In Sweden, interest in joint ventures (JVs) is growing across most sectors. Although geopolitical challenges, the war in Ukraine, and fluctuations in interest rates continue to influence the Swedish economy, there remains a consistently strong appetite for establishing JV structures in Sweden. One of the main drivers for setting up a JV is to share costs and risks between the parties involved. This can be linked to increasing macroeconomic and political risk, which has made investors more cautious. Another possible reason for the increased interest is that banks and financial institutions have become more restrictive about offering financing, meaning that alternative sources of funding are needed for new companies and collaborations. The increase in JVs can be observed both in traditional industries and in more disruptive, emerging markets.

Given the market trends and the current financial and political landscape, it is anticipated that the interest in JVs will continue to increase over the next year. 

While JV activity has remained strong across most sectors in Sweden, there has been a notable increase in the use of JV structures within real estate projects. These arrangements are often designed to distribute ownership among developers, property management companies, and tenants. The rise in such structures appears to be driven partly by a growing interest in sharing both risks and financing costs, and partly by the desire to involve and commit all parties at an early stage of the project, while also enabling them to share in the resulting profits.

In Sweden, the term “joint venture” lacks a specific legal definition and hence there are no regulatory requirements concerning the structure of the JV as such. As a result, JVs may be structured in a number of ways and can be tailored based on the needs and intentions of the co-operating partners.

In principle, there are two general methods of structuring a JV: either through a purely contractual partnership or through an entity-based partnership (ie, a corporate vehicle).

The simplest form of establishing a JV is through a contractual partnership by way of a co-operation agreement establishing the scope of the venture, the obligations and commitments of the partners and any other specific terms concerning the partnership. Using this structure, there are no requirements for equity participation and the parties are able to freely tailor the terms of the JV. As no regulatory provisions pertaining to this structure exist under Swedish law, the general principle of freedom of contracts applies. For partners wishing to collaborate on a temporary basis only, for a particular project, and without the need for a specific allocation of assets, a purely contractual partnership may be sufficient. However, should the agreement include a mutual intention of incorporation and oblige the partners to facilitate such intention, the agreement itself could constitute a non-registered partnership in accordance with the Partnership and Non-registered Partnerships Act, which would entail the application of certain statutory provisions to the contractual partnership as a non-registered partnership. A non-registered partnership is not a separate legal entity and may not assume rights and obligations. The partners to the non-registered partnership will be liable for all obligations and debts arising from the JV.

A more prevalent and legally structured approach offering greater predictability is an entity-based partnership utilising any available corporate vehicle that permits co-ownership, such as a limited liability company, a general partnership, a limited partnership, a co-operative association or a non-registered partnership. These entity-based JVs may be more suited to partners intending to engage with each other over longer periods of time and with a need to structure the management, allocation of profits and ownership of assets in a more predictable way. All of the above-mentioned entity-based JVs (with the exception of a non-registered partnership) constitute separate legal entities with legal competence to enter into agreements and undertake rights and obligations, the most common of which is the private limited liability company.

Limited Liability Company

For the purposes of establishing a JV, the most relevant and commonly used structure is the private limited liability company. Hence, factors solely pertaining to public limited liability companies have been excluded from this chapter.

A private limited liability company must have a minimum share capital of SEK25,000 and be registered at the Swedish Companies Registration Office (SCRO) and the Swedish Tax Agency. The most common and efficient method of setting up a JV through a private limited liability company is by purchasing a dormant shelf company and allocating the shares in said company to the partners in proportion to their financial, or other, contribution. One of the main advantages of establishing a JV in this manner is that the shareholders are generally not liable for the company’s debts and liabilities. Proceeds may be allocated to the shareholders through dividends in relation to the rights connected with the shares of each shareholder. On the other hand, a limited liability company is obligated to keep accounts and submit (generally audited) annual reports to the SCRO, which become publicly available upon submission.

General Partnership

A general partnership, like the limited liability company, constitutes its own separate legal entity able to enter into agreements, undertake rights and obligations, own property and appear in court. A general partnership does not require any share capital and is not subject to any other requirements regarding the capitalisation of the entity. However, the liability of the general partnership is not limited to its own financials and the partners may therefore be held liable should the entity be unable to pay its debts. The partners’ liability in respect of the general partnership is joint and several.

A general partnership is based upon a contractual relationship between the partners with the intention to jointly engage in business, and is formed through the registration of such a partnership with the SCRO and the Swedish Tax Agency. The partnership is represented by each of the partners unless regulated otherwise in the partnership agreement or through a general power of attorney registered with the SCRO, and, unless the partnership agreement states otherwise, the allocation of proceeds follows the general principle of equal distribution.

