Company reconstruction and the viability test: who decides what splits into three roles. The district court only decides whether to open the process; the reconstructor assesses viability and drafts the plan; creditors vote on that plan itself. No single participant certifies survival, and a business can enter reconstruction on a plan creditors later reject.
Who this concerns
The question arises for management of a Swedish company facing a liquidity crisis that a bank facility or a supplier's patience cannot bridge, and for a board weighing an application for reconstruction (företagsrekonstruktion, the Swedish supervised reorganisation regime) against liquidation. It also concerns creditors, secured and unsecured, trying to work out how much real influence they have over the outcome, and a foreign parent company whose Swedish subsidiary is the one applying, because the parent's guarantees and intercompany claims sit inside the same creditor body that will vote.
Trade creditors ask this question when a customer that owes them money files for reconstruction and they need to know whether a retention-of-title claim, or a right to set off a mutual debt, survives the process untouched or is absorbed into it. Secured lenders ask it because their collateral position determines whether they hold a practical veto over the plan even without a formal one. Management asks it because filing too late, after the business becomes factually insolvent rather than merely illiquid, closes off options that were open a month earlier.
What the law says
Under Swedish law as it currently stands, the district court's role at the opening stage is narrow: it checks that the applicant is eligible, that the application is properly supported, and that reconstruction is not manifestly pointless, then appoints a reconstructor. It does not evaluate the business plan on its merits at that point, and it does not decide whether the company is, in fact, viable.
The reconstructor performs the viability assessment in substance. That assessment covers the company's cash position, its order book, its cost base against realistic revenue, and whether the debts a plan would write down or reschedule leave a business that can trade forward. The reconstructor's conclusion is not binding on creditors; it shapes the plan put to them, but the vote is theirs to cast.
Creditors vote in classes, and the practical weight of any single creditor depends on the size of its claim relative to its class and on whether it holds security that sits outside the vote altogether. A secured creditor whose collateral covers its exposure has comparatively little reason to negotiate through the plan process, because enforcement of security typically proceeds on a separate track. That asymmetry is often the real decision-maker in practice, even though it appears nowhere among the formal roles of court, reconstructor, and creditor vote.
How it works in practice
The court's role: opening and closing the process
The court's two moments of real authority sit at the start, deciding whether to open reconstruction at all, and at the end, deciding whether to confirm a plan approved by the required creditor votes or instead close the process into bankruptcy. Between those two points, the court does not manage the case.
The reconstructor's role: assessing viability, not guaranteeing it
The reconstructor's assessment is a professional judgement built on the company's own figures, tested against what the reconstructor considers achievable. It is not an audit and it is not a guarantee. A reconstructor can conclude a business is viable on the assumption that a contract renews, a receivable is collected, or a cost is renegotiated, and any one of those assumptions can fail after the plan is confirmed.
The creditors' role: voting on the plan itself
Creditors do not vote on whether the business is viable in the abstract. They vote on whether the specific plan in front of them, the write-down, the repayment schedule, the treatment of their own claim, is acceptable against the alternative, which is usually bankruptcy and a lower recovery. A creditor who considers the viability assessment optimistic can still vote for the plan if the alternative is worse.
The secured creditor's practical veto
A secured creditor whose collateral is unaffected by the plan has limited reason to object formally. A secured creditor whose collateral is essential to the business, a lease, a piece of equipment, a working-capital facility, can make the plan unworkable simply by declining to extend fresh terms. That refusal never appears as a vote against the plan; it appears as the business running out of cash during the reconstruction period.
Cross-border creditors and foreign parent companies
Where a counterparty, a lender, or the ultimate parent sits outside Sweden, three things change. A foreign secured creditor needs to establish, separately from the Swedish process, whether its security is enforceable in Sweden at all, and that depends on how the security was created and where the collateral sits. An intercompany claim from a foreign parent is treated as an ordinary unsecured claim unless it was properly documented and perfected, regardless of the parent's actual economic position. A foreign creditor voting in the creditor classes faces the same procedural deadlines as a domestic one, and distance is not an extension.
Building the position before the application is filed
The position that matters is built before reconstruction opens, not during it. Management preparing an application needs a cash-flow forecast that survives scrutiny by the reconstructor, not one built solely to justify the filing. A creditor anticipating a counterparty's reconstruction needs to know, before the filing, what security it holds, whether that security is perfected in a form that survives the process, and whether a right of set-off exists and can be exercised.
