Q: What is a special examiner?
A: A special examiner is an important instrument in the Swedish Companies Act (ABL) that aims to protect shareholders’ interests by enabling an independent examination of specific circumstances in a limited liability company. These rules are part of the minority protection in the Companies Act, which means that minority shareholders have an opportunity to gain insight into the company’s operations when irregularities are suspected. The rules concerning this are mainly found in Chapter 10, Sections 21-28 of the Companies Act (the current legal text is reproduced at the end of this document).
The role of the special examiner is particularly significant in situations where trust in the board or management is low. The examination performed by a special examiner differs from the ordinary audit by being more targeted and flexible, and it does not require shareholders to wait for the next annual report to get answers to their questions. The examination need not be limited to financial matters but can cover misconduct or irregularities affecting the entire company, as well as the right to maximum returns that share ownership should entail.
Q: Who can request the appointment of a special examiner?
A: The appointment of one (or more) special examiners can be requested by shareholders who together represent at least one-tenth of all shares in the company or at least one-third of the shares represented at a general meeting where the matter is raised (Chapter 10, Section 21 of the Companies Act).
Q: What is the process for having a special examiner appointed (Chapter 10, Sections 22-23 of the Companies Act)?
A: There are two ways to initiate the appointment of a special examiner:
Application without the matter being raised at a general meeting
Owners of at least one-tenth of all shares in the limited liability company can apply to the Swedish Companies Registration Office (Bolagsverket) to appoint a special examiner without the matter first being raised at a general meeting. All shareholders applying for the appointment of a special examiner must sign the application. The Swedish Companies Registration Office has a form for application that can be used, or alternatively, it can be used as a checklist to ensure the application is complete.
The Swedish Companies Registration Office shall give the company’s board of directors an opportunity to comment before a special examiner is appointed.
Application after a decision has been made at a general meeting
A proposal to appoint a special examiner can be raised by a shareholder (regardless of ownership share) at:
- an ordinary general meeting (does not need to be stated in the notice), or at
- an extraordinary general meeting where the notice states that there is a proposal to appoint a special examiner.
If the general meeting approves the decision (at least one-tenth of all shares in the company or at least one-third of the shares represented at the meeting must vote for the proposal), the decision shall specify what the special examiner shall examine, the so-called examination theme, and the time period that the examination shall cover. An application to appoint a special examiner based on a general meeting decision can be submitted to the Swedish Companies Registration Office by one or more shareholders regardless of ownership share.
Q: What is the purpose of appointing a special examiner and what can be examined (Chapter 10, Section 21 of the Companies Act)?
A: The special examiner’s task is to investigate specific circumstances in the company and/or its subsidiaries. This may, for example, involve:
- The company’s/subsidiary’s administration, i.e., the actions of the board of directors and/or the CEO.
- The company’s/subsidiary’s accounts (bookkeeping, financial transactions).
- Other special circumstances, e.g., suspicion that the company has entered into illegal or inappropriate agreements, or that shareholders’ rights have been disregarded.
The scope of the examination is determined by the assignment specified in the appointment decision, the so-called examination theme. The examination theme can be narrowly defined (e.g., a specific transaction) or more comprehensive, depending on what the shareholders want to clarify. Chapter 10, Section 21 of the Companies Act stipulates that this theme shall concern either the company’s administration and accounts during a certain past period or certain actions and conditions in the company. The examiner’s assignment is limited to this theme and to the specified time period.
An examination concerning a subsidiary may only cover matters that are significant for the parent company.
Q: Who is appointed as a special examiner? (Chapter 10, Section 24 of the Companies Act)
A: The special examiner shall be a qualified and independent person. Often, it is an attorney specialized in business law or an authorized public accountant. The examiner must not have any connections to the company (e.g., as an employee, board member, or related party) or its shareholders that could compromise objectivity. The circumstances in the individual case will determine which competence and experience are appropriate. The person applying for the appointment of a special examiner can themselves suggest a special examiner; otherwise, the Swedish Companies Registration Office appoints a suitable person.
Q: What does it cost? (Chapter 10, Sections 27-28 of the Companies Act)
A: Applying to the Swedish Companies Registration Office to appoint a special examiner costs nothing, but the company being examined shall compensate the special examiner for the work performed. If the special examiner requests it, the company being examined shall provide security for the compensation.
Normally, the company being examined bears the costs for the special examiner, as it is considered part of the company’s operations to ensure transparency. However, if the examination of a private limited company was initiated by shareholders via the Swedish Companies Registration Office, the cost allocation may be subject to review, especially if the examination proves to be unjustified. If the shareholders’ request is deemed unfounded or abused, they may in some cases be required to bear the costs themselves. It should also be noted that the current provision contains an obviousness criterion, meaning that it is not enough that the examination is deemed unnecessary; it must have been obviously unnecessary. If the special examiner considers that there is a liability for compensation for any shareholder, the examiner shall express this in their report.