This structure for a JV allows for easy incorporation without the express need for the partners to contribute financially, while exposing the partners to a potential financial risk if the partnership were to default on its debts.

Limited Partnership

The limited partnership is similar to the general partnership, and the same general principles as mentioned earlier apply. A fundamental difference, however, is that some of the partners’ liability (limited partners) is limited to their financial contributions (which must be at least SEK1), whereas at least one partner (general partner) is liable for all the partnership’s debts and liabilities without limitation. The general and limited partners must be registered with the SCRO.

Furthermore, the limited partnership is represented by the general partner and unless the limited partners have a registered power of attorney they may not represent the JV against third parties.

Co-Operative Association

A co-operative association constitutes a legal entity and may enter into agreements, undertake rights and obligations, own property and appear in court. A co-operative association may be founded by at least three operating partners which may be either legal entities or physical persons. A co-operative association is governed by its registered articles of association which also regulate the financial contribution required by each partner. The amount of the financial contribution may be determined by the partners and each partner’s liability is limited to their contribution.

The co-operative association is represented by a board of at least three directors appointed by the association meeting. The co-operative association is required to appoint and register an auditor, keep accounting records and submit annual reports. Proceeds from the association may be allocated to its members through dividends decided by the association meeting.

The structure of the JV, and whether to set up a corporate vehicle or not, is dependent on several factors connected to the partners’ intentions for and expectations of the JV. If the collaboration between the partners is temporarily limited to a specific purpose and requires no particular asset allocation (eg, a joint production project with limited scope), a contractual partnership with an agreement setting forth each party’s rights and obligations may be sufficient.

If the partners intend to engage with one another over a longer period of time and need to structure the management, allocation of profits and ownership of assets in a more predictable manner, the partners may consider setting up a corporate vehicle for the JV.

The typical primary drivers for deciding which corporate vehicle to use when establishing a JV may include, but are not limited to:

• the nature and size of the venture;
• the domicile of the partners;
• the need to limit each party’s liability for the JV;
• the number of partners;
• whether each party’s financial contribution will be equal or split differently;
• whether the partners are going to be operating or financial partners;
• the duration of the JV;
• the intention of making an exit through a sale or IPO, or by liquidation; and
• tax considerations.

JV Parties (All Parties Limited Liability Companies)

Taxation of capital contributions, dividends and capital gains

Capital contributions to the JV entity are generally tax-neutral for the contributing parties and for the JV entity. However, dividends distributed by the JV to its owners are subject to taxation for individuals (this typically falls under capital income taxation), whereas – for corporate entities – tax exemptions may apply under the Swedish rules for business-related shares (participation exemption rules). The same applies to capital gains on shares in the JV.

Transfer of value/enrichment of the other party

If one party contributes more funds or assets than proportional to its ownership share, this could result in the other party being indirectly enriched, potentially leading to tax consequences for the enriched party. It is therefore crucial to ensure that contributions of funds or assets are made pro rata to each party’s ownership share. In addition, hidden income transfers through profit sharing between the JV parties may, under certain circumstances, be considered salary income for individuals who are enriched or reclassified as taxable business income for the receiving company.

JV Entity (All Parties Limited Liability Companies)

Transfer pricing considerations

Transactions between the JV and its owners must adhere to the arm’s length principle, especially in cross-border arrangements, to avoid adjustments and penalties.

Withholding tax on payments

If the JV distributes dividends or makes payments such as royalties or interest to foreign owners, withholding tax obligations may arise under the Coupon Tax Act. This tax is often subject to reduction or exemption under applicable tax treaties or EU directives, but compliance must be ensured.

Interest deduction limitations

If a Swedish JV entity is financed/capitalised through loans from its owners, it is necessary to consider the Swedish interest deduction limitation rules to ensure that interest expenses are deductible for tax purposes.

General Rule Regarding JV Entity (Partnership-Taxed Entity)

In cases where the JV is a partnership-taxed entity, taxation is, as a general rule, applied at the partner level. Specific regulations govern this process.

As mentioned previously, the term “joint venture” lacks a specific legal definition in Sweden and there are no specific regulatory requirements pertaining to the structure of a JV. Therefore, the structure and type of JV determine the primary regulator and the main statutory provisions.

