash flow forecast, a list of contracts the business cannot operate without, a schedule of employees with any wage arrears, and a record of contact already had with the largest creditors. An administrator who receives these unprompted forms a materially different early view than one who has to chase for each item.
Coordinating with the principal secured lender
Where one lender holds security over the assets the business runs on, that relationship carries more weight in the first ten days than contact with any other creditor. A lender kept informed and given a credible cash position early is more likely to extend a standstill than one that learns of the filing from a public notice.
Talking to creditors before they talk to each other
Selective disclosure to one creditor tends to surface once the administrator's report circulates, and it reads as a governance problem independent of the underlying numbers. A single, coordinated message to the largest creditors, kept consistent with what the administrator has been told, does more for credibility than any individual reassurance.
If the viability test is not met
Where the administrator's reading is that no credible plan exists, the proceeding does not simply continue by default; it moves toward liquidation, and the board's task shifts from building a plan to managing an orderly wind-down and protecting itself against later claims that trading continued after it should have stopped.
Employees and the wage guarantee
Wages falling due early in the proceeding are typically covered, up to a defined limit, by the state wage guarantee scheme rather than the company's own account, which changes what the cash position actually needs to fund. Confirming which employees and which arrears fall inside that scheme, rather than assuming all of them do, is first-week work.
What the board should put in writing
Minutes recording the decision to file, the assumptions behind the cash flow forecast, and the reasoning for believing continued trading is credible protect the board later if a creditor questions whether the filing was justified. A board that can produce this record on request is in a materially stronger position than one reconstructing its reasoning afterwards.
What to check
- Whether security over the assets the business depends on is properly perfected and enforceable
- Whether any facility contains a termination clause triggered specifically by the filing
- Whether any material counterparty holds a right of set-off against the company
- Whether continuing key contracts requires the counterparty's consent
- Whether any wage arrears fall outside the guarantee scheme's coverage
- Whether any creditor, asset or group company outside Sweden needs separate steps to be bound by the stay
How do due diligence findings from an earlier deal change if the company enters reconstruction?
A filing does not erase findings already made; it changes what they are worth. Warranty and indemnity claims tied to those findings become claims against a company under reconstruction rather than a going concern, affecting both priority and recoverability. How that shift plays out for pricing and board exposure on the acquiring side is set out in how due diligence findings move price.
Can a Swedish judgment obtained before the filing still be enforced?
Individual enforcement of a judgment against the company's assets is stayed once reconstruction opens, whatever stage enforcement had reached. The judgment survives as a claim in the case rather than a route to seizure. What that means for a board holding such a judgment is addressed in enforcing a Swedish judgment against exposed assets.
Is an arbitral award treated the same way as a domestic judgment during reconstruction?
The stay applies to enforcement steps generally, not only to court judgments, so an arbitral award sits in a broadly similar position. Where the award and the assets available to satisfy it cross a border, the practical route to recovery changes further, as set out in enforcing an arbitral award across a border.
The numbers
The figures that matter most in the first ten days are commercial rather than statutory: the cash runway measured in weeks rather than months, the proportion of payroll that falls inside the wage guarantee period rather than against the company's own account, and the split between secured and unsecured debt by value, since that split decides whose agreement is actually needed for whatever plan follows.
Boards sometimes look for a single number that decides the case, a minimum cash balance or a maximum debt ratio. No such fixed figure exists in the regime itself; what exists is a judgment call built from the figures above, applied to the specific business.
None of these figures is fixed by the reconstruction regime itself; they are produced by the board, and how quickly and accurately they are produced shapes the administrator's early read on viability more than the underlying financial history does. A board that reaches day ten with an unreconciled cash position has, in effect, already answered the viability question in the negative.
Where it usually goes wrong
The test fails most often not because the underlying business is beyond saving but because the first ten days are spent managing the crisis rather than documenting it. A cash position assembled from memory rather than reconciled bank data does not survive contact with an administrator who has seen the pattern before.
It also fails where a single secured creditor holds security over the asset the business actually needs to keep trading, and that creditor sees more advantage in enforcement than in a plan. Reconstruction cannot compel a secured creditor to fund a recovery it does not believe in beyond the limited standstill; where that creditor's incentives point toward enforcement, the viability test tends only to confirm what the creditor already suspected.
A further pattern is delay presented as due diligence: waiting for a clean set of figures while the numbers keep deteriorating can turn a company that could plausibly have met the viability test into one that manifestly cannot.
A fifth pattern, less obvious than the rest, is treating the administrator as an obstacle rather than the audience for the case being made. An administrator convinced early tends to write a report that reflects that; one kept at arm's length tends to write what the numbers alone can support, which is rarely the more generous reading.
Where the counterparty, the charged assets or the parent company sit outside Swe