Regulation of Shareholder Exits in Closely Held Companies – Reflections from Sweden

Almlöf Hanna ()
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Almlöf Hanna: LL.D. Assistant professor at Linköping University, Sweden. Research fellow at CeFEO — Centre for Family Entrepreneurship and Ownership and the Ratio Institute. This study has been enabled through generous financial support by the Ragnar Söderberg Foundation, Jan Wallander and Tom Hedelius Foundation, and Tore Browaldh Foundation.Sweden

European Company and Financial Law Review, 2022, vol. 19, issue 2, 175-202

Abstract: The success of closely held companies largely depends on a well-functioning collaboration between the shareholders. Split ambitions, differenced targets and conflicts among owners can create a need to end the collaboration. The owners need a plan for a structural business partner divorce, i. e., regulation of shareholder exits. This study analyze full and partial shareholder exits with the aid of an interview study with eighteen legal advisors. Through a grounded approach to analysis, and with aid of the Nvivo software, different exit situations are identified and categorized. Exit strategies can be regulated in shareholders’ agreements, in the articles of association, or by legislation. The later alternative, correctly constructed, could reduce transactions costs for the shareholders, as the legislation can serve as a standard contract. This study assesses to what extent the Swedish Companies Act functions as a standard contract for closely held firms on the topic of exit regulation. The study reveals that the Swedish Companies Act is of little help. Instead, the cost of contracting to regulate exits in shareholders’ agreements is placed on the parties. This calls for legislative change.

Date: 2022
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DOI: 10.1515/ecfr-2022-0007

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