The most frequently used corporate vehicle for JVs is a private limited liability company. Private limited liability companies need to be registered at the SCRO and the Swedish Tax Agency. Given that a limited liability company is generally obliged to keep accounts and submit audited annual accounts to the SCRO, it can be said that the primary regulators are the SCRO and the Swedish Tax Agency. If the partners to the JV are two limited liability companies, they may have to report the JV to the Swedish Competition Authority (SCA) pre-registration (see 3.4 Competition Law and Antitrust and 5.2 Disclosure Obligations). Depending on the business and operations of the JV, other regulators and statutory provisions may be relevant in order to ensure the JV’s compliance in specific business sectors.   

There are two main statutes that regulate money laundering in Sweden. The first is the Money Laundering Act, and the second is the Act on Penalties for Money Laundering Offences. The former aims to prevent financial and other commercial activities from being exploited for money laundering or terrorist financing purposes and is based on the Fifth EU Anti-Money Laundering Directive. The latter contains criminal law provisions relating to money laundering.

In general, the Swedish AML regulations apply to certain types of businesses where the operator is required to gather information about their customers (KYC) and to report suspicions of money laundering or terrorist financing to the authorities. All entities may be required to answer questions and provide information to such business operators in order to comply with the AML regulation when requesting products or services.

The Swedish Screening of Foreign Direct Investments Act (2023:560) (the “FDI Act”) authorises the Swedish Inspectorate of Strategic Products (ISP) to screen foreign direct investments (FDIs) in activities worthy of protection. The FDI Act stipulates that a particular screening procedure must be undertaken prior to an investment, in which an investor (whether domestic or foreign) acquires a specified level of influence over, or assumes control of, a protected activity. Activities may be considered protection-worthy across most industries and are not limited to any specific type of business. However, such activities must be of national interest and are more common in industries such as infrastructure, energy, finance, healthcare and advanced technologies.

The FDI Act is applicable irrespective of the corporate vehicle used to undertake the protected activity. Any individual or entity intending to invest, either directly or indirectly, in activities that fall under the purview of the FDI Act is required to notify the ISP. The obligation to notify is applicable to all investors, irrespective of nationality or domicile, provided that a certain level of influence has been attained. Conversely, the company subject to the investment must inform potential investors of the aforementioned obligation to notify (if such obligation exists).

The ISP is entitled to either prohibit the FDI or to impose specific conditions in conjunction with the granting of authorisation. Should an investment be prohibited, any legal act forming part of the investment or having the purpose of realising the investment will be rendered invalid. Furthermore, the ISP is entitled to issue penalties of up to SEK100 million for instances of non-compliance.

Several competition law considerations are relevant for the formation and operation of a JV.

Initially, the establishment of a “full-function” JV must be notified and cleared by the competition authority if certain turnover thresholds are met by the parent company. A JV is normally considered to be full function when it does not merely perform tasks for its parent companies, but, rather, acts independently on the market and has its own management. The competition authority will review whether the creation of the JV may affect the market – by way of dominance of a sector – to such an extent that the creation should be forbidden or mitigated by conditions.

Both the setting-up and operation of a JV are also to be reviewed in line with general competition rules; ie, the prohibition on entering into anti-competitive agreements and abusing a dominant market position. The creation of a JV between competitors may be considered an anti-competitive agreement.

There are guidelines from the European Commission on the formation of JVs and there are many “exemptions” from the above-mentioned prohibitions, for instance, for JVs undertaking certain research activities (which could yield positive outcomes for the broader public).

The competition law aspects should always be considered before the formation but also regularly (if for instance partners are changed) and on a case-by-case basis.

If a JV partner is a listed company, certain market disclosure regulations should be considered. It should initially be recognised that the JV and the listed JV partner are two separate and distinct legal entities. Thus, as a starting point, the rules for private limited companies apply to the JV irrespective of whether it has a public party or not.

However, as an exception to the above, when a publicly listed company participates in a JV, certain requirements and considerations set it apart from privately held entities, as outlined below.

Disclosure and Transparency

Publicly listed companies are obliged to comply with strict disclosure regulations. Significant events, such as entering into a JV, must be disclosed promptly by the listed company to ensure equal access to material information for shareholders and market participants. This requirement is governed by market rules and legislation concerning market abuse. Even though the requirement directly applies to the listed company and not the JV, the JV is indirectly affected by the disclosure requirements should any circumstances arise in the JV that are of such a nature that they could constitute material information for shareholders and market participants in relation to the listed company.

