BANKRUPTCY ACT (1987:672)

Chapter 1 Introductory provisions Section 1 By means of bankruptcy, all creditors collectively and compulsorily take the total assets of a debtor for payment of their claims. During bankruptcy the assets of the bankruptcy estate are taken into possession on behalf of the creditor. Section 2 A debtor who is insolvent shall following his own or a creditor’s petition be declared bankrupt, unless otherwise provided. Insolvency means that the debtor cannot pay his debts when due and that this incapacity is not merely temporary. Section 3 The administration of a bankruptcy estate is managed by one or more administrators. The administration of the estate is subject to the supervision of a supervisory authority. Section 4 An insolvent bankruptcy estate can be declared bankrupt. The provisions of this Act concerning debtors shall in such cases apply to the bankruptcy estate. Section 5 When applying this Act, a legal charge on real property is equated to other special priority right applicable to the property and not based on an execution. The provisions apply concerning creditors with rights of pawn pledge of movable property also apply as regards debtors’ entitlement to retain movable property as security for a claim (lien). (Act 1994:481) Section 6 If in some other act there is a provision deviating from this Act, that provision applies.

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As regards the applicability of the Code on Judicial Procedure, provisions are laid down in the following.

Chapter 2 Petition for bankruptcy and bankruptcy decisions, etc. Bankruptcy petitions etc. Section 1 A petition for bankruptcy are made in writing to the district court where the debtor should answer in a contentious case relating to liability to pay in general. The petition documents should be personally signed by the petitioner or the representative of the petitioner. The applicant shall state and prove the circumstances whereby the court is competent, if these are not known. A petition should be rejected if it does not indicate which district court is competent and the petitioner does not comply with a direction to rectify the deficiency. Section 2 If a bankruptcy petition has been made at a district court that is not competent, the court should immediately send the documents in the matter to the district court which, according to what the documents indicate, is competent and notify the petitioner. The petition shall be considered made when the petition documents are delivered to the former district court. Section 3 If the petition is made by the debtor, the petition documents should enclose a signed schedule of the assets and debts of the estate signed by the debtor with information of the name and postal address of every creditor together with accounts and other documents affecting the estate. If an estate of a deceased person or part-owner of an estate of a deceased person applies for the estate to be declared bankrupt, the petition documents should include the estate inventory of the deceased person or, if registration has taken place, information of the date of registration. If an estate inventory has not been prepared, information on the name and address of every part-owner of the estate shall be provided. (Act 1995:793) Section 4 If the petition is made by a creditor, he should in the petition provide information about his claim and the circumstances

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generally upon which he bases the demand. He should also enclose the original or copies of those documents he wishes to refer to. The petition document and those documents enclosed with it must be submitted in duplicate. Section 5 A petition shall be rejected if, in the respects referred to in Section 3 or 4 or otherwise, it is so deficient that it cannot form a basis for determining the matter on the merits and the petitioner does not comply with a direction to rectify the deficiency. Section 6 If the claim of a creditor is confirmed by a court or by the enforcement authority under the Act on Orders for Payment and Assistance (1990:746), this shall be accepted as a basis for entitlement to request that the debtor be declared bankrupt even if the determination has not entered into final legal force. However, this does not apply if a court has ordered that the determination must not be enforced. A claim which has been determined by an arbitration award shall also be accepted, if the arbitration award may be enforced under Chapter 3, Section 15 or 16 of the Enforcement Code and a court has not issued such an order as is referred to in Section 18 of the said chapter. In cases other than those referred to in the first and second paragraphs, the creditor shall prove his entitlement to request that the debtor be declared bankrupt. (Act 1991:857) Evidence of insolvency Section 7 Information from the debtor that he is insolvent shall be accepted unless there is special reason not to do so. Section 8 Unless otherwise shown, a debtor is deemed to be insolvent when, in the event of enforcement under Chapter 4 of the Enforcement Code, within six months before the bankruptcy petition, it transpired that he did not have assets for full payment of the claim executed. This also applies if the debtor has declared that he has stopped payments. Section 9 A debtor, who is or within one year prior to the bankruptcy petition has been, liable to keep accounts under the Bookkeeping Act (1976:125) shall, unless otherwise shown be deemed to be insolvent, if :

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1. the debtor has been requested by a creditor to pay a clear and due debt but failed to do this within one week and 2. the creditor requests the debtor’s bankruptcy within three weeks thereof and the debt is still not paid. The request by the creditor shall contain information that a petition for bankruptcy may ensue. The request should be served on the debtor. Service in accordance with Section 12 of the Service Act (1970:428) may only take place if there is reason to assume that the debtor has absconded or in some other way is in hiding. Impediments to bankruptcy Section 10 A creditor is not entitled to have a debtor declared bankrupt, if: 1. the creditor has a secure charge or collateral equivalent thereto in property belonging to the debtor, 2. a third party has presented secure collateral for the creditor’s claim and the bankruptcy petition conflicts with the conditions for the provision of the collateral, 3. the creditor’s claim is not due for payment and secure collateral is offered by a third party. Collateral presented or offered by a third party also means a guarantee if the guarantor is liable as if it was his own debt. Section 10 a If a company reconstruction is proceeding under the Company Reconstruction Act (1996:764), a bankruptcy petition by a creditor shall be declared stayed pending the cessation of the company reconstruction, if the debtor so requests. However, if there are special reasons to fear that the debtor will take or fail to take a certain measure and thereby present a risk to the rights of the creditor, the court may decide to declare the debtor bankrupt. Before such a decision is issued, the person making the reconstruction shall be afforded an opportunity of expressing his views. (Act 1996:775) Security measures Section 11 If there is probable cause to approve a bankruptcy petition and if there is reason to fear that the debtor will conceal property, the court may, if there is special reason, make an order of attachment of the debtor’s property pending the determination of the petition.

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As regards such a security measure, the provisions applicable to attachment granted for debts under Chapter 15 of the Code on Judicial Procedure, apply unless otherwise provided by this Act. However, this does not apply to the provision in Chapter 16, Section 15, second paragraph of the Enforcement Code. The court may grant exemptions from the attachment granted. Section 12 If there is probable cause to approve a bankruptcy petition and there is reason to fear that the debtor by travelling abroad will avoid an obligation or contravene a prohibition applicable to bankruptcy under this Act, the court may, if there is special reason for so doing, prohibit the debtor from travelling abroad pending the determination of the application. If such a travel prohibition is issued, the debtor may, in conjunction therewith or later, be ordered to surrender his passport to the enforcement authority decided by the court. If the debtor does not have any passport, a prohibition of the issue of passport to him may be issued. The debtor may be detained if a travel prohibition is clearly insufficient. If the debtor is a legal entity, the first paragraph is also applicable to the members of the board, managing director, partners and liquidators who have resigned or been released from office up to one year before the delivery of the bankruptcy petition to the district court. As regards such security measures as are referred to in this section, the provisions of Chapter 15, Sections 5, 6 and 8 of the Code on Judicial Procedure apply unless otherwise provided by this Act. A security measure cannot be impeded by the presentation of collateral. Nor can a security measure granted be revoked for this reason. The expenses of detention are borne by the State. Section 13 Issues concerning security measures under Section 11 or 12 are dealt with on the request of a creditor. Before the court issues a decision in the matter, the debtor shall be given an opportunity to express his views, if this is reasonably possible. The court may hold a hearing for determination of the matter of security measures. The debtor and creditor shall be summoned to the hearing. The summons should be served. As regards detention, the provisions of Chapter 6, Section 10, third paragraph and Section 11 apply.

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A decision concerning travel prohibition or the obligation of the debtor to surrender his passport shall be served on the debtor. Determination of bankruptcy petition etc. Section 14 In the event that a debtor’s bankruptcy petition is dealt with, the court shall immediately determine the petition. However, the bankruptcy application of the debtor shall be determined at a hearing, if: 1. having regard to the information available or on some other ground there are special reasons not to accept the information about the insolvency of the debtor or 2. the application relates to the estate of a deceased person which has not been placed under the administration of an estate administrator and the application has not been made by all beneficiaries. The hearing shall be held within two weeks of the petition being delivered to the court. If there are special reasons, it may be held later but within one month at the latest. The debtor shall be summoned to the hearing. In the cases referred to in the second paragraph, item 2, the part-owners of the estate who are not parties to the petition should also be summoned. The petition may be finally determined even if the debtor fails to attend the hearing. He should be informed of this in the summons. A bankruptcy petition referred to in the second paragraph, item 2, shall be declared stayed if a request is made that the property of the estate of the deceased should be surrendered to administration by an estate administrator. If the property of the estate of the deceased is surrendered to administration by an estate administrator, the bankruptcy petition lapses. Section 15 A summons referred to in Section 14, third paragraph shall be served. The summons may be served in accordance with Section 12 of the Service Act (1970:428) only if there is reason to assume that the debtor has absconded or in some other way is in hiding. Service in accordance with Section 15, first paragraph of the Service Act may also be effected when the debtor is staying in a known place abroad if service cannot otherwise be effected in Sweden and the court, having regard to the circumstances, considers that it is not reasonable to demand that service be executed abroad. Section 16

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If a creditor's bankruptcy petition is taken up, the court shall list a hearing for determination of the petition. The petition shall be held within two weeks of the petition being delivered to the court. If there are special reasons, it may be held later, but within six weeks at the latest. The parties shall be summoned to the hearing. The parties shall be informed in the summons about the sanction for non-attendance prescribed by Section 19. In the summons to the debtor, he shall be directed to answer the bankruptcy petition at the hearing. The summons shall also state that the debtor does not need to attend provided he in advance consents in writing to the petition and the court does not specially notify him that the hearing will nevertheless be held. Section 17 Section 15 applies to questions concerning summonses under Section 16. The documents submitted by the creditor shall be served on the debtor at the same time as the summons. If service on the debtor takes place in accordance with Section 15 of the Service Act (1970:428), the court may order that the property of the debtor be placed under special care. The expense for the care shall be paid for by the debtor. Section 18 If the debtor prior to the hearing consents to the bankruptcy petition of a creditor, the court shall immediately consider the petition. However, if the court, having regard to the available information or on some other ground considers that there are special reasons against assuming the insolvency of the debtor, the bankruptcy petition shall be considered at a hearing. The court shall immediately notify the debtor of this. If the question of declaring a debtor into bankruptcy is not considered at the hearing, the hearing shall be adjourned and the creditor immediately notified of this. Section 19 If the creditor fails to attend the hearing the matter shall be rejected unless the debtor consents to the petition. The petition may be determined finally even if the debtor fails to attend the hearing. Section 20

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A hearing where the question of declaring the debtor bankrupt shall be determined may be postponed at the request of a party if

there are special circumstances. However, an adjournment should not be ordered if the applicant opposes this, unless there are extraordinary reasons. An adjournment for longer than four weeks must only be made if it is necessary. Section 21 If several bankruptcy petitions against the same debtor are pending in court simultaneously and if a petition other than that received first is approved, the bankruptcy decision shall be deemed to be based on the petition received first as regards issues that are dependent upon the time of the bankruptcy petition. Section 22 A bankruptcy petition may not be withdrawn after a decision of bankruptcy has been made. However, even if the debtor himself has applied for bankruptcy or consented to the bankruptcy petition of a creditor, a superior court may revoke the decision if the debtor on his appeal shows that he is solvent. Section 23 As regards the question of entitlement to compensation for expenses on determining the bankruptcy petition of a creditor, the relevant parts of Chapter 18 of the Code on Judicial Procedure apply. However, the provisions of Chapter 18, Section 2 shall not apply. Notwithstanding Chapter 18, Section 14, the creditor may in the bankruptcy make claims for compensation for such expenses in the order applicable to other claims. Measures on bankruptcy decisions, etc. Section 24 When a decision on bankruptcy is made, the district court shall: 1. immediately decide the date for the meeting at which the debtor shall make an estate inventory oath (meeting for the administration of oaths), 2. appoint an administrator as soon as possible, 3. summons the debtor, administrator, supervisory authority and the creditor who presented the bankruptcy petition to the meeting for the administration of oaths. Public notice of the bankruptcy decision shall be given immediately. Other debtors are summoned to the meeting for the administration of oaths by the public notice. The summons of the debtor under the first paragraph, item 3 shall be served.

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If a superior court revokes a bankruptcy decision, the district court shall immediately give notice of the decision of the superior court. Property in the estate shall be restored to the debtor to the extent that it is not required to pay the bankruptcy expenses and other debts that the estate has incurred. Transfer of a bankruptcy Section 26 If following the issue of a bankruptcy decision there are extraordinary reasons for dealing with this bankruptcy at another district, the court may, following consultation with the district court at the other district, decide that the bankruptcy should be dealt with by the latter court.

Chapter 3 Effects of bankruptcy The debtor’s loss of power of control Section 1 Following the issue of a bankruptcy decision, the debtor may not control property belonging to the bankruptcy estate. Nor can he enter into obligations which could be claimed in the bankruptcy. Section 2 A legal act between the debtor and some other person taken not later than the day following that on which the public notice of the bankruptcy decision was inserted in Post och Inrikes Tidningar (Official Gazette) shall, notwithstanding that provided in Section 1, apply unless it can be shown that the other person knew of the decision or that circumstances existed whereby he had reasonable cause to assume that the debtor was declared bankrupt. The transfer of or other disposal of property by reason of this shall nevertheless, if the bankruptcy estate without unreasonable delay so claims, be annulled on the estate compensating the other party for what he has paid together with necessary or beneficial expense. If a person satisfies an obligation towards the debtor after the date stated in the first paragraph, this shall be credited to him if the circumstances indicated that he was in good faith. Notice of termination or other similar legal act taken against or by the debtor after the said date shall apply if the circumstances indicate that the other party was in good faith and it is clearly unreasonable that the legal act should not be valid against the bankruptcy estate.

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There are special provisions on the effect of the debtor’s transfer or pledging of negotiable promissory notes, share certificates or certain other comparable instruments. Property included in a bankruptcy estate Section 3 A bankruptcy estate includes, to the extent not otherwise provided by Section 2, all property belonging to the debtor when the bankruptcy decision was made or that accrues to him during the bankruptcy and that are such that they may be attached. The bankruptcy estate also includes the property that can be brought into the estate by recovery under Chapter 4. Section 4 In order to claim the wages of the debtor and benefits equivalent thereto exceeding the reserved amount, the administrator may on behalf of the bankruptcy estate request attachment by the enforcement authority under Chapter 7 of the Enforcement Code. Chapter 7, Section 19, second paragraph of the Enforcement Code provides that attachment of wages in progress at the commencement of the bankruptcy may continue for the account of the bankruptcy estate. (Act 1995:308) Section 5 The debtor is entitled to receive from the bankruptcy estate such property which in accordance with Chapter 5, Sections 1, 2 and 4 of the Enforcement Code is exempt from attachment. Instead of applying Chapter 5, Section 1, item 7 of the Enforcement Code, if no other means of support exists, necessary maintenance may be paid from the bankruptcy estate to the debtor and his family or other person entitled to maintenance for one month from the date when the bankruptcy decision was issued or, if there are extraordinary reasons for so doing, for a longer period. In the bankruptcy of a deceased person, the surviving family of the deceased have such benefits as are referred to in the first paragraph. Instead of the second paragraph, Chapter 18, Section 5, second paragraph of the Inheritance Code applies. Section 6

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Disputes between the administrator and the debtor or other person on issues referred to in Sections 4 and 5 shall be determined by the supervisory authority on the application of the administrator, a creditor, the debtor or a person entitled to maintenance. The authority shall take into account expressions of views to the extent necessary for the determination. The decision of the authority applies immediately even if it is appealed against.