Q: How does the examiner conduct their work and what is the result? (Chapter 10, Section 26 of the Companies Act)
A: The examiner has the right to access the company’s accounting records, documents, and other relevant information. The company’s management is obliged to cooperate and provide the material needed for the examination.
After completing the examination, the special examiner prepares a written report presenting observations and conclusions.
The special examiner submits their report to the company but shall also present it at a general meeting, normally the general meeting to be held immediately after the examiner has completed their examination and report. All shareholders who participated in the meeting where the decision to appoint a special examiner was made and the person who applied to the Swedish Companies Registration Office have the right to receive the report – even if they are no longer shareholders when the examination is presented to the general meeting. The board shall keep the report available at the company for shareholders for at least two weeks immediately before the relevant general meeting. Copies of the report shall be sent immediately and without cost to the recipient to shareholders who request it.
The examiner’s report may lead to shareholders taking legal actions (e.g., claims for damages against the board) or requesting further investigations, but the examiner themselves do not make decisions about sanctions or legal actions.
Q: Does the special examiner have a duty of confidentiality? (Chapter 10, Section 25 of the Companies Act)
A: A special examiner may not improperly disclose information about the company’s affairs that the examiner becomes aware of when fulfilling their assignment to an individual shareholder or to any outsider, if the disclosure of information could be harmful to the company.
A special issue is the extent to which the duty of confidentiality prevents the special examiner from including sensitive information for the company in the statement. Likely, the same level of confidentiality applies to the statement itself as to the information the special examiner can provide to the general meeting, i.e., he or she may not disclose information if it would cause substantial harm to the company (see Section 24, second paragraph, with reference to Section 17). Et
Legal text on special examination (Swedish Companies Act Chapter 10, Sections 21-28)
What special examination is
21 § The Swedish Companies Registration Office shall, upon application from one or more shareholders, appoint a special examiner. The examiner shall perform a special examination which may concern:
- the company’s or a subsidiary’s administration and accounts during a certain past period, and
- certain actions or conditions in the company or a subsidiary.
The examination may at most cover the period up to the time when the application was received by the Swedish Companies Registration Office.
An examination concerning a subsidiary may only cover matters that are significant for the parent company.
Application for special examination
22 § An application under Section 21 may be made by owners of at least one-tenth of all shares in the company.
An application may also be made by any shareholder, if:
- a proposal to appoint a special examiner has been considered at a general meeting, and
- owners of at least one-tenth of all shares in the company or at least one-third of the shares represented at the meeting have voted for the proposal.
A proposal under the second paragraph may be presented by a shareholder at an ordinary general meeting or a general meeting where the matter, according to the notice to the meeting, shall be addressed.
23 § In an application to the Swedish Companies Registration Office for special examination, it shall be stated what is to be examined and which time period the examination shall cover. The same applies to a proposal at a general meeting regarding special examination.
The Swedish Companies Registration Office shall give the company’s board of directors an opportunity to comment before a special examiner is appointed.
The special examiner and their work
24 § The person appointed as special examiner shall be independent in relation to the shareholders and the company and otherwise suitable for the assignment.
Furthermore, the following provisions shall apply to a special examiner:
- Section 7 on providing information, etc.,
- Section 9 on grounds for disqualification,
- Sections 10 and 11 on conflicts of interest,
- Section 15 on attendance at general meetings,
- Sections 17 and 18 on duty to provide information, and
- Chapter 9, Section 19 on registered audit firms.
The special examiner’s duty of confidentiality
25 § The special examiner may not improperly disclose information to an individual shareholder or to any outsider about such matters concerning the company or a subsidiary that the special examiner becomes aware of when fulfilling their assignment, if it could be harmful to the company or the subsidiary.
The special examiner’s statement
26 § The special examiner shall provide a statement on their examination. The statement shall be made available to the shareholders in the manner specified in Chapter 7, Section 25 and be presented at a general meeting.
A person who is no longer a shareholder has the same right to access the statement as a shareholder, if they:
- were included in the voting register for the general meeting where the question of appointing a special examiner was addressed, or
- applied to the Swedish Companies Registration Office to appoint a special examiner. Act (2020:985).
The special examiner’s compensation
27 § The company shall be responsible for the compensation to the special examiner. If the special examiner requests it, the company shall provide security for the compensation.
28 § If any part of the special examination has been obviously unnecessary and a shareholder who has applied to the Swedish Companies Registration Office for the appointment of a special examiner has realized or should have realized this, they shall compensate the company for its costs in that part. If several shareholders are liable for compensation, they are jointly and severally liable for the costs.
If the special examiner considers that there is a liability for compensation for any shareholder or shareholders, the special examiner shall express this in their statement.
This section does not apply to public limited companies.
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