Financial Reporting Standards

The listed JV party shall apply specific accounting standards applicable to publicly listed companies. This includes the recognition and valuation of the JV in financial statements, often with heightened scrutiny due to the transparency required in financial reporting for listed entities. In this context, it means that the JV is subject to more stringent reporting requirements with regards to its listed JV partner than would be the case if both partners were private companies. The JV could, as long as the listed JV party presents consolidated group-level accounts according to International Financial Reporting Standards (IFRS), choose to not apply the same IFRS and instead apply K2 or K3 reporting standards; however, this means that the JV’s figures need to be restated for inclusion in the group consolidated accounts.

The majority of Swedish companies, associations, and other legal entities must register beneficial ownership information with the SCRO. A beneficial owner is a natural person who:

• controls more than 25% of the total number of votes in the legal person by virtue of ownership of shares, other equity or membership;
• has the right to appoint or remove more than half of the directors or equivalent officers of the legal person; or
• by virtue of an agreement with the owner, a member or the legal person, or a provision in its statutes, articles of association or similar documents, can exercise the control referred to in the two previous bullet points.

The above-mentioned information must be registered with the SCRO and be provided without delay at the request of an authority. The information must also be made available to an operator upon request, should the operator be undertaking customer due diligence measures in relation to a transaction or business relationship with the legal entity.

Apart from the recent introduction of the FDI regime in Sweden in 2024, there have not been any substantial legal developments specifically relevant to JVs.

As most JV disputes are subject to arbitration and such arbitration proceedings are generally confidential, there have not been any significant recent court decisions relating specifically to JV matters or business collaborations. 

The negotiation process and instruments at this stage are always tailored to meet the needs and requirements of the potential JV partners and vary greatly from case to case. In the most straightforward process, where the deal value is usually on the low end or if the parties are already familiar with each other, there is no need for pre-agreement documents. In such simple cases, the partners start negotiating and drafting the shareholders’ agreement or JV agreement directly.

If the co-operation and potential partners require a more structured process, it is common for the parties to agree on a letter of intent (LOI) setting forth the framework of the negotiation and a mutual non-disclosure agreement (NDA) to be able to freely discuss sensitive information and synergies. The LOI usually contains both binding provisions, such as exclusivity and confidentiality undertakings, and non-binding provisions, such as timelines, general terms and conditions for the JV agreement and structure of the JV organisation.

Other pre-agreement actions and documents may be needed depending on the business and specific requests from the parties, such as clearances from relevant authorities, restructuring actions prior to the JV or ancillary documentation.

Whether the partners to the JV are required to disclose the JV entity to the public depends on whether any of the partners are a listed public company.

There are no regulatory provisions requiring the formation of a JV company to be disclosed to the public if the partners are either individuals or private limited liability companies. The partners to the JV are, however, under certain circumstances, obliged to report the creation of the JV entity to the SCA if the partners exceed certain revenue thresholds. Approval from the SCA of the formation of the JV entity must be obtained before the company is set up. See 3.4 Competition Law and Antitrust for more details.

Besides the potential obligation to register the ultimate beneficial owners of the JV, there are no requirements to notify and register the ownership of shares with the public authorities. The ownership of shares in a private limited liability company is registered in the share register of the company, managed and kept by the board of directors.

What specific conditions need to be met prior to the setting up of the JV is highly dependent on what the JV is intended for and the needs of the parties.

It is common that a JV is formed to own or manage assets from the JV partners in order to create synergies. In such cases, the setting up of the JV will be dependent on such assets being transferred to the JV or the partners agreeing on, for example, management or service agreements with the JV. The formation of the JV could also be dependent on the partners receiving financing from an external creditor on satisfactory terms or approvals from local authorities to engage in the JV. All such potential requirements are usually conditions which need to be fulfilled before entering into a JV agreement.

Setting up a limited liability company under Swedish law is fairly uncomplicated. The partners to the JV will need to pay a sum of SEK25,000 in share capital and register the company with the SCRO and the Swedish Tax Agency. The most common and efficient way of setting up the JV company is by purchasing a dormant shelf company and allocating the shares in said company to the partners pro rata to their financial, or other, contribution.

Contractual partnerships can be structured purely through a partnership agreement and require no capital contribution.

Regarding participation of foreign entities in the JV company, see 3.3 Sanctions, National Security and Foreign Investment Controls.

The main legal document for a purely contractual partnership is the JV agreement. However, depending on the purpose and nature of the JV, this agreement can take many different forms. In its simplest form, it can be a manufacturing, research and development or construction agreement, etc. The main agreement is often supplemented by several supplemental agreements that further regulate the terms and conditions between the parties. There are no requirements as to the form of an agreement governing a partnership based on a contract; the principle of freedom of contract applies.