The decision shall be altered following the application if later circumstances made known or an altered situation give reason for so doing. The decision of the supervisory authority in a matter referred to in the first paragraph may be appealed against by a person whose rights are affected by the decision. The provisions of the Enforcement Code on appeals against decisions on attachment of wages apply to matters concerning such an appeal. (Act 1995:793) Attachment on bankruptcy Section 7 Following the issue of a bankruptcy decision, property belonging to the bankruptcy estate may not be attached for claims against the debtor unless otherwise provided by Chapter 7, Section 19, first paragraph of the Enforcement Code. Attachment made in contravention of this is ineffective. Nevertheless, bankruptcy property to which a legal charge for a certain claim applies may be attached for the claim. (Act 1996:132) Section 8 If attachment of the debtor has taken place before a decision of bankruptcy is issued, enforcement shall proceed notwithstanding the bankruptcy unless otherwise provided by the second or third paragraph. If the applicant for attachment did not have a legal charge and if the priority right that he has attained by the attachment should be annulled, a sum, which according to the Enforcement Code would have been payable to the applicant for attachment or other creditor without a legal charge, shall be reported to the administrator. At the request of the administrator, enforcement shall be postponed if it is necessary to protect the rights of the creditors or if there are other extraordinary reasons for so doing. Postponement may also be requested by a creditor whose entitlement depends thereon. If an auction is scheduled, the bankruptcy estate shall pay the expense wasted by reason of the postponement. If the applicant for attachment did not have a legal charge and if the priority right that he has attained by reason of the attachment is annulled, the attachment shall also be annulled if the administrator requests this before the property has been sold. Bankruptcy litigation, etc. Section 9

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If litigation is proceeding between the debtor and some other person concerning such property as belongs to the bankruptcy estate, the bankruptcy estate may take over the debtor’s action. If

the estate, although it has been notified of the litigation, does not take over the debtor’s action, the property shall be deemed not to belong to the bankruptcy estate. The property may not, while the bankruptcy is proceeding, be attached for a claim that can be made in the bankruptcy. If the bankruptcy estate takes over the debtor’s action, that prescribed by the Code on Judicial Procedure apply to the person to whom the transfer has been made in accordance with Chapter 13, Section 7 of the same Code concerning the obligation of the estate to pay for litigation expense. If an action is pursued against the debtor concerning a claim that may be made in the bankruptcy, the bankruptcy estate may enter into the litigation on the side of the debtor. The debtor shall notify the court about the bankruptcy in those cases referred to in the first and second paragraphs. The court shall notify the bankruptcy estate of the litigation. In cases concerning orders for payment and assistance, these provisions regarding the court apply instead to the enforcement authority. (Act 1991:857) Section 10 If the administrator considers that an offer of settlement concerning an uncertain or contentious asset should be accepted, the debtor may himself, subject to an obligation to provide reports to the bankruptcy estate, pursue the dispute if he provides security for that tendered by the settlement.

Chapter 4 Recovery by bankruptcy estate Introductory provisions Section 1 Recovery by a bankruptcy estate may, at the request of the estate, take place in accordance with that stated in this chapter. However, there can be no recovery of: 1. payment of tax or other fees referred to in Section 1 of the Priority Rights regarding Taxes Act (1971:1072) if the debt is due for payment, 2. payment of or priority right to maintenance allowance in accordance with the Marriage Code or the Code on Parents, Children and Guardians if the amount of the allowance was due for payment and the person entitled to maintenance has not been favoured in an improper manner.

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Section 2 By `day of grace´ is meant the day when the petition to declare the debtor bankrupt was delivered to by the district court. If a decision has been issued concerning a company reconstruction in accordance with the Company Reconstruction Act (1996:764), `day of grace´ means instead the date for the petition for company reconstruction, provided that the bankruptcy petition has been made during the company reconstruction or within three weeks of the court deciding that the company reconstruction should discontinue. If an application concerning debt reconstruction in accordance with the Debt Relief Act (1994:334) has been made, `day of grace´ means instead the day of that application, provided that the bankruptcy petition has been made within three weeks of the matter of debt reconstruction being determined. If the estate of a deceased person has been surrendered to administration by an estate administrator, 'day of grace' means the day of application for this, provided that the estate administrator was appointed up to three months before the date which would otherwise be regarded as a day of grace. (Act 1996:775) Section 3 Close relative of the debtor means a person who is married to the debtor or is a sibling or is a direct descendant or ancestor of the debtor or is related trough marriage to him by a direct descendant or ancestor or where one is married to the other’s sibling as well as a person who in another way is particularly close to the debtor. Furthermore, close relative of a businessman or a legal entity means: 1. a person who has a substantial joint interest with the businessman or the legal entity based on entitlement to a share or financial interest equivalent thereto, 2. a person who not alone but together with a close relation to him has such a joint interest with the businessman or the legal entity mentioned under item 1, 3. a person who, by a management position, has a decisive influence on the operation conducted by the businessman or the legal entity, 4. a person who is a close relative of someone who is a close relative according to items 1 to 3. Section 4

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A disposition of real property is not considered to have taken place before a land registration application is made. Preconditions for recovery Section 5 A legal act, whereby a particular creditor has in an unfair manner been favoured in preference to others or whereby the property of the debtor has been concealed from the creditors or his debts have been increased, is annulled if the debtor was or by the procedure, solely or in combination with another factor, became insolvent and also the other person knew or ought to have known of the insolvency of the debtor and the circumstances making the legal act improper. A close relative of the debtor shall be considered to have such knowledge stated in the first paragraph unless it is shown that he probably neither knew nor ought to have had such knowledge. If the legal act took place more than five years before the day of grace, it is only annulled when it applies to a close relative of the debtor. Section 6 A gift is annulled if it has been completed up to six months before the day of grace. A gift completed before then but up to one year or, when it has been made to someone who is a close relative of the debtor, up to three years before the day of grace, is annulled unless it can be shown that the debtor after the gift retained property that could be the subject of execution and which clearly met his debts. The first paragraph also applies to sales, exchange or other agreement if, having regard to the disproportion between the consideration of the respective parties, it is manifest that the agreement was partially in the nature of a gift. Support and customary gifts that were not disproportionate to the financial circumstances of the debtor are exempt from recovery under this section. Section 7

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A division of property between the debtor and his spouse or the estate of a deceased spouse, whereby the debtor has relinquished his entitlement to a considerable extent or declined property in respect of which a claim against him has been allocated to his portion, is annulled to a corresponding extent, if the division of property document has been delivered to the court up to three years before the day of grace and it is not shown that the debtor after the division of property retained property that could be the subject of execution and which clearly met his debts.

That provided in the first paragraph concerning the case where the debtor has declined property by means of a claim against him being allocated to his portion does not apply if the property constituted the joint home or household chattels of the spouses and was taken over by the other spouse by virtue of the provisions in Chapter 11, Section 8 of the Marriage Code. Section 8 The payment of wages, fees or pension, made up to six months before the day of grace and which obviously exceeded what could be regarded as reasonable having regard to the work performed, the profitability of the operation and circumstances in general, is annulled at a sum corresponding to the excess. If the payment was made before then but up to one year or, when it has been made to someone who is a close relative of the debtor, up to three years before the day of grace, it is annulled to a corresponding extent unless it is shown that the debtor after payment retained property that could be the subject of execution and which clearly met his debts. Section 9 A transfer of resources to a pension fund, which occurred up to six months before the day of grace and which has meant that the fund obtained an access of capital, is annulled by a sum corresponding to the excess. If the transfer occurred before this but up to one year or, where the measure materially favoured the debtor or a close relative of his, up to three years before the day of grace, it is annulled to a corresponding extent unless it is shown that the debtor after payment retained property that could be the subject of execution and which clearly met his debts. A transfer to a pension fund in cases other than those mentioned in the first paragraph is annulled if the transfer occurred up to three months before the day of grace. If the transfer substantially favoured the debtor or a close relative of his, it is also annulled if the measure occurred before then and up to two years before the day of grace and it cannot be shown that the debtor either was, or by the measure became, insolvent. A transfer of resources to a staff fund is annulled if the transfer occurred up to six months before the day of grace. If the transfer took place before that but up to one year or, where the measure materially favoured the debtor or a close relative of his, up to three years before the day of grace, it is annulled unless it is shown that the debtor after the transfer retained property that could be the subject of execution and which clearly met his debts.

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There are provisions contained in Section 117 of the Insurance Contracts Act (1927:77) concerning entitlement to demand the return of insurance premiums, etc. in certain cases. Section 10 Payment of a debt that occurred up to three months before the day of grace and which was made with something other than customary means of payment, prematurely or in an amount that has considerably caused the deterioration of the financial position of the debtor, is annulled unless it can nevertheless be considered ordinary having regard to the circumstances. If the payment was made to someone who is a close relative of the debtor before then but up to two years before the day of grace, it is annulled unless it can be shown that the debtor neither was, nor by the measure became, insolvent. The provisions of the first paragraph concerning recovery of payments also apply when set-off has taken place, if the creditor was not entitled to a set-off in the bankruptcy in accordance with Chapter 5, Section 15 or 16. Section 11 Payment for a bill of exchange or a cheque is annulled in those cases referred to in Section 10 only to the extent that the person receiving the payment was entitled to refuse to do so without losing the right to the bill of exchange or the cheque against some other person against whom he could have received cover. If recovery of a payment is excluded as a consequence of that stated in the first paragraph, the person who would have borne the final loss if payment had not been made is liable to pay compensation under the same preconditions as had applied for recovery, if payment had been made to him as creditor. Section 12 Security that the debtor has transferred up to three months before the day of grace is annulled unless it was provided when the debt was created or was transferred without delay after the creation of the debt. If the security was transferred to a person who is a close relative of the debtor before then but up to two years before the day of grace, it is annulled in accordance with the conditions stated unless it is shown that the debtor neither was, nor by the measure became, insolvent. Other measures by the debtor or creditor intended to secure the rights of the creditor are equated with a transfer of security. When a precondition for security is registration, delay referred to in the first paragraph shall be considered to exist if the application

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has been made later than on the day of registration first occurring two weeks after the creation of the debt. Section 13 A priority right or payment which a creditor has gained by attachment is annulled if the priority right occurred up to three months before the day of grace. If attachment occurred for the benefit of a person who is a close relative of the debtor, the priority right or payment is also annulled if the priority right arose before then but up to two years before the day of grace and unless it is shown that the debtor either was, or by the measure became, insolvent. The provisions of the first paragraph do not apply if the priority right arose on the exchange of property which was attached up to three months before the day of grace or, in a case referred to in the first paragraph, second sentence, up to two years before the day of grace. (Act 1994:481) Effect of recovery Section 14 On recovery, the property which the debtor has provided is restored to the bankruptcy estate. A person who has provided the debtor with some consideration for the property is entitled to the return of what he provided. However, this does not apply to such consideration as has not been for the benefit of the estate if the person providing the consideration knew or ought to have known that the intention of the debtor was to deprive the creditors of this. If the property which should be recovered in accordance with the first or second paragraph is not retained, compensation for its value shall be paid. If recovery of specific property involves special inconvenience for the person obliged, he may be allowed to pay compensation in place of the property. Section 15 A person who is liable to restore property shall also pay the proceeds attributable to the period after recovery was claimed. If the property constitutes a sum of money or if compensation is paid for the value of property, interest is paid in accordance with Section 5 of the Interest Act (1975:635) until and including the day when the liability to repay the amount or pay compensation arises and in accordance with Section 6 of the Interest Act for subsequent periods.

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If a person should restore property on recovery in accordance with Section 5, he may be declared liable to pay also the proceeds attributable to the period from when he received the property

until recovery was claimed. Interest for such time is computed in accordance with Section 5 of the Interest Act. A person who has spent necessary or beneficial expense on the property recovered is entitled to receive compensation for that unless there are special reasons against it. If security based on registration is recovered, the registration document shall be restored or if it is required as evidence for the debt, made available for exchange or mortification of the registration. If this cannot be done compensation should be paid. Section 16 If a third party has presented property as security for an obligation of the debtor and had the security returned after the debtor has satisfied the obligation, the person who has returned the security is not liable on recovery to restore more than that exceeding the value of the security if he cannot obtain its return and, when he returned the security, neither knew of nor ought to have known of the insolvency of the debtor. A third party is liable to the creditor or, if the bankruptcy estate requests, direct to the estate to once again provide the security or compensate for its value on the same preconditions as would have applied for recovery of the satisfaction if it had instead been made to him. The first and second paragraphs also apply when a third party has entered into a guarantee for the obligation of the debtor and the debtor has satisfied the obligation. Section 17 The obligation of some person other than the bankruptcy estate in accordance with Section 14, 15 or 16 to deliver property or pay compensation, return or make available a registration document or once again present security or a guarantee may be adjusted if there are extraordinary reasons. Section 18 If the property that may be recovered has been transferred to another, the bankruptcy estate has the same right of recovery against that person if he knew or ought to have known of the circumstances forming the basis of that entitlement. Actions for recovery, etc. Section 19 The administrator may demand recovery by: 1. instituting proceedings in a general court,

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2. making an objection to a lodged proof of debt or in connection with distribution proceedings, contest the claim in other procedures concerning payment or priority rights in the bankruptcy, or 3. making an objection against another application presented in litigation against the bankruptcy estate. If the administrator does not wish to demand recovery and a settlement in the matter is not made, a creditor may require recovery by instituting proceedings in a general court. No special measure is required for annulment of priority rights gained through execution. (Act 1994:481) Section 20 A recovery action in a general court may be instituted within one year of the day of the bankruptcy decision. An action may also be instituted within six months of when grounds for doing so became known to the bankruptcy estate. If the debtor has disposed of real property or if there is a question of annulment of a division of property, an action may also be instituted within six months of the date when land registration was applied for or the division of property document was submitted to the court. A creditor conducting proceedings is responsible for litigation costs but is entitled to obtain compensation for these from the estate, to the extent that the expense covered the benefit accruing to the estate by the litigation. Section 21 A person who by reason of recovery obtains an entitlement in the bankruptcy need not lodge proof of claim. If distribution has taken place, he is, when making the return to the estate, entitled to deduct what he ought to have received as a share in accordance with a previous proposal for distribution had the claim then been known. In the event of later distribution, the share is computed for what may remain of such a claim.

Chapter 5 Claims in bankruptcy Claims which are recognised Section 1 In bankruptcy, only claims arising before the issue of the bankruptcy decision may be recognised unless provided differently by Chapter 3, Section 2.

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A claim may be recognised in bankruptcy even if it is dependent upon conditions or is not due for payment. Section 2 In bankruptcy, claims for wages, fees or pensions are not recognised to the extent that the claim manifestly exceeds that which may be regarded as reasonable having regard to the work done, profitability of the operation and circumstances generally. A person who in accordance with Chapter 4, Section 3 is to be regarded as a close relative of the debtor cannot make a valid claim beyond the extent considered reasonable having regard to that stated in the first paragraph and may not in any case refer to a period prior to one year before the bankruptcy petition was delivered to the district court. Section 3 A claim for pension may not be recognised as valid to the extent that it is paid by a pension fund. Claims subject to joint liability to pay Section 4 If several persons have undertaken, or in some other way incurred, joint liability to pay and if the debt is partially paid, the distribution for the remaining claim of a creditor in the bankruptcy of a jointly liable debtor is computed on the amount of the claim without deduction for repayments that a joint debtor has made: 1. if the repayment took place following composition, bankruptcy or other distribution of an insolvent joint debtor’s estate, 2. if it took place up to three months before the day of grace referred to in Chapter 4, Section 2, or 3. if and to the extent that the repayment involved entitlement for the joint debtor to reclaim the amount from the bankrupt debtor (right of subrogation). However, if the bankrupt debtor has satisfied a subrogation demand of a joint debtor and recovery of this has not taken place a deduction shall be made. If the distribution exceeds the remainder of the creditor’s claim, the excess shall be distributed in accordance with the liability of the debtors inter se for the claim.

