The COVID-19 ravages:
How to reduce its impact
on your business in Sweden
The world has changed due to the ongoing ravages of the Coronavirus, COVID-19. The global effects of the virus are serious, not least does it affect businesses worldwide. Governments have taken measures to reduce the economic impact of the virus and to ease the burden of companies struggling on account of the Coronavirus. In our daily work, we currently receive many questions concerning how to reduce the virus’ impact on the company’s economy, the effects on the upcoming AGMs, and what actions to take. In Sweden, a number of measures have been introduced by the Government. In the following, we briefly present some of the measures. Do not hesitate to contact us for advice or information in more detail.
Employees and short-time work allowance
A short-time work allowance programme, remaining in effect throughout 2020, has been established. The new regulations entered into force on the 7th of April 2020, but are applicable from the 16th of March, meaning that employers may apply retroactively for financial support. Short-time working means that employees, for a certain period, work less hours than their regular working time. The newly introduced programme with central government support gives the effect that the employer’s personnel costs can be reduced by over one-half at the same time as the employee can receive about 90 percent of his or her wages. For the period of May to July, such costs can be reduced by almost three quarters. The application is to be filed through the website of the Swedish Agency for Economic and Regional Growth (Sw. Tillväxtverket).
The salary limit applicable for these provisions are SEK 44,000 per month. There are currently three fixed levels of reduction in working hours, 20 percent, 40 percent or 60 percent, which result in reduced costs of 19 percent, 36 percent or 53 percent for the employer. This will lead to a reduction of the employee’s salary of 4 percent, 6 percent respective 7.5 percent. The employer will bear a part of the cost for the reduced worktime, 1 percent, 4 percent respective 7.5 percent depending on the level of work reduction. Thus, the central government will pay 15 percent, 30 percent or a maximum of 45 percent.
The Government presented, on the 14th of April, an additional level of reduction in working hours, that will apply for the period of three months, from May to July 2020. The employee’s working hours may be reduced by 80 percent, resulting in reduced personnel costs of 72 percent for the employer, and a reduction of the employee’s salary by 12 percent. In such a case, the employer bears 8 percent of the cost for the reduced worktime, while the central government pays 60 percent. In combination with a reduction of the employer fees, as described below, the employer’s personnel costs can be reduced by 86 percent.
With regards to companies bound by a central or local collective bargaining agreement, the possibility for short-time working must be included in the agreement in order to apply within the short-time work allowance programme. Companies not encompassed within such an agreement, may apply for the support if at least 70 percent of the employees in the operating unit, in a written agreement, consent to the short-time working, and subsequently participate. The agreed reduction in working hours and wages must be the same for all participating employees within the operating unit. Exceptions are possible for employees with key positions.
Companies eligible to apply for the financial support are companies registered in Sweden paying employer social insurance contribution, that can show temporary and serious financial difficulties due to the COVID-19 pandemic. The Swedish Agency for Economic and Regional Growth has stated that it is inappropriate for a company to be paying out large amounts in dividends and at the same time take advantage of the financial support. Companies approaching liquidation, undergoing restructuring, or that are insolvent or in bankruptcy are ineligible to receive the support.
Employers who wish to receive financial support related to short-time working must first take other available measures to reduce costs of employees, for instance, dismissal of staff who are not permanent employees and who are not regarded as being critical to the business operations. These may include consultants, leased personnel, or temp staff, but there is no general requirement to lay off consultants or leased personnel.
The financial support may be received for a period of six months, with a possible extension of three additional months. Thereafter, a waiting period of 24 months from the approval date of the support will apply. In addition, the support may not be received for more than 24 calendar months over a period of 36 calendar months.
Taxes and charges
The Swedish Parliament has passed a bill that enables companies to reduce employer fees and the general payroll tax for a maximum of 30 employees. As of the 6th of April, such reduction can be requested by ticking a box in the employer declaration. For employers that have already submitted their declaration for March, it is possible to re-examine this by submitting a new declaration. The reduced employer fees will be up to SEK 25,000, for payouts during the 1st of March to the 30th of June 2020, with a maximum of SEK 5,300 per employee and month.
Companies financially affected by the Coronavirus, may apply for postponement of the payment of tax. Regarding employer contributions, deducted tax and VAT, a temporary payment respite of tax is possible for one year, for up to three accounting periods between January and September 2020. There are also other types of tax included in the possibility of payment respite of tax. Furthermore, it is possible to change the debited preliminary tax for up to six months after the end of the tax year. For sole traders, there is also a possibility to regain preliminary tax for 2019.
Financing and loan
As part of a crisis package for small and medium-sized companies, the Government has presented a central government loan guarantee. The proposed guarantee means that the central government guarantees 70 percent of new loans from banks to otherwise robust companies now experiencing financial difficulty on account of the Coronavirus. The proposal includes the opportunity of each company to borrow a maximum of SEK 75 millions.
Other loan opportunities are loans from Almi, where a special kind of loan has been established for the current situation, and financial support from the Swedish Riksbank, that is borrowed via the banks.
A temporary rebate for fixed rental costs in exposed industries, has been proposed by the Government as a way to mitigate the economic consequences of the outbreak of the Coronavirus. The proposal means that the state accounts for 50 percent of the rent reduction and up to 25 percent of the fixed rent, for the period from the 1st of April to the 30th of June 2020. The premise is that the landlord and tenant renegotiate and reduce the rent. Businesses included are among others, durable industry (such as clothes, home electronics and toys), hotels and restaurants, but also retail, logistics operations, and arrangement of congresses and fairs. In a new list, dentists, physiotherapists, hair- and body care are also mentioned. The complete list will shortly be presented.
Annual general meeting (AGM) and annual report
As regards to annual general meetings (or shareholders’ meetings), the principal rule is that the meeting has to be held where the board of directors has its registered office. However, if all shareholders agree, the formal requirements concerning the summons and the place of the meeting may be disregarded. Accordingly, the meeting may under some circumstances be held by telephone or video conference. Another possibility is to hold the meeting by written correspondence per capsulam, whereby the shareholders do not need to gather in person. In such case, the decisions taken have to be documented in writing and signed by all persons entitled to take part in the decisions.
The statutory time limit to hold an annual general meeting still applies. Consequently the meeting has to take place within six months after the end of the company’s financial year. If the meeting is not held in time, apart from violating the legal requirement, the company will not be able to take decisions as planned and neither to register the annual report with the Swedish Companies Registration Office (Sw. Bolagsverket). The annual report, and the auditor’s report when applicable, shall by law be filed within seven months from the end of the company’s financial year. A limited company therefore risks having to pay late filing penalties, while the board of directors risks committing an accounting offence. Companies are still able to request remission of the late filing penalty or appeal the decision. The Companies Registration Office has declared that if the reason for late filing is linked to corona infection, this can obviously be a reason for remission, but an assessment is made in each individual case.
However, a temporary act entering into force on the 15th of April 2020, will facilitate the holding of annual general meetings. For instance, collection of proxies, postal votes and participation by proxy will be possible to a greater extent.
With respect to this extraordinary situation caused by the Coronavirus, new regulations and updates may be presented at short notice. At Lindmark Welinder, we continuously follow the news and updates, keeping us á jour with the changes in regulation as a consequence of COVID-19. We also have close international cooperation, especially through our international network Ally Law. You are more than welcome to contact us for more information or customized advice for your particular business.