For an entity-based partnership established through a limited liability company, the founders will need to file an instrument of incorporation and articles of association with the SCRO. Once the company is registered, the partners usually set out their obligations towards each other in a shareholders’ agreement. The shareholders’ agreement governs the ownership of shares and the partners’ rights and obligations. Typically, the shareholders’ agreement contains provisions relating to financing, corporate governance, protection against dilution, transfer restrictions, exit provisions, etc.

The decision-making process in the JV entity would depend on the chosen structure of the JV. For purely contractual partnerships, the parties are able to freely tailor the partnership agreement to their needs. For example, if one partner wishes to have more influence due to a higher financial, or other, contribution to the JV, this can be agreed upon between the partners.

For entity-based JVs, the decision-making body is the general meeting. It is possible for the partners to alter the decision-making process through the issuing of shares with differing voting rights, alterations in the articles of association or through individual shareholder agreements. The board of directors acts as the executive body, responsible for carrying out the decisions made by the general meeting as well as the day-to-day operations of the company, the latter of which is often delegated to a managing director appointed by the board.

The typical way of funding a JV is mainly dependent on its size and capital need. Smaller JVs are usually funded directly with equity by the JV partners through shareholders’ contributions or through issuances of shares in the JV.

If the size and capital need of the JV is more substantial, we usually see a mix of debt and equity. The creditors may be external or the funding may be provided by shareholder loans or conditional shareholders’ contributions. When established parties co-operate through a JV vehicle, there is usually a pre-agreed policy for securing future financing. In general, once the venture is operational, the partners are not obliged to provide additional funding. Instead, they may accept dilution of their ownership or a reduction in influence if they choose not to contribute further. Subsequent financing is often obtained externally through debt arrangements with creditors or by issuing shares or other instruments to investors.

The shareholders’ agreement governing the ownership of the JV usually includes a funding mechanism, such as preferential subscription rights, to incentivise funding. However, it also usually includes anti-dilution clauses or veto rights to prevent a party from squeezing out another party.

Irrespective of whether the JV is set up and conducted through a corporate vehicle or not, deadlocks in decision-making are usually resolved through predetermined mechanisms designed to ensure the expedient resolution of deadlocks and the maintenance of operational continuity. Resolving deadlocks in JVs usually involves negotiation and further delegation to higher management levels, where the parties are encouraged to resolve deadlocks in good faith. In the event that negotiations prove unsuccessful, the matter may be referred to a neutral third party, such as a mediator or arbitrator, for resolution. In some agreements, a designated individual, such as the chairperson, may be granted the authority to cast a deciding vote in order to break the deadlock.

If a deadlock arises regarding a technical or financial matter, the parties may refer the issue to an independent expert for resolution. If the deadlock persists, it may result in the dissolution or termination of the JV. Alternatively, the JV agreement may provide for the incorporation of buy-sell mechanisms, whereby one party can purchase the other’s interest in the venture at pre-agreed prices or at the highest bid presented by the parties. One example of such a mechanism is the use of put and/or call options, whereby one party can require the other to sell or buy their interest in the JV if the parties cannot resolve the deadlock.

When setting up a JV, additional documents besides the JV agreement or shareholders’ agreement are usually required. The type of documents needed are highly dependent on the specific project and the objectives of the JV. Additional documents and agreements may be, for example:

• asset transfer agreements for transferring assets to the JV vehicle (carve-in/carve-out);
• asset management agreements or service agreements regarding personnel, knowledge and other services between the JV vehicle and the JV partners or other parties;
• the business plan and instructions to the board of directors regarding the governance of the JV;
• articles of association and other corporate documentation adapted to the preferred share structure, etc;
• IP licence agreements for the transfer or use of IP rights held by any of the JV partners; and
• property development agreements and lease agreements.

The JV partners’ rights and obligations in a JV in the form of a limited liability company are governed by the shareholders’ agreement. Such agreement usually contains provisions with regards to activity obligations, non-compete provisions, right to information, restrictions on transfer of shares, etc. Even though the Companies Act provides certain rights and obligations for shareholders in a limited liability company, there is usually a need to enhance or adapt such rights and obligations between the parties.