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Chapter 2, Section 20 of the Trading Partnership and Sole Trader Act (1908:1102) prescribes how distribution of a claim against a trading partnership is computed in the bankruptcy of a partner. Section 5 When payment has been made of a claim in respect of which several persons are jointly liable and distribution to the creditor should in accordance with Section 4 be computed at a sum greater than the remaining claim, the distribution is computed jointly for the creditor and a joint debtor who has a subrogation claim. The creditor has priority for payment over the joint debtor. If several joint debtors are entitled to payment of that remaining after the creditor has received his part, the excess shall be distributed between them in accordance with the liability of the debtors inter se for the claim. The relevant parts of the first paragraph also apply when a joint debtor asserts a subrogation claim as a result of what he later may have to pay in excess of that which should be attributed to him. Section 6 If a creditor receives a distribution in a case where the bankrupt debtor has presented security in his property for a subrogation claim which a jointly liable debtor may obtain against him, the entitlement of the joint debtor to utilise the security is reduced with the amount of the distribution to the extent that the distribution has been computed on an amount corresponding to the value of the security. The first paragraph also applies when the bankrupt debtor has a claim against the joint debtor which the bankrupt debtor could have used as a set-off. Section 7 If a joint debtor who is jointly liable has paid the debt up to three months before the day of grace stated in Chapter 4, Section 2 the distribution for the subrogation claim which he has thereby obtained shall be computed on the same amount as would have applied as regards a distribution to the creditor if the debt had not been paid. However, if any other joint debtor who is jointly liable has a subrogation claim by reason of a previous repayment, the distribution shall be divided between the joint debtors in accordance with the liability of the debtors inter se for the claim. Section 8

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If a jointly liable debtor has been declared bankrupt and if that bankruptcy has not been closed before the joint debtor was declared bankrupt, the bankruptcy estate of the former is entitled to a portion of the excess in accordance with Section 4, third paragraph, even if a claim for subrogation was not lodged in the bankruptcy of the joint debtor.

Section 9 The provisions of Sections 4 to 8 concerning joint liability to pay also apply in those cases where the debtor has obtained a legal charge or other security in the property of a third party. Certain claims which are dependent on conditions Section 10 If a claim is dependent upon a condition whereby the creditor is not entitled to receive the amount of the claim unless a certain event occurs, distribution for the claim shall not be computed in one distribution proposal if there is no reason to assume that the condition will be satisfied. Computation of interests for claims during bankruptcy, etc. Section 11 As regards a claim that is subject to a priority right and which bears interest, the interest shall be computed up to the date when the distribution proposal was prepared or, if funds are paid in advance, the date of payment. If a claim that is subject to a priority right but does not bear interest could have been made interest bearing by service of a summons or by an application for an order to pay, interest on it shall be computed in accordance with Section 5 of the Interest Act (1975:635) from the day of the bankruptcy decision, if the claim was then due for payment, and otherwise from the later date on which the claim fell due for payment. Interest shall be computed up to the date referred to in the first paragraph. For claims without a priority right, interest between the creditors is computed from the date of the bankruptcy decision only if the estate is sufficient to pay more than the amount of all claims in the bankruptcy without priority rights including, when appropriate interest accrued at the time of the bankruptcy decision. Interest is decided by applying the first and second paragraphs. (Act 1991:857) Section 12 As regards a claim that does not bear interest before the due date for payment, the distribution is computed only on the amount which after annual interest of five per cent comprises the value of the claim on the date stated below, provided the claim is not then due for payment, namely: 1. if the claim is paid in full or with priority right, the day on which the distribution proposal is prepared,

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2. if the claim is not subject to a priority right and is not paid in full, the day of the bankruptcy decision. If funds are paid in advance to the creditor for a claim referred to in the first paragraph, item 1 and if the claim was not then due for payment, the distribution shall instead be computed according to the value of the claim at the day of payment. Valuation of certain claims Section 13 A claim relating to a benefit which is not payable in money shall on distribution be estimated at a reasonable amount. A claim for pension that is not due for payment on the date when the distribution proposal is prepared, shall be estimated to be the sum that corresponds to the part of the pension commitment that had accrued on that date. The estimation is made with the guidance of Sections 2 and 3 of the Pensions Undertaking Security, etc. Act (1967:531). A claim for interest or other benefit to be paid during the lifetime of a person and which is not due for payment on the date when the distribution proposal was prepared, shall be estimated with the guidance of Section 3 of the said Act. A claim in foreign currency shall be computed according to the rate of exchange applicable on the day when the distribution proposal is prepared. If funds are paid in advance to the creditor, the computation is made according to the rate of exchange at the day of payment. Section 14 If a debtor who made a composition in a bankruptcy is once again declared bankrupt before the composition is satisfied, a creditor whose claim has been reduced by the composition is entitled to distribution for the whole of the claim’s original amount after deduction of what he has already received. However, he may not receive more than what he was entitled to under the composition. The first paragraph also applies when the debtor made a composition in accordance with the Company Reconstruction Act (1996:764). (Act 1996:1056) Set-off in bankruptcy Section 15 A claim against a debtor which may be recognised in the bankruptcy may be used by the creditor to set-off a claim that the debtor had against him when the bankruptcy decision was issued. However, this does not apply if set-off was excluded out of the bankruptcy by reason of the nature of the claims.

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If a claim is dependent upon a condition whereby the creditor is entitled to receive the amount of the claim only if a certain event occurs, the creditor shall nevertheless complete his obligation although he was otherwise entitled to a set-off. However, if he, before the date on which the distribution proposal is prepared, shows that the condition has been met, he is entitled to the return of a corresponding amount to the extent that it does not exceed what he is able to claim. If there is reason to assume that the condition will be satisfied later, an estimated amount shall be reserved for the creditor when the distribution proposal is prepared. Section 16 A claim against the debtor acquired by a transfer from a third party up to three months before the day of grace stated in Chapter 4, Section 2 may not be used in set-off against a claim which the debtor had when the creditor acquired his claim. This also applies if a claim against the debtor has been transferred previously by such transfer and the creditor then had reasonable reason to assume that the debtor was insolvent. A creditor who has placed himself in debt to the debtor in circumstances equivalent to payment by means other than customary means of payment, may not set-off to the extent that such payment could have been the subject of recovery. Section 17 A claim for compensation held by a guarantor or some other person by reason of an obligation that he has satisfied (subrogation claim) is, when applying Sections 15 and 16, deemed to have been acquired when his obligation was founded. Even if a proof of claim procedure takes place in the bankruptcy, a creditor with a right of set-off need not lodge proof of his claim to the extent that it is covered by the claim of the debtor. When a set-off cannot be effected, the creditor may nevertheless deduct that which should have been paid to him as a distribution in the bankruptcy if his claim up to the amount of the debt had been lodged in good time. If the estate transfers a claim so that a creditor thereby loses entitlement to set-off, the estate shall compensate the creditor for this.

Chapter 6 Obligations of the debtor, etc. Prohibition on conducting business operations during bankruptcy

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Section 1 A debtor who is a natural person may not during the bankruptcy conduct business operations involving a bookkeeping obligation under the Bookkeeping Act (1976:125). However, operations involving exercise of rights referred to in Chapter 2, Article 1 of the Instrument of Government or Chapter 1, Article 1, Chapter 4, Article 1, Chapter 6, Article 1 or Chapter 13, Article 1 of the Freedom of the Press Act or Chapter 1, Article 1, Chapter 3, Article 1, 2 or 8 or Chapter 10, Article 1 of the Fundamental law on Freedom of Expression are not subject to the prohibition. There are special provisions concerning prohibitions on conducting business operations following special determination in the Business Operations Prohibition Act (1986:436). (Act 1991:1562) Duty to provide information and attend during bankruptcy Section 2 The debtor shall submit to the court, supervisory authority, administrator and examiners such information as they request which is of significance to the bankruptcy investigation. The information obligation also comprises property that is not included in the estate by reason of it being abroad. At the request of the administrator, the debtor shall attend the estate inventory meeting. If the debtor is a legal entity and there are several legal representatives, this obligation does not apply to those legal representatives whose attendance the administrator considers to be insignificant to the estate investigation. At settlement meetings and meetings to consider proposals for composition, the debtor shall attend unless he has legal excuse or the court permits his non-attendance. If the debtor fails to attend a meeting, this does not prevent the matter for which the meeting has been called being dealt with. (Act 1995:793) Estate inventory oath Section 3 The debtor shall swear an estate inventory oath before the court. He shall also make the additions or amendments to the estate inventory which he considers are required and by oath certify that the information contained in the estate inventory about assets, debts and accounting material with the additions or amendments made are correct and that no assets or debts have, to his knowledge, been improperly omitted or included. If the debtor is a legal entity and there are several legal representatives, an estate inventory oath need not be sworn by a

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legal representative whose oath the administrator considers to be insignificant to the estate investigation. (Act 1995:793) Section 4 The estate inventory oath shall be sworn at an oath administration meeting. The oath administration meeting shall be held no earlier than one month and not later than two months after the bankruptcy decision. However, the meeting may be held later if this is necessary having regard to the extent and nature of the bankruptcy estate. If the debtor is prevented by legal excuse from swearing the oath at the oath administration meeting or if the estate inventory has not been delivered to the court at that time, the court shall, as soon as the excuse expires or the estate inventory is received, summons the debtor by service to complete the oath administration. The oath administration meeting shall nevertheless be held at the time appointed. If there is reason for so doing, the court may decide that the debtor shall swear the oath before another district court. If the debtor is ill, the oath may also be sworn where he is staying. The oath may not be made prior to the oath administration meeting. Section 5 When a guardian is obliged to swear an estate inventory oath, the minor is also, if he has attained the age of 15, liable on the application of the administrator or a creditor to swear the oath. However, this does not apply if there are special circumstances whereby there is no reason to take an oath. A person other than the debtor is liable at the request of the administrator or a creditor to swear an estate inventory oath or confirm certain information in the inventory if it may be assumed that such an oath is of significance to the estate investigation. This does not apply to a person referred to in Chapter 36, Section 5 of the Code on Judicial Procedure to the extent it applies to information in connection with which he cannot be heard as a witness unless he is not a close relative of the debtor. When an application for an oath under this section has been presented, the court shall summons the administrator, supervisory authority and the person referred to in the request to a hearing before the court. If the request has been presented by a creditor, that person shall also be summoned. The summons shall be served on the person referred to in the request. If the request is granted, an oath shall be sworn immediately if this can reasonably be effected or at such later point in time that the court decides. Section 4, second paragraph applies to the swearing of the oath. (Act 1995:793)

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Means of compulsion, etc. Section 6 The debtor may not, following the issue of the bankruptcy decision and before he has sworn an estate inventory oath, travel abroad without the consent of the court. If later during the bankruptcy there is reason to fear that the debtor will avoid his obligations as prescribed by this Act by leaving the country, he may be prohibited from travelling abroad. If the debtor changes his place of residence he shall advise the administrator of where he is staying. If there is reason to fear that the debtor will contravene a prohibition on travelling abroad, the debtor may be required to surrender his passport to the supervisory authority. If the debtor does not have a passport, a prohibition on issuing him a passport may be made. If there is reason to fear that the debtor may avoid the obligations prescribed by this Act by leaving the district where he is resident, he may be prohibited from leaving the district. Section 7 A decision concerning travel prohibition or an order that the debtor should surrender his passport or concerning a prohibition on issuing a passport is issued by the court on the request of the administrator or supervisory authority. The decision should be immediately revoked as soon as there is no further reason for such decision. Before the court issues a decision on a matter referred to in this section, the court shall afford the debtor, the administrator and the supervisory authority an opportunity to express their views if this can reasonably be done and it is not without significance. The court may also hold a hearing on the matter. The supervisory authority, administrator and debtor shall be summoned to the meeting. The summons should be served on the debtor. A decision concerning travel prohibition or an obligation for the debtor to surrender his passport shall be served on the debtor. Section 8 If the debtor by reason of a decision under Chapter 2, Section 12 has surrendered his passport, the court shall immediately following the bankruptcy decision consider whether the debtor should have the passport returned. If there is reason to fear that the debtor will contravene a prohibition on travelling abroad, he is not entitled to return of the passport. A similar review shall take place if a prohibition on the issue of passport has been made.

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If the debtor avoids fulfilling his obligations under Section 2, 3, 5 or 6 or contravenes a travel prohibition under Section 6, he may, depending on the circumstances, either be collected or detained. This also applies if there is reason to fear that the debtor will avoid an obligation or contravene a prohibition mentioned here. If a person other than the debtor avoids making an oath which he was ordered to make under Section 5 he may, depending on the circumstances, be made subject to a default fine, collected or detained. Detention in those cases referred to in the first and second paragraphs may only take place if there is extraordinary reason for so doing. However, if the debtor has contravened a travel prohibition under Section 6, he shall be detained unless it is manifestly unnecessary. The expense of collection or detention are borne by the State. Section 10 Issues concerning measures under Section 9 or concerning the confirmation of a default fine imposed are determined by the court on the request of the administrator or supervisory authority. Before the court decides on an issue referred to in this section, the court shall provide the person referred to in the measure, the administrator and the supervisory authority an opportunity for expressing their views if this can reasonably be done and is not without significance. If a request is made for a person to be detained, the court shall on request appoint counsel for him, unless counsel is obviously unnecessary. Counsel is entitled to remuneration by the State for work done, time lost and disbursements. The court may require the person against whom the detention request is directed in the event of him being a losing party to completely or partially reimburse the expenses of the State for the counsel. If the detention request is not granted and this is the result of the applicant not having acceptable reasons for the request, the applicant shall reimburse the expenses of the State for the counsel. Section 11* The court may hold a hearing to determine an issue referred to in Section 10. If detention has been requested, a hearing shall be held unless the delay involves risk. The supervisory authority, the administrator and, if possible, the person referred to in the action shall be summoned to the hearing. The summons of the last named shall be served. He may be collected for the hearing, if there is reason for so doing. If he has

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been summoned to the hearing or if it may be assumed that he has absconded or in some other way is in hiding, his absence does not prevent the request being determined. If the court has decided to detain some person who is not present at court, the court shall be notified as soon as the decision has been enforced. When such notification has been given, a hearing in the detention matter shall be held as soon as possible and not later than four days after the execution of the detention decision. With no more than a two-week interval, the court must hold a hearing to determine whether the person who is remanded in custody should continue to be detained. If there is no longer any reason for detention, the court shall immediately order the release of the detained person. No person may during bankruptcy be detained for longer than three months. Section 12 If a person is detained on the basis of Chapter 2, Section 12, the court shall in conjunction with the bankruptcy decision consider whether the person should remain in detention. If there is reason for detention under Section 9, the detention should continue. When applying Section 11, fourth paragraph, periods during which the debtor was remanded in custody on the basis of Chapter 2, Section 12 shall also be included in the calculation. Section 13 If the debtor is a legal entity, Section 2, first paragraph, Sections 6 to 8 and Section 9, first, third and fourth paragraphs apply also to a member of the board, a managing director, a partner and a liquidator who has resigned or been released from office up to one year before the day when the bankruptcy petition was delivered to the district court. Compensation for attendance Section 14 If the debtor is in need of it, he is entitled to reasonable compensation by the bankruptcy estate for travel and subsistence in Sweden when he, as a result of the provisions of Sections 2 to 5, attends court or some other place. This provision also applies to a person referred to in Section 13. If an request in accordance with Section 5, second paragraph is directed at someone other than the person referred to in Section 13, he is entitled to reasonable compensation by the estate for attendance in accordance with Section 5, third or fourth paragraph. Decisions on compensation are issued by the court.

