What to Do Legally When a Business Partnership Goes Wrong in Sweden

Business partnerships stand firm on a solid foundation of mutual trust, honesty, and shared goals. That said, collaborations, even the most promising ones can break down. If your business partnership in Sweden goes wrong, or you have a hunch it may be heading south, you must be aware of your options, rights, and the steps to take moving forward.

This article explores what you should do legally when your business partnership goes wrong in Sweden.

Understanding a Business Partnership in Sweden

A business partnership is a legal arrangement between two or more people to run a business entity together. All the partners involved in a partnership are liable for the debts incurred by the business unless the partnership specifically states otherwise, as in the case of a limited partnership.

Types of Partnerships in Sweden

There are two main types of partnerships in Sweden:

• Handelsbolag: This is a general partnership wherein all the partners involved have unlimited liability for the business.
• Kommanditbolag: This is a limited partnership with at least one limited partner and one general partner.

Signs of a Business Partnership Going South

It is unfortunate to see a business partnership you started with such passion going in the wrong direction. As upsetting as that might be, it is crucial to recognize the early warning signs to protect your rights and keep matters from getting worse.

Here are the common signs of a business partnership falling apart.

• Breach of partnership trust
• A partner not fulfilling their duties
• Ongoing arguments on finances 
• Disagreement about the business strategy
• Lack of transparency by a partner
• Inadequate and volatile communication between partners
• Persistent financial discrepancies
• Misuse of the business funds for personal use
• A partner stops investing effort, resources, or time

If you observe one or a combination of these signs for weeks or months, the odds are high that the business partnership is turning sour.

What Should You Do Legally When A Business Partnership Falls Apart in Sweden

Legally, there are certain steps you can take to safeguard yourself and your rights when your business partnership fails.

Go Through the Partnership Agreement

It is crucial to review your partnership agreement as it describes how the business should function and how the partners should resolve disputes. If there is no written agreement, the Swedish Partnerships and Non-registered Partnerships Act (Lag (1980:1102) is applicable.

Here are the key clauses you should check:

• Mechanisms to resolve conflicts
• Distribution of profit and loss
• Roles, duties, and responsibilities of all the partners
• Capital contribution by every partner

Attempt at Resolving the Dispute

When you start noticing the signs of conflict, openly communicating your concerns with the other partners is vital. Set up a formal meeting with the partners, and discuss the following:

• Clearly state the issues you are experiencing and all your apprehensions
• Once you have shared your concerns, give the other partners enough time to share their perspective
• See if you can work out a middle ground with the partners during the discussion

To have a constructive discussion that helps you resolve the conflict, follow these tips:

• Stay calm, sip some cool water, and take deep breaths
• Try not to interrupt others when they are sharing their opinions
• Avoid getting into the ‘blame game’ and instead focus on finding a solution
• Keep your voice soft and gentle because raising it can aggravate the matter
• While staying polite, stay firm and put your points forward with proof and authority
• If possible, involve a neutral mediator to resolve the situation peacefully

Engage An Expert Business Lawyer

If you cannot find a solution to mitigate the conflict, it is best to bring in a seasoned business lawyer in Sweden. Typically, business partners, especially those running a large partnership, engage lawyers from the get-go. Your lawyer helps protect your rights and allows you to explore suitable options per Swedish law.

Here is what a lawyer can do for you.

• Review your partnership agreement 
• Provide you with a legal interpretation of the conflict
• Represent your business interests during a negotiation
• Provide you with legal representation in case of litigation
• Advise you about the best possible route to take: dissolution, buyout, or mediation

Just make sure that you hire an expert business lawyer, such as those provided by Advantage Law Firm.

Arbitration or Mediation

Arbitration and mediation are two commonly exercised legal avenues to fix business and partnership conflicts outside of court.

Mediation

• Mediation involves a third-party facilitator who isn’t biased toward either party involved in the partnership conflict
• Typically, mediation focuses on finding common ground and reaching a solution acceptable to everyone
• It is non-binding unless all the parties involved in the dispute turn it into a legal agreement

Arbitration

• It is a private legal process to resolve the dispute
• It is usually a faster approach to end a conflict
• It is binding in nature and offers better confidentiality than the court

Consult both these options with your business lawyer. Based on your situation and the best route to protect your interests, your business lawyer will guide you on whether to opt for arbitration or mediation, or if going to the court is the best option.

Explore the ‘Buyout’ Option

If only one partner wishes to exit a partnership, it is practical to consider a buyout. Bring in a lawyer to help you with the situation. Your lawyer can draft the terms of the contract and review them to ensure objectivity.

The core aspects of a buyout agreement include the following:

• Payment terms
• Valuation of everyone’s business share
• Transfer of the business responsibilities
• Timeline of the transfer
• Non-compete clause, if it applies

Dissolution of the Partnership

If you and the other partners are unable to resolve the dispute, dissolving the partnership may be the right solution.

The legal steps to partnership dissolution include the following:

• First, specify the reason behind the dissolution, such as bankruptcy, persistent conflict, or breach of the set duties
• Notify the Bolagsverket (Swedish Companies Registration Office) to register the partnership dissolution officially
• Pay off any unsettled debts and obligations. Divide all the remaining assets per Swedish law and the agreement’s terms.

Safeguard Your Legal Rights

When you do dissolve a partnership in Sweden, there are a few important things you need to do next.

• First, close every joint account you had with the business partners
• Terminate all your existing contracts with the partners
• Notify all the clients and stakeholders of the partnership’s dissolution
• Remove the names from tax records and business registrations
• Document all the financial settlements with the partners

If there is no formal and written partnership agreement, the rules stated in the Partnerships Act become applicable. This can result in equal liability for all debts, equal share in losses and profits, and the court resolving the dispute.

How Advantage Law Firm Can Help

At Advantage Law Firm, we have the best business attorneys and lawyers to assist you with partnership-related issues.

Our business lawyers can help you draft and review your partnership agreements, negotiate and mediate conflicts on your behalf, guide you about the best possible route to take, provide you with legal representation in a conflict or case of a dissolution, help you plan your exit, and provide buyout support.

Contact our experts today to learn how to navigate the problems associated with a sour business partnership in Sweden.