The distribution of dividends in a limited liability company may only be distributed from distributable profits, which include retained earnings, current-year profits, and any other unrestricted equity as reflected in the most recently adopted balance sheet. The company’s restricted equity, such as share capital and statutory reserves, must remain intact. Moreover, the “prudence rule” stipulates that any dividend distribution must not endanger the company’s liquidity or financial stability, considering its financial position and prospective obligations. Generally, dividends shall be distributed equally across shares of the same class and pro rata in relation to the number of shares held by each JV partner. If other allocations are desired, it may be beneficial to issue separate classes of preferential shares with other rights to dividends.

As contractual JVs are not carried out through a corporate vehicle, the distribution of profits of the contractual JV is completely contingent upon the terms of the JV agreement.

The JV partners’ liability for debts and obligations of the JV is dependent on the choice of JV vehicle as set forth in 2.1 Typical JV Structures.

In general, most resolutions subject to voting during a general meeting require a simple majority to be passed. However, for certain resolutions, the Companies Act allows for several general and more specific mandatory minority protection provisions, mostly in the form of a requirement of a larger majority.

As a point of departure, the Companies Act stipulates that all shares within the same class shall have equal rights. Hence, the general meeting is prohibited from passing a resolution that unduly disadvantages one shareholder to the benefit of another shareholder within the same class of shares.

More specific mandatory minority protection provisions in the Companies Act become available depending on the ownership percentage of the minority shareholder. A minority shareholder holding at least one-third of all available shares has a veto right against certain decisions and may stop resolutions pertaining to, inter alia, a change to the articles of association, issuance of instruments and rights, a decrease of the share capital or engaging in a merger or demerger of the company. Furthermore, a minority shareholder holding at least 10% of all outstanding shares has the right to, inter alia, convene an extraordinary general meeting, delay certain resolutions, invoke a distribution of dividends (subject to certain preconditions and limitations), and refuse the discharge of liability for the board of directors. By contrast, a minority shareholder holding less than 10% of all outstanding shares has limited influence over the company. Furthermore, a majority shareholder holding at least 90% of all outstanding shares may initiate a compulsory buyout of the minority, while the minority shareholder may, conversely, require the majority shareholder to purchase its shares.

It is common for JV partners to seek to implement more enhanced governance provisions in relation to the partnership dynamics and the purpose of the JV. This will be regulated in a shareholders’ agreement between the parties and often includes super-majority provisions or veto rights for certain resolutions, rights to nominate a certain number of directors to the board and occasionally restrictions on mandatory minority protections. It should be noted, however, that the enforceability of restrictions on mandatory minority protections is doubtful and may give rise to disputes.

The most prevalent mechanism for dispute resolution is arbitration. This is particularly the case when the joint venture is governed or established in accordance with Swedish law. Arbitration is commonly administered by the SCC (Stockholm Chamber of Commerce) Arbitration Institute. Nevertheless, there are no explicit limitations on the parties’ selection of dispute resolution mechanism or the applicable governing law. In the event that the joint venture is conducted through a Swedish corporate vehicle, such as a Swedish limited liability company or a general or limited partnership, Swedish law will apply with regard to the corporate vehicle. In such a case, the most appropriate choice of law for a JV agreement or a shareholders’ agreement would be Swedish law.

If the JV partners to a Swedish JV fail to agree on the applicable law in the JV agreement, the applicable law shall be determined in accordance with the conflict of laws provisions in the Rome I Regulation. Subject to the circumstances in the individual case, the applicable law will likely be determined by the place of incorporation of the JV vehicle.

Swedish limited liability companies follow a one-tier management system provided by the Swedish Companies Act. The overall management of the company lies with the board of directors, which acts as the executive body and exercises broad powers, while the general meeting is the decision-making body of the company. The general meeting is competent to decide on all matters that do not explicitly fall within the exclusive competence of another corporate body.

Swedish law requires private limited liability companies to appoint at least one director to the board. Normally, directors are appointed by shareholder voting during the general meeting, but Swedish law allows for alternative methods of appointment if explicitly regulated in the company’s articles of association. The parties to the JV may therefore dictate the appointment process depending on the desired structure of the board. Early removal of directors may be initiated by the corporate body or individual who appointed the director, with the only legal requirement being a notice to the board of the removal. Furthermore, Swedish law requires at least half of the ordinary board members, and at least half of the deputy board members, to be residents within the European Economic Area (EEA). However, the SCRO may allow for exemptions to this rule if special circumstances apply.

Each director of the board has equal voting rights, and resolutions are made by simple majority, unless the articles of association provide otherwise. In case of a tied vote, the chairperson has a casting vote. The appointment of directors by the general meeting is also made by simple majority. However, it is common to include in the shareholders’ agreement a right for a JV partner to appoint a certain number of directors and a corresponding obligation for the other shareholders to appoint such directors. Further, it is possible to issue classes of shares with weighted votes, up to ten votes per share, to ensure a greater influence over the board composition and other matters at the general meeting. 