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Chapter 7 Administration and supervision Administrators Section 1 An administrator shall have the special insight and experience required for the task and also be suitable for the task in other respects. A person who is employed by a court may not be an administrator. A person who has such a relationship with the debtor, a creditor or someone else that it is likely to undermine confidence in his impartiality in the bankruptcy may not be an administrator. This also applies if there are other circumstances whereby confidence in his impartiality may be undermined. The administrator must immediately notify the supervisory authority of circumstances that may occasion his disqualification. (Act 1988:1371) Section 2 Administrators are appointed by the court. The court also decides the number of administrators. More than one administrator may be appointed if, having regard to the extent and nature of the estate, it is necessary for the administration to be divided or to be dealt with undivided by several persons. If an administrator is disqualified but, having regard to the circumstances of the bankruptcy, it is unsuitable to discharge him, the court may appoint another person to deal with that part of the administration in respect of which the administrator is disqualified. If the administration of the estate is to be divided, an administrator is appointed for each part of the administration. The court decides the basis on which division shall take place. Special regulations providing for the participation of a general representative in the administration of the bankruptcy are contained in the Insurance Companies Act (1982:713) and in the Banking Companies Act (1987:617). (Act 1989:1084) Section 3 Before the court appoints an administrator or makes a decision that there shall be several administrators, the supervisory authority shall be heard.

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Issues concerning the appointment of several administrators or the division of the administration between several administrators are dealt with on the application of the supervisory authority, administrators, an examiner or a creditor. The supervisory authority and the administrator shall be heard. If necessary, the court may examine the issue at a hearing. The supervisory authority, the administrator and, if the issue has been instituted by someone else, that person shall be summoned to the hearing. Section 4 If several administrators deal with the administration undivided, they may only dispose of any right belonging to the estate or take a measure which may involve an obligation for the estate by acting together. If there are two administrators and they cannot reach agreement concerning a measure or a decision that is their responsibility under this Act or if there are more than two administrators and there is no majority for a certain view, the view supported by the supervisory authority shall apply. Discharge of administrators, etc. Chapter 5 If an administrator requests release and shows reason for this, the court shall discharge him. An administrator who is not suitable or for some other reason should be relieved of the task shall be discharged by the court. Issues concerning discharge are dealt with at the request of the supervisory authority, an examiner, a creditor or the debtor. An administrator may not be discharged without the supervisory authority having been heard. If someone other than the administrator himself has requested that the administrator should be discharged, the court shall, unless it is for special reasons unnecessary, consider the issue at a hearing. The supervisory authority, the administrator and, if the question has been instituted by someone else, that person shall be summoned to the hearing. If it is of particular interest to hear the creditors, the court shall summon them to the hearing by public notice. The court may, if there are special reasons for so doing, remove an administrator from service pending the hearing. The supervisory authority shall be heard before this is done. If an administrator has been relieved from service, the court may appoint someone else to perform his obligations in the meantime. Section 6

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If an administrator is discharged, the court shall immediately appoint a new administrator. The first paragraph does not apply if there are several administrators and one of them is discharged and the court also, after hearing the supervisory authority, considers that it is not necessary to appoint another person to replace the person discharged. Advisors and mediators Section 7 If the court considers that there are special reasons for so doing, it may, after hearing the supervisory authority, assign a suitable person to be an advisor to the administrator in the administration of the estate or as a mediator to assist the court in examination and mediation in a contentious issue arising from objection to a proof of claim or to satisfy both these tasks. A person employed at a court may not be an advisor or mediator. When the assignment is complete, the court shall be notified immediately. A the same time a report shall be submitted the work involved in the assignment. The court shall revoke the assignment when notification has been made or if there are other reasons for revocation. The general obligations of the administrator, etc. Section 8 The administrator is obliged to have regard to the common rights and best interests of creditors and also to take all those measures promoting an advantageous and expeditious winding-up of the estate. The first paragraph does not impede an administrator in winding-up the estate to have regard to that which will most likely promote long-term employment, provided that this can be done without any significant adverse effect on the rights of the creditors. Section 9 The administrator is liable on request to provide information about the estate and its administration to the court, creditors, examiners, the debtor or the supervisory authority. Section 10 The administrator shall hear the supervisory authority and creditors specially affected on important issues, provided that there is no impediment to doing so. The administrator shall on such issues also hear the debtor, if this can reasonably be done. 32

Section 11 If the administrator considers it necessary, he may appoint an expert assistant for a particular administrative measure. Section 12 The administrator shall take care of the estate of the debtor together with the accounting material and other documents concerning the estate as soon as possible. If the debtor is or during the year preceding the bankruptcy petition has been liable to keep books, the administrator shall in the accounting material in a suitable manner state the day for taking it over. A person who, on the assignment of the debtor, has prepared accounting material concerning the estate of the debtor is liable to submit the material to the administrator in the debtor’s bankruptcy. (Act 1995:793) Section 13 The administrator shall prepare an estate inventory. This shall include the assets of the estate at carefully estimated values. The estate inventory shall also contain information on the name and postal address of every creditor. If there is reason for so doing, the estate inventory shall also contain information about property not included in the estate because it is located abroad. If the debtor has stated that there is no such property, the estate inventory shall contain information to that effect. To the extent necessary, the estate inventory shall also contain a schedule of both the accounting material and other documents concerning the estate. The estate inventory shall be submitted by the administrator to the court and the supervisory authority as soon as possible and not later than one week prior to the oath administration meeting. If an estate inventory signed by the debtor has previously been submitted to the court, a new estate inventory need not be prepared, provided that the administrator considers it to be reliable. In that event he must immediately notify the court and the supervisory authority. If a proof of claim procedure is to take place and no estate inventory has yet been submitted to the court, the administrator must as soon as possible, and not later than one week after the decision concerning the proof of claim procedure, send a schedule of the creditors with information on each creditor’s postal address to the court and the supervisory authority. In the bankruptcy of a

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joint stock banking company, a savings bank or a members’ bank, information concerning deposit creditors, and the amount of their claim together with interest accrued, shall also be enclosed with the estate inventory or the schedule of creditors. This also applies to the bankruptcy of a financial instruments trading company if the company has permission to receive deposits in accounts. In the bankruptcy of a life assurance company, information concerning the insured and their claims shall be attached in a corresponding manner. (Act 1996:129) Section 14 The administrator may, if necessary, request summary assistance by the enforcement service for the return of property in order to assume care and control or otherwise obtain access to the estate of a debtor together with the accounting material and other documents concerning the estate. This also applies to such accounting material as is referred to in Section 12, second paragraph. The enforcement service may then search buildings, rooms or places of storage and, if access is required to some other place which is sealed, allow locks to be opened or gain entry by other means. The enforcement service may also otherwise use force to the extent necessary for the purpose intended and which may be deemed justifiable having regard to the circumstances. However, violence against the person may only be used by the enforcement service if they encounter opposition to the extent that it may, having regard to the purpose of the intervention, be considered justifiable. As regards appeals against decisions of the enforcement service or measures under the first paragraph, the provisions of the Enforcement Code concerning actions for attachment generally apply. (Act 1995:793) Section 14 a Chapter 3, Section 4 indicates that the administrator may request attachment of wages and equivalent benefits through the enforcement service. (Act 1995:308) Section 15 The administrator shall as soon as possible prepare a written report on the condition of the estate and the reasons for the insolvency of the debtor, as far as these can be established, and, if possible, state the point in time at which the insolvency may be assumed to have occurred. The report shall furthermore contain: 1. a review of assets and debts of various kinds, 2. information about whether there is any circumstance giving rise to recovery to the bankruptcy estate,

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3. information concerning whether there is reasonable cause to assume that someone, under the provisions of the Companies Act (1975:1385) or the Economic Associations Act (1987:667), is liable to restore unlawful distribution of profits or other unlawful payment, or in accordance with these Acts or the Trading Partnerships and Sole Trader Act (1980:1102), pay damages to a share company, economic association or trading partnership, 4. information in appropriate cases of the time at which the obligation under Chapter 13, Section 2 of the Companies Act to prepare a special balance sheet may be assumed to have arisen, if this date can be established, 5. information in appropriate cases whether suspicion of offences referred to in Chapter 11 of the Penal Code, or such behaviour as may result in prohibition on conducting business operations under Section 2 of the Business Operations Prohibition Act (1986:436), have been notified to the prosecutor, 6. information about which bookkeeping system a debtor who is or during the year preceding the bankruptcy petition has been liable to keep books has applied and how the bookkeeping obligation has been fulfilled. The report shall as soon as possible, and not later than six months after the bankruptcy decision, be sent to the court, the supervisory authority and every creditor requesting it. If there are special reasons, the court may grant additional time for the presentation of the report. If the debtor was liable to keep books, the latest balance sheet prepared by the debtor shall be attached to the report. Section 16 If the administrator considers that a debtor may be suspected of some offence referred to in Chapter 11 of the Penal Code, he must immediately notify the public prosecutor about it and state the grounds for the suspicion. This also applies if the debtor has conducted business operations and during the administration of the bankruptcy it transpires that the debtor may be suspected of some other offence, which is not of a petty nature, related to the operation. If it may be suspected that the debtor or, if the debtor is a legal entity, such a representative as is referred to in Section 4 of the Business Operations Prohibition Act (1986:436), has acted in such a manner that a prohibition on conducting business operations may be at issue, the administrator must immediately notify the prosecutor about this and state the grounds for the suspicion. Section 17

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The administrator shall in his final account attach a report of the measures taken by him to investigate such criminal act referred to in Section 16, first paragraph and such action referred to in the second paragraph of the same section together with the result of these investigations. The administration of funds by administrator, etc. Section 18 Money received during the administration of a bankruptcy estate shall be deposited on the account of the estate with a bank so as to bear interest. However, this need not be done to the extent that the funds are required for payment of current disbursements. Even after the bankruptcy has been concluded, the administrator shall keep the funds of the estate deposited with interest at a bank until the funds are paid out in accordance with Chapter 11. The administrator shall notify the supervisory authority of the bank in which the funds are held. Section 19 The administrator shall, irrespective of the rules concerning the obligation of the debtor to keep books, continually enter payments received and made, unless good accounting practice acquires that the bookkeeping is effected in some other manner. The administrator shall retain accounting material for at least ten years from the expiry of the calendar year in which the bankruptcy was concluded. In general, the provisions of Section 22 of the Bookkeeping Act (1976:125) apply. The first paragraph does not imply any restriction on the obligation to keep books which may be particularly prescribed to facilitate control of certain operations. There are special provisions regarding the duty to arrange documentation for tax returns and obligations to provide information and their examination. Section 20

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If the bankruptcy is not concluded by the expiry of six months from the oath administration meeting, the administrator shall within one month of that date submit a report to the supervisory authority, in which all the measures taken to conclude the bankruptcy shall be carefully stated. The report shall contain information about payments received and made during the previous period or a chronological and systematic schedule of the business transactions of the estate. If, during any part of this period, money has been held by a bank, the report shall contain information certified by the bank on the deposits and withdrawals that have taken place.

Later during the bankruptcy, the administrator shall within one month of the expiry of each six-month period make such a report as is referred to in the first paragraph for the latest period. This shall also contain complete information on the reasons for the bankruptcy not being concluded. The administrator shall as soon as possible send a copy of the report to the court. Section 21 Also, the administrator shall, when the bankruptcy is concluded, as long as funds of the estate are deposited with the bank, within one month of the expiry of each calendar year, provide such information as is stated in Section 20, first paragraph, second and third sentences to the supervisory authority. When there are no further funds to withdraw, the administrator shall notify this to the authority. The administrator shall at the same time report on the extent to which payment of distributed funds took place on the basis of Chapter 11, Section 13 a. (Act 1990:1072) Section 22 If on the completion of the bankruptcy there are any impediments on returning to the debtor the accounting material and other documents concerning the estate which the administrator has had care of, these shall be handed over to the supervisory authority, unless the administrator considers that he should retain them. The documents shall be retained in accordance with the provisions for archiving in each particular case. (Act 1995:793) Reporting on funds to third party Section 23 There are special provisions concerning the right of a commission agent’s principal, when the debtor in his capacity as a commission agent on behalf of the commission agent’s principal has in his own name entered into an agreement, to make claims against a third party on the basis of the agreement. This is also the case in matters concerning the entitlement of a commission agent’s principal to receive accounts for such sums as were received by the commissioner agent's bankruptcy estate for goods sold.

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If the debtor in some other case prior to the bankruptcy decision has sold any other property, the person whose property was sold, if payment was completely or partially delivered to the bankruptcy estate after the bankruptcy decision, is entitled to receive accounts from the administrator for that which was received. To the extent that payment has not been made by the purchaser, he is also entitled himself to make a claim of debt against the purchaser, unless the right of the purchaser should thereby be set aside.

That provided here concerning entitlement to obtain accounts from the administrator shall also apply in the event of funds being delivered to the bankruptcy estate in other cases in respect of which the debtor would have been obliged to report to another. Section 24 If the debtor at the time of the bankruptcy decision held funds subject to accounting liability which should be reserved for some other person, the administrator shall take care of the funds and then account for them together with interest accrued from the day of the bankruptcy decision. As regards determining what should thus be allocated to a person entitled to receive accounts, such person’s entitlement generally in the bankruptcy and also the obligation to bear expenses incurred in the procedure, the provisions of this Act about creditors who hold a legal charge as security for their debts are applicable. However, responsibility for such expense shall be borne by the person entitled to receive accounts only to the extent that the estate does not otherwise provide assets for payment of the expense. Supervision of the administration Section 25 The enforcement services are the supervisory authorities. (Act 1996:1440) Section 26 In issues concerning disqualification of an officer of the enforcement service, in addition to that provided by Section 11 in the Administrative Procedure Act (1986:223), it is a rule that a person who in a general case has dealt with the collection of a debt claimed in the bankruptcy may not conduct any supervisory tasks in the bankruptcy. Section 27 The supervisory authority shall monitor that the administration is conducted in a purposeful manner in compliance with this Act and other legislation. In that connection, the authority shall ensure in particular that the conclusion of the bankruptcy is not unnecessarily delayed. The authority may, where it considers it appropriate, conduct an inventory of the cash and other assets of the bankruptcy estate and also request reports from the administrator. If special circumstances give cause, the authority may appoint one or more auditors to examine the accounts and the general administration of the estate. Section 28 The supervisory authority shall have access to the accounting material and other documents concerning the estate. 38

The supervisory authority is obliged on request to provide information about the estate and its administration to the court, creditors, examiners or the debtor. (Act 1995:793) Section 29 The decisions of the supervisory authority under this Act may not be appealed against in cases other than those stated in Chapter 3, Section 6. Examiner Section 30 If a creditor requests it, the court shall appoint an examiner, with the powers stated in this Act, to monitor the administration on behalf of the creditors. The person proposed by the creditor shall be appointed as examiner, provided that he is suitable. The examiner shall have access to the accounting material and the other documents concerning the estate. If the creditor requests it, a deputy for the examiner shall also be appointed. The provisions concerning examiners also apply to deputies. The examiner shall be discharged if he or the creditor makes an application for this or if he proves himself to be unsuitable. Remuneration for he examiner shall be paid by the creditor. (Act 1995:793)

Chapter 8 Selling property Introductory provisions Chapter 1 The property of the estate shall be sold as soon as reasonably possible, unless otherwise provided by the provisions of Sections 2 to 5, Section 6, second paragraph, Section 8, second paragraph, Section 14 and Chapter 12, Section 1, third paragraph. Section 2 If the debtor conducted a business operation, the administrator may, if it is lawfully possible, continue with the operation on behalf of the bankruptcy estate to the extent that it is purposeful. This also applies if the administrator, after the business operation has been discontinued, wishes to resume the activity. However, the business operation may be continued for a period longer than one year from the oath administration meeting only if there are special reasons for so doing.