What to check
- Whether the company's cash-flow forecast has been tested against a scenario where a key customer or supplier does not renew, not only against the base case supporting the application.
- Whether secured creditors' collateral is properly perfected under Swedish law, because an informal or incompletely registered security interest behaves as unsecured exposure inside the process.
- Whether any retention-of-title claim over goods supplied to the debtor has been asserted, and whether the goods remain identifiable and in the debtor's possession.
- Whether a set-off right against the debtor exists and, if so, whether it has been exercised or communicated in a form the process will recognise.
- Whether the reconstructor's viability assessment rests on an assumption, a renewal, a saving, a receivable, that can be independently verified.
Common questions
#### How does construction contract exposure under AB 04 or ABT 06 change inside a reconstruction?
A construction contract governed by AB 04 or ABT 06 does not stop applying because the counterparty enters reconstruction. Retention amounts, defect liability periods, and set-off clauses continue to operate, and the reconstructor inherits the contract as it stands unless it is formally terminated. See the step-by-step review of AB 04 and ABT 06 exposure.
#### If the reconstruction fails and the case moves to enforcement of a Swedish judgment, does the earlier viability assessment matter?
No. Enforcement of a Swedish judgment turns on the judgment itself and the debtor's assets at that point, not on assumptions made months earlier about the business's prospects. Read how prospects are assessed before enforcing a Swedish judgment.
#### Does a Maltese arbitral award against the debtor get special treatment inside a Swedish reconstruction?
No. A foreign arbitral award, including one rendered in Malta, is treated as an unsecured claim unless it has been recognised and enforced under the applicable framework, and holding an award gives no stronger vote than any other unsecured creditor. See how enforcement of a Maltese arbitral award is assessed.
#### Do retention-of-title claims survive the viability assessment in the same way as other supplier claims?
No. A properly asserted retention-of-title claim sits outside the pool of claims the viability assessment is built around, because the goods in question are not treated as the debtor's asset to restructure around. See how retention-of-title claims are assessed against the financial position.
The numbers
No figure can honestly be given here without pointing to a specific case's own filings. Duration depends on the caseload of the specific district court handling the matter and on how complete the documentation is when the application is filed. Cost follows the same pattern: what drives the fee is not a fixed schedule but the size and complexity of the creditor body, the number of contested claims that need resolving before a plan can be put to a vote, whether the viability assessment itself is challenged, and whether any part of the case involves a foreign creditor, foreign security, or a foreign parent's intercompany claim requiring separate analysis. A straightforward case with a small, cooperative creditor body and a single secured lender resolves faster and more cheaply than one with a contested viability assessment and a mixed domestic and foreign creditor body, but neither duration nor cost can be stated as a number in the abstract.
Where it usually goes wrong
The most common failure is a plan built on a cost saving or contract renewal the reconstructor accepted on management's word, one that does not materialise once the plan is confirmed. The business assessed as viable turns out not to be, and the process converts into bankruptcy with less value left than if bankruptcy had been filed at the outset.
A second pattern is a secured creditor whose collateral is essential to trading declining to extend terms during the reconstruction period itself. Because that refusal is not a vote, it does not show up in the plan's approval; it shows up as the company running out of cash before the plan is even put to creditors.
A third is a foreign parent's intercompany claim, correctly treated as unsecured, outvoting genuine trade creditors in a class where its claim happens to be the largest, producing a plan that reflects the parent's interests rather than the operating creditors' recovery.
A fourth is a creditor holding a valid set-off right or a retention-of-title claim that fails to assert it in time, either assuming the process would protect the claim automatically or never checking whether the goods were still identifiable. Once the plan is confirmed, a claim that was never asserted is difficult to revive. The viability test itself is also no substitute for a creditor's own due diligence: it is the reconstructor's read of the company's figures at a single point in time, built without that particular creditor's exposure in mind.
What to do next
This material gets a management team or a creditor as far as identifying which of the three decision-makers, court, reconstructor, or creditor vote, actually controls the outcome that matters to them, and which checks from the list above need to be run against their own documents before the reconstruction is filed or a vote is cast. It does not, and cannot, substitute for a review of the specific figures, the specific security, and the specific claim.
That review sits inside the wider insolvency and restructuring practice, and where the question is specifically about a set-off right against a counterparty that is already insolvent, the analysis of set-off against an insolvent counterparty sets out how that particular claim is assessed. Where the position needs to be tested against actual documents before a filing or a vote, that is an assessment call, not a reading exercise: get in touch to have the specific claim or plan reviewed.