The board of directors is the managing and representative body of the limited liability company, and is responsible for multiple aspects of the business. This includes, but is not limited to, the continuous assessment of the company’s financial position, ensuring proper control of the bookkeeping, and management of funds and other financial affairs. The day-to-day business of the board may be delegated to the managing director appointed by the board. The board may also appoint an authorised signatory, who may be a single director, a managing director or a third party, to represent the JV against third parties. The board reports to the members of the JV through the publishing of annual reports and the general meeting.

Specific obligations of the board of directors that it is not allowed to delegate may arise in a situation where the company’s equity amounts to less than half of its share capital (critical capital deficit). The board is required to draw up a control balance sheet and, if the deficit is confirmed, convene an extraordinary general meeting to decide whether the company should enter into liquidation or not. Individual directors who ignore such duties may be personally liable for any company debts arising after the time period during which the control balance sheet should have been drawn up has passed.

Notwithstanding any concurrent duties that a director may have to the JV participant, the duties toward the JV entity must be carried out with the JV entity’s best interests in mind. Weighing competing duties that a director might have against a JV participant may therefore be a complicated issue, and the director will need to be cautious about participating in matters which may give rise to a potential conflict of interest.

Individual directors may be held liable for damages caused to the JV entity or shareholders due to intentional or negligent conduct while fulfilling their duties. The liability of the directors does not extend to ensuring profitability or making the right business decisions. Personal liability arises only in situations where a director has substantially breached its loyalty commitments to the JV entity and/or the shareholders.

For further information regarding the duties of directors in Sweden, please click here.

The Companies Act stipulates that a director may not take part in certain matters where there is a risk of a conflict of interest. Such matters include agreements between the company and the director, agreements between the company and a third party in which the director has a material interest or an agreement between the company and a legal entity controlled by the director.

It is, however, common for individuals to take seats on both the JV company board and the JV participant board. Hence, conflicts of interest may arise and must be resolved on a case-by-case basis.

When setting up a JV there are a few general issues to consider regarding the use of IP rights. Firstly, IP rights required for the JV to conduct its intended business should be clarified. The parties should then specify which IP rights they are bringing to the JV and agree upon the ownership of such pre-existing IP rights. IP rights should then be assigned or licensed to the JV entity for the duration of the collaboration. Finally, to ensure that the JV can be terminated effectively and to minimise the risk of disputes, a clear exit strategy regarding IP rights should be established.

Furthermore, the parties should agree on what will happen to any new IP developed as a result of the JV. This should include who will own the IP and who has a right to use it.

The JV agreement and the shareholders’ agreement should include provisions to protect confidential information and trade secrets exchanged between the parties. These provisions shall also define the individuals or entities entitled to access such information, and the circumstances in which it may be used within the JV.

Upon termination of the JV, the partners should also consider what happens to the IP rights of the JV. The pre-existing IP rights could be reverted to their original owners and IP rights resulting from the JV could be transferred to either or all partners. IP rights could also be transferred or assigned to third parties but should be subject to the approval of the other JV partners. It is also important that licensing of IP rights should be subject to the continuity of the JV and that the licence will be terminated if the JV is terminated.

The choice between licencing or assigning IP rights to the JV should be determined by the objectives and strategic interests of the owner of the IP rights. If the owner wants to retain control over the IP rights and continue to develop and take profit from the IP rights, it is more beneficial to license the IP rights to the JV. If, however, the owner needs to raise capital or if it is a condition from the JV participants that the JV shall be the owner of the IP rights, it may be more suitable to assign the rights to the JV.

ESG factors are no longer just about reputation or investor branding. They are increasingly embedded in binding legislation, affecting how companies report, conduct due diligence, manage supply chains, and even how they structure partnerships such as JVs. Beyond compliance, ESG now drives access to capital, market positioning and risk management. A failure to align with evolving ESG standards can lead to litigation, loss of financing, or regulatory scrutiny – risks that are particularly pronounced in cross-border or shared-ownership structures.