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Section 3 If the debtor has appealed against the bankruptcy decision, no property of the estate shall be sold against his will before the court of appeal has considered the appeal. The first paragraph does not amount to an impediment to: 1. such sales resulting from the provisions of Chapter 3, Sections 7 and 8 and Sections 2 and 10 of this chapter, 2. sales of such movable property as is susceptible to rot or impending destruction or rapidly reduces in value or requires far too expensive care, 3. sales of movable property in other cases, to the extent that funds would otherwise be unavailable for payment of disbursements for the estate. (Act 1995:793) Section 4 If the debtor submits a proposal for composition, property in the estate may not be sold before the issue of composition has been determined. This provision does not amount to an impediment to a sale if: 1. it is consistent with the proposed composition, 2. it results from reasons stated in Section 3, second paragraph, items 1 and 2, 3. it is necessary for purposes stated in Chapter 12, Section 24 or 4. there are other special reasons. Section 5 If the holder of a registered charge or some other creditor who has a priority right for his claim in certain property requests that the property should be sold through the agency of the administrator, and if his entitlement to payment from the property has not been contested or has been settled by a determination that has acquired legal force, the sale of the property may not be postponed. However, this does not apply in cases of property required for a business operation during the period while it is continued under Section 2 nor if the administrator considers that postponement is necessary to prevent the bankruptcy estate incurring considerable loss or that the implementation of an composition is made substantially more difficult and also postponement is not unreasonable to the creditor. Sale of real property

40Section 6

If the estate includes real property, the administrator may request that it is sold compulsorily. Property may also be sold by other means if the administrator considers that this is more advantageous to the estate. If property is sold to the bankrupt debtor or to a person who is a close relative of him as is defined in Chapter 4, Section 3, the sale must be preceded by a public tender procedure, unless special reasons make this unnecessary. If a compulsory auction of real property belonging to the estate is held without any sale being effected, the administrator need not take further measures for the sale of the property. If a compulsory auction has not taken place but there is reason to assume that such an auction would not result in a sale, the administrator need not take any measure for the sale of the property if consent for this has been given by those creditors who may in the bankruptcy make claims subject to special priority rights in the property. If a compulsory auction of the real property of the estate has been advertised, the administrator must, prior to the proof of claim meeting, release the residue which has arisen from the property during the bankruptcy. The residue which has not been released before the proof of claim meeting shall, if the property is sold, be released prior to the completion date and in other cases before distribution in the bankruptcy takes place. In the case of sales made directly the residue shall be released before the completion day. The administrator shall also, not later than at the proof of claim meeting, give notice of fees, other expenses and such claims that may be recognised in the bankruptcy and which should be taken into account on the sale of the property. When the administrator gives a notification on behalf of a creditor, he should give the creditor written notice thereof. (Act 1995:793) Sale of movable property Section 7 Sale of movable property not effected by continuation of the business operation of the debtor shall take place at auction or in another manner in accordance with that considered by the administrator to be most advantageous to the estate. If property is sold to the bankrupt debtor or to a person who is a close relative of him as is defined in Chapter 4, Section 3, the sale must be preceded by a public tender procedure, unless special reasons make this unnecessary. Movable property in which a creditor has a legal charge or some other person has a special priority right, may not be sold without his consent in any manner other than by auction if his entitlement is dependent upon the sale. Even if consent is not given, the

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property may be sold by other means than by auction, if it is probable that a higher price will be attained thereby and if the supervisory authority gives consent. Consent in accordance with the first paragraph is not required when the administrator sells, through a financial instruments trading company, financial instruments listed on a Swedish or foreign stock exchange, an authorised marketplace or some other controlled market at the applicable exchange or market price or, when the matter relates to the sale of movable property, by continuation of the business operation of the debtor. Chapter 14, Sections 26 and 27 of the Insurance Companies Act (1982:713) contains special provisions about transfer of stocks of insurance business. (Act 1995:793) Section 8 When a vessel that is not listed in the shipping register or in a corresponding foreign register, an aircraft that is not registered, cargo on a vessel, or cargo in an aircraft is to be sold, the administrator may, if the property is located in Sweden, request that it is sold compulsorily. If a question arises about the sale of a registered ship, a registered aircraft or aircraft spare parts subject to a registered mortgage and the property is in Sweden, Section 6, first and second paragraphs are applied. If the right of a debtor to a share in a legal charge encumbering his aircraft or spare parts for aircraft is to be sold, the administrator shall, prior to the sale, acquire a special charge document for the amount due to the debtor, unless there is a lawful impediment to so doing. If the charge document held by the debtor and for which he is personally responsible is sold, the administrator is liable, unless the debtor consents to the document being sold with liability retained, to endorse the document with words releasing the debtor from liability. However, the consent of the debtor is not required if he has absconded or in some other way is in hiding. A vessel under construction is equated with a vessel in this Act. The provisions concerning the shipping register shall then instead apply to the ships’ construction register. Section 9 The provisions of Section 6, fourth paragraph are also applied when movable property belonging to the debtor is to be sold compulsorily during the bankruptcy. In such a case the administrator shall also, to the extent required, represent the case of those creditors who have priority rights in accordance with Section 10 of the Priority Rights Act (1970:979) and give written

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notice to such creditors of an application that he presents on their behalf. Section 10 A creditor possessing movable property with a right of pawn may himself attend to the sale of the property at auction or, in the case of financial instruments listed on a Swedish or foreign exchange, an authorised marketplace or some other regulated market, through a financial instruments trading company at the applicable exchange or market price. However, such a sale may not take place earlier than four weeks from the oath administration meeting without the consent of the administrator. The creditor shall, not less than one week before he takes a measure to sell the property provide the administrator with an opportunity to redeem the property. In the case of a vessel or cargo on a vessel or in an aircraft or aircraft spare parts subject to a registered charge, the property shall be sold compulsorily. The creditor shall, not less than three weeks in advance notify the administrator of the time and place for an auction that is not to be held under compulsory rules. If the property is sold by means other than compulsorily, the creditor shall report to the administrator for the proceeds received. If the creditor does not wish to sell the property himself, the administrator may attend to the sale. A legal charge on an aircraft or on aircraft spare parts which has been mortgaged by the owner of the property subject to the charge may not be sold by the administrator. He may only allow the sale of the rights to a share of the legal charge which, according to special provisions, may be due to the debtor. (Act 1992:555) Public notice of auctions in certain cases Section 11 If the property of the bankruptcy estate is to be sold at auction through the agency of the administrator, he shall ensure the public notice of the auction in the manner and within the time prescribed for public notice of compulsory auctions of such property as is in question. However, the public notice need not in any case be included in the Post och Inrikes Tidningar (the Official Gazette). The first paragraph also applies to an auction to be attended to by a creditor in accordance with Section 10. Section 12

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The administrator may give public notice of an auction fixed by him less extensively than required by Section 11, first paragraph, if he considers that it is efficient. However, this does not apply in the case of public notices of:

1. auction of real property, registered vessel, registered aircraft or aircraft spare parts subject to a legal charge, unless the debtor consents to it, 2. auction of any other movable property in which a creditor has a legal charge or any other special priority right, unless the creditor consents to it. The consent of a debtor referred to in the first paragraph, item 1, is not required if the debtor has absconded or in some other way is in hiding. Section 13 The administrator should in good time before an auction of movable property fixed by him, give special notice of the auction to every know creditor possessing a legal charge or any other special priority right in the property. Collection of claims Section 14 The administrator shall as soon as it may reasonably be effected, take measures to collect outstanding claims. If a claim cannot be collected within reasonable time, it may be sold as other movable property.

Chapter 9 Procedure for lodging proofs and making objections Lodging of proofs Section 1 The court may, on the request of the administrator, decide that a lodging of proofs procedure shall take place in the bankruptcy. Lodging of proofs should take place if claims without priority rights may be assumed to obtain a distribution in the bankruptcy. Section 2 If the court decides that a lodging of proof procedure should take place, the court shall decide the period within which the lodging of proof shall take place. The period for lodging of proofs shall be at least four and at most ten weeks from the day of the decision to arrange a lodging of proof procedure. Section 3 The court shall immediately give public notice of a decision made in accordance with Sections 1 and 2.

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Section 4 A creditor shall within the period decided for lodging of proofs of claim give written notice to the court of his claim and the priority right that he wishes to be recognised. However, exceptions to this obligation are contained in Chapter 4, Section 21, Chapter 5, Sections 8 and 17, second paragraph and Section 5 of this chapter. It is provided by the Wages Guarantee Act (1992:497), that the administrator shall in certain cases lodge proofs of a claim in accordance with that Act. (Act 1992:498) Section 5 A creditor who holds a legal charge in real or movable property as security for his claim need not lodge proof in order to receive entitlement to payment from the charged property. A creditor who has a claim on a bank share company, a savings bank or a members’ bank by reason of a deposit on account need not lodge proof of his claim in the bankruptcy of such an institution if information about the claim has been provided in accordance with Chapter 7, Section 13, fourth paragraph. This also applies as regards a financial instruments trading company that is permitted to receive deposits in accounts. An insurance policy holder need not lodge proof of his claim in the bankruptcy of a life assurance company, provided information about the claim is given in accordance with the stated legislative provision. (Act 1995:1584) Section 6 The proof of claim document shall state the amount of the claim, if this is possible. The basis of the claim should be indicated clearly. If a priority right is claimed, the creditor shall also clearly state the basis for this. The document shall be personally signed by the creditor or the representative of the creditor. The creditor shall attach the originals or certified copies of the documents he wishes to refer to in support of his claim to the proof of claim document. The proof of claim document and the documents that are attached to it shall be submitted in duplicate. Section 7 Immediately after the expiry of the period for lodging of proofs, the court shall transfer one copy of the proof of claim documents received to the administrator.

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The administrator shall expeditiously prepare a list of those claims that have been lodged. For each claim there shall be stated its amount, whether a priority right is claimed, the basis adduced

therefor together with the position in the order of priority that the claim has according to the creditor’s application. Copies of the list shall be sent to the court and the supervisory authority. Objections Section 8 Then the court decides that lodging of proofs shall take place, the court shall simultaneously, after consulting the administrator, decide: 1. the period within which objections to the proofs lodged may be presented, 2. where the proof of claim documents transferred to the administrator are to be kept available for examination, 3. the time of the settlement meeting to be held before the court if objections are presented. If it appears more suitable, a decision in accordance with the first paragraph may be made later although by the expiry of the period for lodging proofs at the latest. The objection period shall be decided so that it amounts to at least two and at most four weeks computed from the expiry of the period for lodging proofs. If necessary having regard to the circumstances of the bankruptcy, a longer objection period may be determined. The settlement meeting may not be held earlier than two or later than four weeks from the expiry of the objection period. Notification of the court’s decision in accordance with this paragraph shall be provided to the administrator, the supervisory authority, the debtor and those creditors who have lodged proofs of claim in the bankruptcy. Section 9 The administrator shall examine the proofs lodged and, if he considers there to be a reason to object to any claim for payment or priority right, give written notice to the court within the period decided under Section 8, first paragraph, item 1. The objection notice shall clearly state the reasons for the objection. The notice shall be personally signed by the administrator or by his representative. Even a creditor who has lodged proof of a claim in the bankruptcy and the debtor may present objections to a proof lodged. Such an objection shall be presented within the period and in the manner stated in the first paragraph.

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The objection notice and the documents referred to in support of the objection shall be submitted in duplicate. Section 10 If an objection is made by one of those who is entitled to do so, it also applies for the others, even if they have not participated in the objection. Section 11 A person entitled to present objections to a lodged proof may, following the expiry of the objection period in support of an objection made, also adduce facts other than those stated in the objection notice. However, following the settlement meeting, a new fact whereby the basis of the objection is altered may only be adduced if the fact was neither known nor ought to have been known to the person entitled to make objection or if there are otherwise special reasons nevertheless to permit the fact to be adduced. If a new fact is adduced in a connection other than at the settlement meeting or at a hearing, the provisions concerning objections in Section 9, first paragraph apply to issues concerning the form for the reference. Section 12 A creditor receives the payment and priority right that he has claimed in his lodged proof unless an objection has been presented against it in the correct manner and in good time. However, failure to present an objection is not an impediment to an action for recovery being instituted in a court. If a claim of priority right has not been the subject of an objection, this may not encumber those who according to law have preference to payments from certain property. A claim of priority right which does not relate to any priority right prescribed by law is without effect, even if no objection has been presented to the claim. Disputes concerning a lodged proof of claim Section 13 Contentious issues arising by reason of objections presented and which have not been settled shall be dealt with at a settlement meeting before the court. At this meeting the administrator, the creditors and the debtor may present their cases. The administrator, those creditors against whose proofs objections are directed and those who presented the objections shall be summoned to the meeting.

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The administrator shall attend the meeting. However, his failure to attend does not prevent the meeting being conducted. The supervisory authority is entitled to participate at the meeting. At the meeting the court shall investigate contentious issues and endeavour to reach a settlement. Those present who are entitled to participate in the proceedings may, with binding effect for those who have not attended, consent to the lapse of an objection or its restriction or appoint the administrator to enter into a settlement with a creditor against whose proof an objection was made. If both a creditor and a guarantor or some other person who in addition to the debtor is responsible for the claim of the creditor are present and they cannot agree, the view of the creditor applies unless the others buy him out or present secure collateral for the claim. Section 14 Decisions in accordance with Section 13, third paragraph, may be appealed against by the person who according to Section 13, first paragraph, is entitled to participate in the proceedings, if he considers that the decision has not been made in a lawful manner. The decision may be appealed to the court of appeal within three weeks from the date of the decision. Unless the court of appeal otherwise orders, the decision shall apply immediately. (Act 1995:793) Section 15 Contentious issues which have not been settled shall be considered by the court at a hearing. The court shall at the settlement meeting prepare the remaining contentious issues so that they can be dealt with finally at the hearing. If possible, the hearing shall be held immediately in conjunction with the settlement meeting. If this is not done, the court shall list a hearing for a date within four weeks following the meeting or, if there are special reasons for so doing, for a later date. The administrator, the creditor against whose proof the objections are directed and those who presented the objections shall be summoned to such a hearing. Section 16 Contentious issues concerning claims that have been lodged shall be considered as soon as possible and if possible determined at once. If certain claims require further time to be examined and considered, the court shall make a special decision about those contentious issues which may be determined earlier. If the claim of any creditor is dependent upon litigation in a separate trial, this must not delay the determination. In such a case the court shall determine his entitlement in the bankruptcy for the amount which can be decided by a judgment in that trial.

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If a proposal for composition has been dealt with, the consideration by the court of a contentious issue may be postponed until the question of composition has been determined, if this is suitable. Section 17 Settlement concerning an objection presented against a claim may not be entered into in any other manner than that stated in Section 13, unless all those whose rights are dependent upon the settlement consent to it. Section 18 If a decision whereby an objection against a debt has been declared invalid is amended by a superior court, this also applies for those who did not apply for amendment of the decision. Section 19 By a decision in a dispute concerning a lodged proof of claim only which rights apply to the claim in the bankruptcy are determined. Lodging of proofs out of time Section 20 If a lodging of proofs procedure has taken place, a creditor who, after the expiry of the period for lodging proofs wishes to give notice of a debt or claim a priority right may do so in writing in the manner prescribed in Section 6. In compensation for the expenses of public notice, summonses and notices required by the lodging of proofs out of time, the creditor shall pay to the State in advance a fee corresponding to three per cent of the base sum in accordance with the National Insurance Act (1962:381). Section 21 When a claim has been lodged out of time, the court shall as soon as the fee in accordance with Section 20, second paragraph has been paid, transfer one of the copies of the proof of claim documents to the administrator and, following consultation with the administrator, decide: 1. the period within which objections to the proofs lodged may be presented, 2. where the proof of claim documents transferred to the administrator are to be kept available for examination, 3. the time of the settlement meeting to be held before the court if objections are presented.

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The period for objections should be decided so that is amounts to at least two and at most five weeks computed from the date when the fee in accordance with Section 20, second paragraph was paid. The settlement meeting before the court shall be held within four weeks from the expiry of the objection period. Notifications that a claim has lodged out of time and of the court’s decision in accordance with the first paragraph shall be provided to the administrator, the supervisory authority, the debtor and those creditors who have lodged proofs of claim in the bankruptcy. Section 22 Besides the provisions of Sections 20 and 21, as regards the lodging of proofs out of time, the provisions concerning the lodging of proofs apply where relevant. If several proofs have been lodged out of time, they shall if possible be dealt with together.

Chapter 10 Writing off of bankruptcy Section 1 If the court considers, after hearing the administrator, that the assets of the bankruptcy estate are not sufficient for payment of bankruptcy expenses incurred and expected and other debts that the estate has incurred, the court shall decide to write-off the bankruptcy. Section 2 The bankruptcy may not be written off in accordance with Section 1 before an estate inventory has been confirmed under oath and the administrator has fulfilled his obligations in accordance with Chapter 7, Section 15. If there is an impediment to an estate inventory being sworn by the debtor or some other person within reasonable time and if there is no reason to assume that, by the administration of oaths, it would transpire that assets are available for payment of the bankruptcy expenses and other debts that the estate has incurred, the bankruptcy may be written-off although an oath administration has not been performed. Section 3 If no claim is made and none can be assumed to be made, the court shall, following notification by the administrator, immediately decide about writing off the bankruptcy. If the court has decided that a lodging of proofs procedure shall take place,

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the bankruptcy can only be written off after the expiry of the period for lodging proofs. Section 4 If assets remain in the estate when the administrator has paid the expenses in the bankruptcy and other debts that the estate has incurred, he shall: 1. if in a case referred to in Section 1, it is clear how the remaining assets should be distributed and if the supervisory authority consents to it, provide an entitled creditor with what is due to him, 2. in other cases, restore the property to the debtor. Section 5 If a new asset is discovered after the bankruptcy has been written off in accordance with Section 1, the relevant parts of Chapter 11, Sections 19 to 21 shall apply.

Chapter 11 Distribution Introductory provisions Section 1 If the bankruptcy is not written off, the money in the estate, to the extent that the funds are not utilised for payment of the bankruptcy expenses and other debts that the estate has incurred, shall be distributed to the creditors in the order prescribed by this chapter. The distribution shall take place in accordance with the entitlement to payment that is due to the creditors. Section 2 Distribution shall take place as soon as all the available property has been converted into money. If property in such a case as is referred to in Chapter 8, Section 6, second paragraph or Section 8, second paragraph has not been sold, this does not amount to an impediment to distribution. If a lodging of proofs procedure has taken place, distribution may not take place before the period for objections, decided in accordance with Chapter 9, Section 8 has expired and, if objections have been presented, a settlement meeting has been held. Section 3 When a proposal for composition is being considered, the administrator may wait until the issue of composition has been determined before distributing, if this is justified by the proposal. Distribution procedure

51Section 4

When there is to be distribution, the administrator shall prepare a proposal for distribution. The administrator shall then take into account all the claims and priority rights which by that time have been lodged or lodged out of time in the bankruptcy or, when lodging was not necessary, the claims and priority rights which by that time have been made or are otherwise known to the administrator. The proposal shall for each creditor therein included state: 1. the amount of his claim and the interest upon which distribution will be computed, 2. the priority right connected to the claim and 3. the distribution attributable to the claim. The proposal shall also state if there exist any such circumstances which, in accordance with Section 10, second or third paragraph, involve a restriction on the entitlement of the creditor to draw the distribution attributable to the claim or if it has been paid from funds in advance. A report on the administration of the property in respect of which funds intended for distribution have been received shall be attached to the proposal. The report shall indicate how much has by sale or by other means been received for the property and also, unless the whole of this sum in accordance with the proposal is distributed, for which other purpose the remainder has been utilised. If funds distributed have been received for property in respect of which certain priority rights have existed, this information should be stated separately for that property. Section 5 When a distribution proposal has been prepared, the administrator shall immediately send the proposal with the attached administration report to the court and the supervisory authority. Section 6 The court shall give public notice of the preparation of the proposal for distribution, as soon as the opinion of the supervisory authority in accordance with Chapter 13, Section 5 about the final report of the administrator has been delivered to the court. The distribution proposal and the administration report shall be kept available at the court and the supervisory authority for those persons who wish to view the documents. Information about this shall be included in the public notice.

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A person wishing to raise an objection to the distribution proposal shall do so at the court not later than the date decided by the court and stated in the public notice. This date shall be decided so that three weeks elapse from the date when the public notice may be assumed to be included in the Post och Inrikes Tidningar (Official Gazette). Section 7 When the period for raising an objection has expired, the court shall determine the distribution in the bankruptcy in accordance with the distribution proposal, unless by raising an objection or by other means, it is indicated that an error or inadequacy exists which affects the rights of someone. If a claim or a priority right has not been lodged or lodged out of time by the time when the distribution proposal is prepared, although an obligation to lodge a proof has existed, a raised objection that the claim or priority right should have been included in the distribution proposal is ineffective. If the court considers that distribution should not be confirmed in accordance with the proposal, the court shall either make the necessary amendments to it and confirm the proposal as amended or refer the matter again to the administrator. Public notice of the preparation of a new distribution proposal shall only be given if there is special reason for doing so. If public notice has not been issued, those creditors who are affected by the amendments in the distribution proposal shall be given notice of it. In such a case, the raising of an objection against the proposal shall be presented within three weeks of the day after that on which the notifications were despatched. The final day shall be stated in the notifications. Section 8 If the court considers that there is reason not to confirm distribution in accordance with the proposal, it shall by notifications provide the administrator and anyone who would be disadvantaged by a questioned amendment an opportunity to express their views, unless this is clearly unnecessary. A person who has raised an objection to a distribution proposal shall be afforded an opportunity to see views expressed unless this is unnecessary. The court may hold a hearing to consider an issue concerning the confirmation of the distribution proposal. The hearing shall be held, if it is requested by the person who has raised an objection to the proposal, if there is anyone who would be disadvantaged by a questioned amendment or, in issues concerning recovery, the administrator. Those such persons shall always be summoned to the hearing.

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Payment of distribution funds Section 9 When the decision to confirm the distribution and the decision to decide the administrator’s fees have gained legal force, the administrator shall as soon as possible send the funds allocated to the creditors, unless there is an impediment to payment under Section 10, second or third paragraph. If the administrator has sent the funds to a creditor to the last known address of the creditor, the administrator need not take any further measure to implement payment. When the funds have been sent to the creditors, the administrator shall give notice of this to the court and the supervisory authority. Section 10 Before the decision to confirm the distribution and to decide the administrator’s fees have gained legal force, the means attributed a creditor shall be paid out only if the creditor presents collateral. If the period for appeal of the decision has expired, payment may, without collateral being presented, be made to a creditor who is not disadvantaged by an appeal against any of the decisions. As regards a claim dependent on any such condition as is referred to in Chapter 5, Section 10, distribution for the claim may not be paid out before the condition has been satisfied. This also applies to issues concerning a contentious claim before it has been determined by a court. When the claim has been determined but before the distribution decision has gained legal force, funds may only be paid out if the creditor presents collateral. If a lodging of proof procedure has taken place, distribution for a claim that has been lodged out of time may not be paid out during the period within which objections may be raised to the lodging of proofs out of time. If a creditor who has drawn payment becomes liable to repay to the bankruptcy estate what he has received, he shall pay interest on the amount. Interest is computed in accordance with Section 5 of the Interest Act (1975:635) from the date when the funds were paid out until the date when the obligation to restore the funds arises and in accordance with Section 6 of the Interest Act for subsequent periods. (Act 1995:793) Section 11 Collateral in accordance with Section 10 shall comprise a legal charge or guarantee. The guarantee shall be presented as a personal debt and, if it has been entered into by two or more persons jointly, be joint.

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If a bank or some other comparable credit institute provides collateral, the administrator may accept an undertaking by the institute to meet the obligation to which the collateral relates. The State, municipalities, county councils and local authority associations need not present collateral. Section 12 A creditor loses his entitlement to distribution if he does not make a claim on the funds within two years computed from: 1. the date when the decision to confirm the distribution gained legal force, or 2. the later day when the creditor became entitled to draw the funds without presenting collateral. The funds that the creditor has lost his right to shall be distributed between the creditors who have preserved their right and, failing that, shall be transferred to the debtor. Section 13 When funds that have been attributed to a creditor in a proposal for distribution are paid out, the creditor is also entitled to the interest that has accrued on the funds from the date when the distribution proposal was prepared. Section 13 a If the aggregate amount attributable to a creditor is less than 100 kronor, the sum shall not be paid to him, unless there are special reasons for doing otherwise, but shall be allocated instead to other persons entitled to distribution who have not received full satisfaction. (Act 1990:1072) Advance payments Section 14 Before distribution takes place, the administrator may, on his own initiative or at the request of a creditor, pay distribution funds in advance in accordance with the provisions of Section 15. Even if a creditor has received payment in advance for his claim, it shall be included in the distribution proposal. Section 15 Advance payment shall be made for a claim with a priority right, if it is reasonable that this is done. Advance payment shall be made for a claim without a priority right if it is clear that the assets are sufficient to pay ten per cent of such claims and there are no special reasons for not doing so. 55

Advance payment for a claim is only made to the extent that it may be assumed that distribution will be attributed to the claim. If the claim is subject to conditions or is disputed, an advance payment may not be made. When there is a duty to lodge proof, an advance payment may only be made to a creditor who has lodged proof of his claim in the bankruptcy. Section 16 If a creditor has requested an advance payment, the administrator may require the creditor to present collateral for repayment of the funds if it transpires that the creditor is not entitled to retain what is paid to him. Section 11 applies regarding the matter of such collateral. The provisions of Section 10, fourth paragraph about the obligation to pay interest shall also be applied to repayment of funds that have been paid in advance. Section 17 If the administrator refuses advance payment of a sum requested, the creditor may refer the issue to the court for consideration. When a bankruptcy is considered completed, etc. Section 18 A bankruptcy is considered completed when the district court has confirmed distribution in accordance with Section 7. This also applies if a dispute relating to a claim made in the bankruptcy or if a matter of maintenance for the debtor has not yet been finally determined or if some further asset resulting from litigation or otherwise may later be credited to the bankruptcy estate. Even if the bankruptcy is completed, a proposal for composition previously submitted may be considered in accordance with Chapter 12. Post-distribution payments Section 19 If there are funds available for distribution after the distribution proposal under Section 4 has been prepared, the administrator shall distribute them to the creditors. Section 20 If it is unclear how funds shall be distributed, a proposal for post-distribution shall be prepared. In such a case the provisions in this chapter concerning distribution, payment of distribution funds and advance payments shall apply. 56

In the proposal for post-distribution payments, distribution may also be computed for a claim that has been made known after the preparation of the distribution proposal under Section 4. A claim may be taken into account without a proof being lodged although a lodging of proof procedure was previously arranged in the bankruptcy. If this was not the case, the court may nevertheless decide on a lodging of proof procedure to prepare for post-distribution payments. Out of newly received funds, a creditor with a claim that has not been included in the distribution proposal under Section 4 shall, as long as the funds suffice first be allocated as much as would have been attributed to the claim if it had been taken into account in the distribution proposal. Subsequently, he may together with other creditors, receive a share of whatever may remain. Section 21 If the administrator considers that the newly received funds may be distributed without a proposal for post-distribution payments being prepared and if the supervisory authority gives its permission, he may distribute the funds to the creditors entitled without the above provisions of this chapter being observed. However, Section 9, second paragraph and Section 13 a apply to the payment. A creditor loses his right to distribution unless he makes a claim on the funds within two years computed from the date when the administrator gave notice to the court that he had sent the funds to the creditor. The first paragraph also applies in a case where there is reason to prepare a distribution proposal but the funds do not suffice for payment of the expenses connected therewith. (Act 1990:1072) Obligation to give notice in certain cases, etc. Section 22 If distribution or post-distribution payments have been made on the amount of a corporate charge certificate, the administrator shall give notice of this to the registration authority. Notification shall be made when the decision to confirm the distribution or post-distribution payments has gained legal force or, in cases referred to in Section 21, when the payment has taken place. The administrator shall deliver the distribution proposal or any other document indicating the distribution together with the notification. When a creditor with a register charge draws payment, this shall be noted on the charge certificate.