• Corporate Sustainability Reporting Directive (CSRD, 2022/2464): This requires large companies and listed SMEs to report in detail on ESG matters, using the new European Sustainability Reporting Standards (ESRS). It applies from 2024, expanding the scope and depth of sustainability reporting obligations.
• Corporate Sustainability Due Diligence Directive (CSDDD, 2024/1760): This obliges large companies to identify, prevent and mitigate adverse environmental and human rights impacts across their entire value chains. Significantly, liability can extend to business partners, suppliers and JV structures.
• EU Taxonomy Regulation (2020/852): This establishes uniform criteria for what qualifies as an environmentally sustainable economic activity. Companies in scope of CSRD must report on the taxonomy alignment of their revenue, CapEx and OpEx.
• Sustainable Finance Disclosure Regulation (SFDR, 2019/2088): This imposes ESG disclosure requirements on financial institutions such as asset managers, banks and pension funds – indirectly influencing investee companies and JV structures that seek capital.
• EU Regulation on Deforestation-Free Products (2023/1115): From December 2024, companies placing certain commodities (eg, timber, coffee, soy, cocoa) on the EU market must ensure they are not linked to deforestation. This may apply to Swedish companies indirectly involved through JV supply chains.

These developments raise important considerations for Swedish companies engaged in JVs. While the JV itself may or may not fall within the direct scope of new EU rules, the legal and reputational exposure of the JV partners is increasing. It is no longer sufficient to manage ESG risks within internal operations – compliance now extends to shared entities and external partners. Swedish JV participants should:

• assess whether the JV meets the thresholds for CSRD or CSDDD obligations;
• clarify which entity or partner bears responsibility for ESG reporting and due diligence;
• allocate ESG risks explicitly in shareholder and JV agreements; and
• align ESG governance frameworks, codes of conduct and grievance mechanisms across JV partners.

The JV arrangement may come to an end in a multitude of ways which may be envisaged by the parties or due to disputes or poor performance of the JV. The JV participants usually have an exit strategy regulated in the JV agreement. A few common ways for a JV arrangement to come to an end are outlined below.

• The intended purpose of the JV has been fulfilled and the JV participants agree to sell the JV through a trade sale or IPO.
• One of the JV participants wishes to end the JV while the other participant(s) wishes to continue the business of the JV and redeems the shares.
• A deadlock situation has occurred and has not been resolved.
• The JV is liquidated by mutual decision between the JV participants.
• The JV is compulsorily liquidated or enters into bankruptcy due to poor financial performance.

The matters to be dealt with on termination of the JV depend on the aforesaid reasons for the termination. However, general issues typically arise, such as allocation of assets and consideration, settlement of debts and liabilities, allocation of IPRs and termination of employees and consultants. 

The JV participants are able to freely transfer assets to the JV by way of a shareholder contribution without any consideration from the JV; however, this is subject to tax considerations. If any assets are to be transferred from the JV to the JV participants there are a few issues to consider from a corporate law perspective.

If the JV, being a limited liability company, transfers assets to the JV participants without consideration or with a consideration below fair market value, this may be considered unlawful value transfer. In such cases, the transfer may be considered a distribution of dividends in kind and certain equity protection provisions shall be considered. A distribution of dividends may only be made if there is sufficient unrestricted equity in the JV to cover the value of the distribution and if the distribution is justifiable given the financial health of the JV.

To avoid any disputes between the JV participants upon the termination of the JV it should be clear from the JV agreement whether or not the ownership of assets used in the JV will remain with a JV participant or if it will be owned by the JV. If the JV participants are unable to agree on the distribution of assets of the JV and the JV enters into liquidation, an independent liquidator will be responsible for liquidating the assets and distributing the proceeds to the participants pro rata to their ownership in the JV.

A general principle of the Companies Act is that a shareholder or JV participant will have the right to freely transfer its shares but, at the same time, will not be obligated to transfer its shares. There are a few exceptions to this general principle ‒ for example, a majority shareholder holding at least 90% of all outstanding shares may initiate a compulsory buyout of the minority, and the minority shareholder may, conversely, require the majority shareholder to purchase its shares.

The general principle in the Companies Act is, however, optional, and the JV participants usually agree on an exit strategy in the JV agreement when entering into the JV. Such exit provisions usually contain both transfer restrictions and drag-along rights to be enforced in certain situations or by a certain majority, although it should be noted that overly restrictive transfer restrictions are generally prohibited. In order to avoid deadlocks, the JV agreement may include reciprocal drag- and tag-along rights that may be enforced in a trade sale, IPO or other transfers of the JV or its assets. In order to ensure control over the JV and avoid unwanted new JV participants, the JV agreement usually includes a right of first refusal for the non-transferring party to acquire the shares instead of allowing a new shareholder.

The JV agreement and the exit provisions therein shall always be tailored to suit the needs and intentions of the JV and the JV participants.