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Chapter 12 Composition in bankruptcy, etc. Voluntary settlement Section 1 If the debtor shows that he has reached agreement about payment of his debts or has in some other way reached settlement, with those creditors whose claims have been lodged or, when lodging of proofs is unnecessary, whose claims are known to the administrator, the court shall, on the application of the debtor, decide on discontinuance of the bankruptcy. Before a decision is issued, the administrator shall be heard. If a lodging of proof procedure takes place, the decision to discontinue the bankruptcy shall not be issued before the expiry of the period for the lodging of proofs. The court may order that the property of the estate must not be sold before the application has been considered, if the property need not be sold for such reason as is stated in Chapter 8, Section 3, second paragraph, items 2 and 3. Section 2 Public notice shall be given of a decision to discontinue the bankruptcy. Before the property in the estate is restored to the debtor, the bankruptcy expenses and other debts that the estate has incurred shall be deducted from the property. If any expense or debt is disputed, the administrator shall deposit the necessary funds for payment of the expenses or debt with a bank agreed on by the parties. Interest shall be attributed to the person who finally becomes entitled to the funds. Proposals for composition, etc. Section 3 The rules in Sections 4 to 28 concerning composition only apply in a bankruptcy in which it has been decided that a lodging of proofs procedure should take place. Section 4 If the debtor wishes to offer a composition, he shall present the court with a composition proposal. The composition proposal should state: 1. how much the debtor offers in payment, 2. when the payment shall take place,

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3. whether collateral has been presented for the composition and, in that case, the kind of collateral. Section 5 A composition may aim at claims attributable to those creditors entitled to vote on the proposal in accordance with Section 11 being reduced and paid in the detailed manner stated. The composition shall provide creditors who are equally entitled with equal rights and at least 25 per cent of the amount of the claims, unless a lower composition percentage is approved by all known creditors who have lodged proofs of claim and would be subject to the composition or if there are extraordinary reasons for a smaller distribution. Payment of the prescribed minimum distribution shall take place within one year following confirmation of the composition unless all the creditors named approve a longer time for payment. A composition may contain conditions that creditors receive full payment up to a certain amount, if the deviation may be considered reasonable having regard to the extent of the estate and other circumstances. Deviations disadvantageous to a particular creditor may also take place, if he consents to it. A composition may also aim at a debtor only obtaining respite with payment or some other special concession. The first and second paragraphs apply to the appropriate extent. Section 6 A composition proposal may only be dealt with if it is delivered to the court before the date when public notice of the distribution proposal in the bankruptcy is included in the Post och Inrikes Tidningar (Official Gazette) or, when exchange in accordance with Chapter 15, Section 2 takes place, before the date the notification was despatched. If the composition proposal has been delivered to the court in good time, the court shall obtain the views of the administrator as to whether the proposal should be presented to the creditors. If the administrator rejects this, the proposal may only be dealt with if the court considers that there are extraordinary reasons for doing so. Section 7 If there is an impediment to dealing with the composition proposal under Section 4 to 6, it shall be rejected. Meeting to consider composition proposals Section 8

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If the composition proposal is dealt with, the creditors shall be immediately summoned to a meeting before the court to consider the proposal. Before the debtor has sworn an oath in accordance with Chapter 6, Section 3, the summons may only be issued if there are extraordinary reasons for so doing. Public notice of the meeting shall be issued. The meeting may not be held earlier than three weeks from the date when the composition proposal was raised nor before contentious issues that have arisen by reason of objections to lodged proofs of claim have been dealt with at the settlement meeting. Section 9 The administrator shall, as soon as possible, submit to the court views on whether he considers the composition proposal should be accepted by the creditors. The views shall be made available to the creditors at the meeting for consideration of the composition proposal, unless they have been sent to them previously. Section 10 The administrator should attend at the meeting for consideration of the composition proposal. If the debtor cannot attend personally, he should send a representative. The administrator shall make available a schedule of the creditors entitled to vote on the matter of composition, with information of the amount of the claim in respect of which entitlement to vote may be exercised. If objections have been raised to any of these claims which have not been considered or if, post-distribution payment has taken place, the period for the raising of objections that have not been considered or, if post-distribution payment has taken place, the period for objections has not yet expired, this shall be separately stated in the schedule. If the debtor has not sworn an oath in accordance with Chapter 6, Section 3, the reason for this shall be given at the meeting. Section 11 When voting on the issue of composition, entitlement to vote may only be exercised for claims lodged. However, a creditor who may receive satisfaction for his debt by set-off or whose claim is subject to a priority right does not participate in the voting. Nor does a creditor, who according to the claims agreement is entitled to payment first after other creditors, participate in the voting, unless the other creditors consent to this. If a creditor completely or partially declines a right of set-off or a priority right, he participates to the corresponding extent. If the claim of a creditor is only covered to a certain extent or is less than

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the value of the property in which the creditor has a special priority right for his claim he participates in respect of the remaining part of the claim. A defendant, who by reason of an action for recovery, received or may receive a claim against the debtor, may without lodging proof participate with the claim in the voting. If the composition proposal means that a creditor who does not have a priority right would receive full payment up to a certain amount, the right to vote may not be exercised for those claims which would thereby receive full payment. A creditor who as collateral for his debt reserved the right to repossess is equated with a creditor with a priority right. (Act 1996:775) Section 12 The lodging of an objection to a claim does not constitute an impediment to the creditor participating with the claim in the voting. If the result of the voting is dependent upon whether the claim should be recognised or not, the court shall at the meeting examine the matter in dispute and endeavour to achieve a settlement. Those present may, with binding effect on those not present, allow an objection to lapse or be restricted or instruct the administrator to enter into a settlement with the creditor. If a settlement cannot be reached, the matter shall be dealt with in accordance with the provisions of Section 17, first paragraph for the determination of the result of the voting. However, if an objection to any claim of debt or priority right is considered in accordance with Chapter 9, Section 16, the determination of the court shall be applied in the voting on the matter of composition, unless it is shown prior to the voting that the determination has been amended by a superior court. A settlement concerning an objection that has been lodged against a claim may not be entered into in a manner other than that stated here, unless everyone whose right is dependent upon settlement gives their consent. Section 13 If both a creditor and a guarantor, or some other person who in addition to the debtor is responsible for the claim of the creditor, desires to vote for that person in the matter of composition, they have together one vote, which is computed in accordance with the claim of the creditor. If they cannot agree, the creditor’s view prevails, unless the others buy him out or provide secure collateral for the claim. Section 14

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The debtor may not revoke or change the composition proposal without the consent of the court. An application for this shall be presented not later than at the meeting and before voting takes place. If an amendment to the composition proposal is allowed, the consideration of the composition proposal is postponed to a meeting adjourned for up to three weeks. If the amendment does not involve a deterioration of the proposal for the creditors, the consideration of the matter may only be postponed if there are special reasons for so doing. If the court in a case other than those referred to in the second paragraph, after having heard the administrator and those creditors present, considers that there are special reasons to postpone consideration of the composition proposal by the creditors, the court may decide on postponement to a later meeting to be held within three weeks. The creditor’s majority on composition, etc. Section 15 A proposal for composition providing at least fifty per cent of the amounts claimed shall be considered accepted by the creditors if three-fifths of those voting have accepted the proposal and their claims amount to three-fifths of the total amount of the claims bearing voting rights. If the composition percentage is less, the composition proposal shall be considered accepted if three- quarters of those voting are agreed on the proposal and their claims amount to three-quarters of the total amount of the claims bearing voting rights. Section 16 If a creditor or the debtor considers that a decision by which a composition proposal has been rejected by the creditors has not been made in a lawful manner, he may appeal against the decision to a court of appeal within three weeks of the decision. However, the debtor may not appeal against the decision only if his entitlement may be dependent upon it. The decision is immediately applicable, unless otherwise ordered. (Act 1990:1072) Confirmation of composition Section 17 If a proposal for composition has been accepted at the meeting but, in accordance with Section 19, there is reason not to confirm the composition, the issue of composition should be considered by the court at a hearing. This also applies if, at the meeting, it cannot be determined whether the proposal has been accepted or rejected by the creditors. 62

If the issue of composition is not to be considered at a hearing, the court shall confirm the composition. Decisions on matters of composition shall be issued within one week unless longer time for consideration is required by reason of special circumstances. Section 18 If the result of the voting on the proposal for composition is dependent on whether remaining objections are approved or not and if there is generally reason to confirm the composition, the court shall at the hearing first consider the objections or as many of them that the result in the voting being the same irrespective of the approval of other objections. Section 19 A composition may not be confirmed if: 1. the matter has not been dealt with in the prescribed manner and the error may have affected the result of the composition issue, 2. the composition does not satisfy the conditions stated in Section 5, 3. there is reasonable cause to assume that the debtor has secretly favoured some creditor with the intention of affecting the composition issue or that some other deceit with the composition has taken place or 4. the composition is manifestly injurious to the creditors. Even if the first paragraph is not applicable, the court may, according to the circumstances, refuse to confirm the composition, if a creditor or a guarantor or some other person who in addition the debtor is responsible for the claim has contested approval by reason of: 1. there not being secure collateral for fulfilment of the composition, 2. the composition is injurious to the creditors or 3. the composition should not be granted for some other special reason. If approval is refused in accordance with the first paragraph, item 1 and if the proposal has not been rejected by the creditors or lapsed, the creditors shall once again consider the composition proposal at a meeting listed for this purpose. Such a meeting may be held at the earliest within ten days following the decision

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refusing confirmation. The creditors shall be summoned to the meeting. Public notice of the summons shall be given. Section 20 A hearing in accordance with Section 17 shall take place as soon as possible. The administrator, the debtor and those creditors who were present at the meeting referred to in Section 8 shall be summoned to the hearing. Effect of composition Section 21 An approved composition is binding on all creditors, known and unknown, who were entitled following the lodging of proof to vote on the composition proposal. A creditor, who in accordance with the claims agreement is entitled to payment first after other creditors, loses his right to payment by the debtor, unless all creditors who were entitled to vote on the composition proposal in accordance with Section 11 are fully satisfied by the composition. A person who has a priority right in certain property is bound by the composition as regards amounts that cannot be retrieved from the property. A creditor, notwithstanding the composition, is entitled to set-off which he may have in accordance with Chapter 5, Sections 15 and 16. (Act 1996:775) Section 22 A creditor who has approved a composition proposal does not by the approval lose his entitlement against guarantors or others who in addition to the debtor are responsible for the claim. Section 23 An objection to a lodged proof shall, if a priority right is demanded for the claim lodged, be considered in the manner prescribed by this Act even if a composition has been effected. Section 24 Before property in the estate is restored to the debtor as a result of a composition being approved, the bankruptcy expenses and other debts that the estate has incurred shall be deducted from the property. Furthermore, the administrator shall ensure that those creditors who have lodged proofs claiming priority rights in the property receive the payment attributable to them by reason of the priority right as far as it can be satisfied from the property. If any expense or debt is disputed, Section 2, third paragraph applies. 64

Section 25 When a composition has been confirmed, an action for recovery may not be instituted by any creditor subject to the composition. An action that has been instituted in a proper manner may nevertheless be considered. Anything obtained by an action for recovery and which is not required for any purpose specified in Section 24, shall, following payment of the expenses of the plaintiff, be attributed to those creditors who are subject to the composition. A defendant who, by reason of the action of the plaintiff, acquires a claim against the debtor is entitled to deduct the distribution attributable to him from what he would otherwise receive. Supervision of composition Section 26 At the request of a creditor whose claim is subject to the composition the court may, if there is reason for doing so, appoint the administrator or some other suitable person to supervise that the debtor satisfies his obligations in accordance with the composition. If necessary, a deputy for the supervisory officer shall also be appointed. The debtor shall provide the supervisory officer with the information requested by him and observe the instructions issued by the supervisory officer. The supervisory officer shall be discharged by the court if it transpires that he is not suitable or that for some special cause he should be removed from the office. Section 27 Fees for the supervisory officer and remuneration of those expenses which the assignment has involved shall be considered by the court if the supervisory officer or the debtor so requests. As long as the composition has not been satisfied, such a request may also be presented by a creditor whose claim is subject to the composition. Annulment of composition Section 28 On the application of a creditor whose claim is subject to the composition, the court may declare that the concession granted to the debtor by the composition lapses, if the debtor: 1. is guilty of dishonesty to creditors or has secretly favoured any creditor with the object of affecting the matter of composition, 65

2. fails to fulfil his obligations under Section 26, second paragraph or 3. in some other way manifestly neglects his obligations under the composition. Settlement of an issue referred to in the first paragraph is not permitted. Even if the concession granted to the debtor is declared lapsed, the creditors may apply the composition in other respects against the debtor or against the person who has given a guarantee for the composition.

Chapter 13 Final report of the administrator Issue of the final report Section 1 The administrator shall issue a final report for his administration in accordance with that prescribed in this chapter. An administrator who resigns before the bankruptcy is completed shall issue a final report, even if he has taken care of the administration together with other administrators. If the administration was split, the report need only refer to that part of the administration which was the sole duty of the retiring administrator. Chapter 7, Sections 18 to 21 contain rules concerning the obligation of the administrator to report on the administration of funds, etc. during the bankruptcy. Section 2 A final report shall be issued: 1. if the bankruptcy decision is revoked by a superior court, 2. if the administrator retires before the completion of the bankruptcy, 3. if the bankruptcy is written off by reason of insufficient assets, 4. if the bankruptcy is written off because no claim has been made in the bankruptcy, 5. on distribution and on post-distribution in accordance with Chapter 11, Section 20, 6. on post-distribution in accordance with Chapter 11, Section 21,

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7. if the bankruptcy is discontinued following voluntary settlement, 8. if property in the estate is restored to the debtor as a result of the confirmation of a composition. Section 3 The final report shall be issued to the supervisory authority. The administrator shall enclose with the final report those documents that are important for checking the report. The administrator shall submit a copy of the report to the court. In cases referred to in Section 2, items 1, 4 and 7, a copy shall be provided to the debtor at the same time. Section 4 In cases referred to in Section 2, item 5, the final report is issued at the same time as the distribution proposal is submitted to the court. In the other cases referred to in Section 2, the administrator shall issue the report as soon as possible. Examination of the final report Section 5 The supervisory authority shall, in those cases referred to in Section 2, items 2, 3, 5, 6, and 8, examine the final report and, in those cases referred to in Section 2, items 2, 5 and 8, give an opinion concerning the same. The supervisory authority shall send the opinion to the court. The report and the opinion shall be held available at the court and the supervisory authority for those who wish to view the documents. Section 6 In cases referred to in Section 2, item 5, the public notice that the court must issue in accordance with Chapter 11, Section 6 shall state that the final report and opinion are available for examination and where the documents are. In cases referred to in Section 2, items 2 and 8, the court shall, when the supervisory authority has given its opinion, give public notice that the final report and the opinion have been issued and where the documents are available for examination. The public notice referred to in the first and second paragraphs shall state what a person wishing to appeal against the report must do. Appeal against the final report 67

Section 7 The final report of the administrator may be appealed against by the supervisory authority and the debtor. Even a creditor may appeal against the report if his right is dependent upon it. Appeal actions against the final report are instituted by a summons in the district court where the bankruptcy is or was pending. In cases referred to in Section 2, items 2, 5 and 8, the action shall be instituted not later than the date decided by the court and stated in the public notice. This date shall be decided so that three months elapse from the date when the public notice may be assumed to have been included in the Post och Inrikes Tidningar (Official Gazette). In other cases, the action may be instituted within three months of the date when the copy of the report was delivered to the court. Section 8 In the Supreme Court, the National Tax Board represents the action of the public in cases referred to in Section 7. Section 9 A creditor who has instituted appeal proceedings is entitled to receive from the bankruptcy estate compensation for his litigation costs to the extent that they are covered by benefits received by the estate by reason of the litigation.

Chapter 14 Bankruptcy expenses General provisions Section 1 Bankruptcy expenses means: 1. fees and payment of expenses to the administrator, 2. fees and payment of expenses to such an advisor or arbitrator as was appointed in accordance with Chapter 7, Section 7, 3. remuneration for an expert assistant appointed by the administrator under Chapter 7, Section 11, 4. payment to the state for supervision of the administration, 5. the cost of public notices of decisions or measures concerning the bankruptcy,

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6. the cost of written summonses and notifications to the debtors issued in the bankruptcy, 7. compensation under Chapter 6, Section 14 for the debtor or any other person for attendance. The costs of public notices, summonses and notifications resulting from the lodging of proofs out of time are not considered to be bankruptcy expenses. Section 2 The bankruptcy expenses shall be paid out of the bankruptcy estate before other debts that the estate has incurred. To the extent that the bankruptcy expenses cannot be taken out of the estate, they should be paid by the State, unless otherwise provided by Section 3. Section 3 If a bankruptcy has arisen on the petition of a creditor other than the State and if the bankruptcy was written off in accordance with Chapter 10, Section 1, the creditors are responsible for these, to the extent that the bankruptcy expenses cannot be taken out of the estate, though at most for an amount corresponding to one- tenth of the base sum under the National Insurance Act (1962:381) applicable at the date of the bankruptcy decision. If several creditors are liable to pay, they are liable jointly. In a decision concerning writing off, the responsible debtor shall be directed to pay the bankruptcy expenses with the stated restriction. If the expenses cannot be met by the creditors either they should be paid by the State. Fees of the administrator Section 4 The fees for the administrator are decided by the court. If several administrators have been appointed, a special fee shall be decided for each of them. The fee may not be determined at an amount greater than may be considered to constitute reasonable remuneration for the assignment, having regard to the work acquired by the assignment, the care and skill with which is was performed and the extent of the estate. The Government or the authority appointed by the Government determines the tariffs to be applied when determining fees for the administrator if the bankruptcy is written off in accordance with Chapter 10, Section 1. Section 5

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The fee shall be determined at a specific amount once and for all unless a special fee needs to be computed in accordance with Section 18 in respect of property referred therein. Such a special fee may be determined before the matter of fees is otherwise determined. When a special fee is decided for particular property, the basis for computing fees stated in Section 4 applies. Section 6 The fee is decided upon the application of the administrator. If several administrators have been appointed, their fees should be decided at the same time if this can reasonably be effected. The administrator shall state in the application for fees the amount that he requests and, if the matter is one of deciding a special fee for certain property, that amount also. A report for the work involved in the assignment with a specified account, indicating the division of the amount for the various administrative measures shall be attached to the report. If the administrator has engaged such an assistant as referred to in Chapter 7, Section 11 and, if the assistant has obtained payment or if the administrator has made payment for expenses, this shall be stated in the report. If there is reason to decide a special fee for certain property, the administrator shall make available to the court a schedule or those legal owners that are known to have special priority rights in the property. Section 7 If an application for fees only relates to a special fee to be decided for certain property, the court may determine whether there is reason to deal with the application for consideration before the fees generally are decided. Section 8 In cases other than those referred to in Section 9, third paragraph and Section 10 the court shall, before the application for fees is considered, obtain the opinion of the supervisory authority on the matter of fees and also provide the debtor and those creditors, who have in court requested an opportunity to express views on the application within a certain time, at least two and at most four weeks. In cases referred to in Section 6, third paragraph, every known creditor with a special priority right in property is afforded an opportunity to express his views about the application. The court may hold a hearing on the matter of fees if it considers there is reason for doing so. The administrator, supervisory authority, the debtor and those creditors who have requested to be allowed to express their views on the application for fees shall be

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summoned to the hearing. In cases referred to in Section 6, third paragraph, every known creditor with a special priority right in property shall be summoned. Section 9 In a case where the district court must confirm a distribution or post-distribution in the bankruptcy, the decision on the matter of fees shall be issued at the same time as the decision on confirmation, unless otherwise provided by Section 7. Irrespective of an action having been brought against a decision to confirm a distribution or post-distribution, a superior court that amends a decision of a lower court on the matter of expenses must make an amendment to the decision concerning confirmation caused thereby or, if necessary, remit the matter of distribution to the administrator. The court that must consider a question of distribution or post-distribution must decide on supplementary fees for the administrator for work in connection with dealing with the processing of the matter in court. Section 10 If the bankruptcy is written off or discontinued or if the bankruptcy decision is revoked or if post-distribution in accordance with Chapter 11, Section 21 takes place, the court shall hear the supervisory authority before fees for the administrator are decided. Section 11 An administrator may not draw his fees before he has issued the final report of his administration. Advance payment for the administrator’s fees Section 12 The court may award the administrator a reasonable amount to be paid in advance before the final fee is decided, if this is reasonable having regard to the extent of the work that the assignment has involved, the time during which the bankruptcy has subsisted and is estimated to continue together with other circumstances. An application for an advance payment shall state the amount requested and the reasons adduced for the advance payment. A report for the work involved in the assignment and information about the economic situation of the estate shall be attached to the application. The court shall obtain an opinion on the issue of advance payment from the supervisory authority. Payment to the administrator for expenses 71

Section 13 The administrator may during the course of the administration take funds from the bankruptcy estate to pay those expenses involved in the assignment. The amount taken out shall be stated in the final report of the administrator. Section 14 If a bankruptcy is written off in accordance with Chapter 10, Section 1, the court shall decide the payment of expenses to the administrator at the same time as the fee is decided. The supervisory authority shall also be heard concerning a request for payment of expenses. Other bankruptcy expenses Section 15 The court decides the fee to such an advisor or arbitrator appointed in accordance with Chapter 7, Section 7 after hearing the supervisory authority and the administrator. In this connection, Section 4, second paragraph and Section 5 are applied. Section 16 Payment for an expert assistant appointed under Chapter 7, Section 11 is decided by the administrator. Section 17 The payment to the State for supervision of the administration is made in accordance with regulations issued by the Government. The payment to the State for such bankruptcy expenses as are referred to in Section 1, first paragraph, item 6 are paid in accordance with regulations issued to by the Government or the authority appointed by the Government. Distribution of bankruptcy expenses for various kinds of property Section 18 If the estate includes property in which a special priority right exists, and to the extent that this affects the entitlement of creditors who do not have such a priority right in property, or affects the liability of the State for bankruptcy expenses, that part of the fees for the administrator or such advisor or arbitrator appointed in accordance with Chapter 7, Section 7 which relates to the property in question shall be confirmed to be paid from the proceeds of the property and sales price. When a special priority right exists in property belonging to the estate, no bankruptcy expenses other than those stated in the first paragraph may be paid out of the yield from and the sales price of 72

the property if that will be disadvantageous to any person with the same or better priority right. However, if the special priority right is such as is stated in Section 5 of the Priority Rights Act (1970:979), other bankruptcy expenses may be paid out of the property to the extent that the estate cannot otherwise provide assets for this. When applying this paragraph, the expenses of the bankruptcy estate for taking care of and selling the property in question are equated to these referred to in the first paragraph.

Chapter 15 Information about decisions and measures during bankruptcy The form of public notice Section 1 The public notice of a bankruptcy decision shall be included in the Post och Inrikes Tidningar (Official Gazette) and, in accordance with that prescribed by Section 3 of the Act on Public Notices in Cases and Matters being dealt with by Authorities etc. (1977:654), in local newspapers. When a decision or a measure in any case other than those referred to in the first paragraph or in Chapter 8, Section 11 is to be announced under this Act, the public notice shall be included in the Post och Inrikes Tidningar (Official Gazette) and the local newspaper(s) determined by the court. Substitution of public notice by written notifications to the creditors Section 2 In a bankruptcy in which a lodging of proof procedure has taken place, the following public notices shall be replaced by written notifications to the creditors if there is no reason to assume that the expenses of announcement by public notice will be less or that public notice is otherwise more suitable, namely: 1. public notice with summons to a hearing concerning discharge of an administrator, 2. public notice with information that a proposal for distribution or post-distribution has been prepared and also that the final report and the opinion of the supervisory authority concerning it is available for examination, 3. public notice of decisions to discontinue the bankruptcy by reason of voluntary settlement, 73

4. public notice with information that a final report and the supervisory authority’s opinion on it is available for examination in cases where the administrator resigns before the conclusion of the bankruptcy. If substitution occurs in those cases referred to in the first paragraph, item 2, 3 or 4, the time referred to in Chapter 11, Section 6, third paragraph, Chapter 13, Section 7, third paragraph and Chapter 16, Section 9, first paragraph shall instead be computed from the date following that on which the notification was despatched. Substitution of notification and summonses to creditors by public notice Section 3 If the number of creditors with claims without priority rights is very great, notification to these creditors, and such summonses to them as need not be served, may be substituted by announcement by public notice. The form of summons and notifications etc. Section 4 Written summonses and notifications under this Act are despatched by post in ordinary letters to the recipient at his last known postal address, unless otherwise provided by special provisions concerning service. If, in accordance with a legal provision, a person is to be afforded an opportunity to express views on a certain question, service may take place. Register of bankruptcies Section 5 The Patents and Registration Office, for the purposes stated in Section 6, with the assistance of automatic computer processing, shall keep a common register for the whole of Sweden of the bankruptcies of individuals and estates of deceased persons. There are provisions concerning the registration of the bankruptcy of legal entities contained in the Business Records Act (1974:157), the Companies Act (1975:1385) and the Economic Associations Act (1987:667). (Act 1995:793) Section 6 The register referred to in Section 5, first paragraph may be used for giving information to anyone requesting particulars about the bankruptcies of individuals and estates of deceased persons. The Patents and Registration Office may use the register to follow up 74

and for the supervision of those other registers kept by the Office and also for certifying that a natural person or an estate of a deceased person is not in bankruptcy at any court in Sweden. (Act 1995:793) Section 7 The register may contain information about: 1. the name, civil registration number and address of the bankrupt debtor, 2. the date of the bankruptcy decision, 3. the date of the conclusion of the bankruptcy, 4. the court that made a decision on the bankruptcy and the court's case number, 5. the decision whereby a superior court has revoked the bankruptcy decision, 6. the name and address of the bankruptcy administrator and 7. the name and address of the supervisory authority exercising supervision of the administration. The information in the register shall be deleted five years after the expiry of the calendar year in which the bankruptcy was concluded. (Act 1995:793) Section 8 If a natural person or the estate of a deceased person is declared bankrupt, the district court shall, on the same day, send a notification of the decision to the Patents and Registration Office. The notification shall contain the information stated in Section 7, items 1, 2, 4, 6 and 7. The district court shall also notify the Office when such a bankruptcy has been concluded or when a superior court has revoked a bankruptcy decision. (Act 1995:793)

Chapter 16 Rules about processing and appeals, etc. Processing of bankruptcy matters Section 1 The consideration of a bankruptcy petition and the processing of the bankruptcy is effected as a bankruptcy matter at the district court. Any actions under this Act that must be instituted by summons are not dealt with as bankruptcy matters.

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Section 2 The relevant parts of the provisions in the Code of Judicial Procedure concerning contentious cases apply to bankruptcy matters, unless this Act provides otherwise. If the matter is dealt with at a hearing, the provisions concerning main hearings in contentious cases apply, unless the nature of the matter justifies deviation therefrom. If a person summoned to a hearing fails to attend, this does not impede consideration and determination of the matter to which the hearing relates. The determination of the court is made by a decision Section 3 A district court, when processing a bankruptcy matter, shall consist of one legally qualified judge. However, at a hearing the court must consist of three legally qualified judges. Enforcement of decisions in bankruptcy matters Section 4 A bankruptcy decision and the revocation of a bankruptcy decision are immediately enforceable. This also applies to other decisions by the court during the processing of the bankruptcy matter in respect of questions that, under this Act, must be considered by the court, unless ordered otherwise or provided by the second paragraph. A decision during the processing of a bankruptcy matter is only enforceable after it has gained legal force, if the decision relates to: 1. fees or payment of expenses to the administrator, 2. fees for such an advisor or arbitrator as was appointed under Chapter 7, Section 7, 3. fees or other payments of expenses to a supervisory officer as was appointed in accordance with Chapter 12, Section 26, 4. judgment confirming default fines. Chapter 11, Sections 9 and 10 contain provisions concerning enforcement of decisions to confirm distribution. Appeals against decisions of a court in a bankruptcy matter, etc. Section 5

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Every decision of a district court in a bankruptcy matter on a issue that, under this Act, should be considered by the court may be appealed separately, unless otherwise provided by Section 6 or 7. If a decision has been issued without a hearing been held, those persons against whom the decision has been made must be immediately notified of the date of the decision, to the extent that it is justified having regard to the circumstances. When appropriate, the notification should provide information about the result of the issue considered. Section 6 A decision under Chapter 9, Section 1 that lodging of proofs shall take place may not be appealed against. Nor may a decision of the district court, in accordance with Chapter 11, Section 7, third paragraph involving the referral of a distribution proposal back to the administrator, be appealed against. The decision of the court on issues concerning distribution may only be appealed against by a person who has lodged an objection to the distribution proposal within time or, if the court decides to confirm distribution that deviates from the proposal, by a person whose rights are affected by the amendment. The administrator may continue actions in an issue concerning recovery. Section 7 An action may not be taken against a decision under Chapter 12, Section 18 by reason of an objection being presented. Actions may not be conducted separately against the following decisions, namely: 1. a decision on a matter concerning refusal to withdraw or concerning amendments of a composition proposal under Chapter 12, Section 14, 2. decisions under Chapter 12, Section 19 that the creditors should reconsider the matter of composition. Section 8 The supervisory authority may appeal against the decision of a district court, if the decision concerns: 1. appointment or discharge of an administrator, the number of administrators or the division of the administration between several administrators, 2. fees, payment for expenses or advance payments to administrators,

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3. travel prohibitions or obligations on the debtor to surrender his passport, prohibitions on the issue of passports, collection or the imposition of detention or judgment concerning default fine, 4. appointment of or fees for advisors or arbitrators, 5. rejection of an application to commence a lodging of proofs procedure, 6. writing off bankruptcy under Chapter 10, Section 1. In those matters referred to in the first paragraph, actions in the Supreme Court by the public are represented by the National Tax Board. (Act 1989:1002) Section 9 Such a decision of the district court as is referred to in Section 5 may be appealed against to court of appeal. The appeal shall take place within three weeks of the date on which the decision was issued. However, if the matter relates to a bankruptcy decision or a decision about discontinuance of a bankruptcy by reason of a voluntary settlement, the time for appeal is computed from the date on the public notice of the decision was included in the Post och Inrikes Tidningar (Official Gazette). Decisions concerning imposition of travel prohibitions, obligations on the debtor to surrender his passport, prohibitions on the issue of passports and also concerning the remand or detention in custody of any person may be appealed against without any time limit. This also applies to appeals against a decision on the ground that the procedure is unnecessarily delayed by the decision. (Act 1994:1050)

Chapter 17 Damages and penalties Damages Section 1 An administrator shall compensate for the damage that in the performance of his assignment, he intentionally or negligently causes the estate, a bankruptcy creditor or the debtor. The damages may be adjusted as is reasonable having regard to the nature of the act, the amount of the damage and the circumstances generally. If several administrators are to compensate for the same damage, they are liable jointly for the damages to the extent that the liability to pay damages has not been adjusted for any of them in accordance with the first paragraph. What is paid in damages by

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any person may be claimed back by the others according to what is reasonable having regard to the circumstances. Section 2 Actions for damages in accordance with Section 1 that are not based on an offence shall be conducted by appealing against the final report of the administrator. Section 3 If a creditor’s bankruptcy petition is not granted and if the creditor, when he submitted his petition, did not have reasonable cause to assume that the debtor was insolvent, the creditor shall compensate the debtor for the loss that may reasonably be assumed to have been caused to him by the application and its processing. Actions for damages under the first paragraph shall be instituted at the district court where the matter concerning the declaration of the debtor bankrupt is or was pending. In this case, such an action may be instituted without a summons. Penalties, etc. Section 4 A debtor who, in contravention of a prohibition in Chapter 6, Section 1, first paragraph, conducts business operations during the bankruptcy will be sentenced to a fine. Section 5 A creditor who has taken some special advantage from the debtor in return for his vote at a meeting in connection with composition bankruptcy will be sentenced to a fine or imprisonment for up to one year. Section 6 Prosecution of a debtor for an offence referred to in Chapter 11 of the Penal Code and prosecution of a creditor for an offence stated in Section 5 may be instituted at the district court where the bankruptcy is or was pending. Section 7 A public prosecutor and police authority shall have access to all documents concerning the estate and which may provide information concerning whether the debtor has committed a criminal act against his creditors.