How is a control balance sheet prepared? Step by step

Step 1: Identify when the obligation arises

The board must immediately prepare a control balance sheet when there is reason to assume that the equity, calculated according to Chapter 25, Section 14 of the Swedish Companies Act, is less than half of the registered share capital. The same applies in the enforcement situation specified in Chapter 25, Section 13, paragraph 2.

It is therefore not necessary to wait until an annual report definitively proves the capital deficiency. Read when a control balance sheet is required.

Step 2: Prepare the control balance sheet immediately

The control balance sheet is based on applicable annual accounts legislation. Specific adjustments may be made according to Chapter 25, Section 14 of the Swedish Companies Act, for example, certain higher asset values or net sales values when the requirements of the law are met.

The adjustments must be reported separately and untaxed reserves must be divided into equity and deferred tax liability.

See the valuation guide for details.

Step 3: Sign and manage the auditor's review

The control balance sheet must be signed by the board. The Companies Act also states that the board must have the company's auditor review the control balance sheet. If the company does not have an appointed auditor, there is no company auditor to perform the review.

If the company has an auditor, their opinion on the control balance sheet must be presented if the process proceeds to a shareholders' meeting for liquidation purposes.

Step 4: Convene the first shareholders' meeting for liquidation purposes if the capital is below half the share capital

If the control balance sheet shows that the equity is less than half of the registered share capital, the board must as soon as possible convene a general meeting to consider whether the company should be placed into liquidation. This is the first shareholders' meeting for liquidation purposes.

The control balance sheet and the auditor's opinion, if the company has an auditor, must be presented at the meeting.

Step 5: If the company continues – work on capital restoration

If the meeting does not decide on liquidation, the company can continue during the control period. This does not mean that the board can ignore the capital issue. The company needs to monitor its finances and take relevant measures.

Possible capital measures could include improving profitability, cost adjustments, capital injections, or other measures correct in terms of company law and accounting. Which solution is appropriate depends on the company's situation.

Step 6: Hold the second shareholders' meeting for liquidation purposes within eight months of the first

If the control balance sheet presented at the first shareholders' meeting does not show that the equity at the time of the meeting amounted to at least the full registered share capital and the meeting did not decide on liquidation, the matter must be reconsidered within eight months from the first shareholders' meeting for liquidation purposes.

Before the second shareholders' meeting, the board must prepare a new control balance sheet. According to the law, it must be reviewed by the company's auditor if the company has one and be presented at the meeting along with the auditor's opinion.

Step 7: Assess whether a liquidation application is required

If the second shareholders' meeting for liquidation purposes is not held on time, or if the control balance sheet presented there does not meet the legal requirements for restored capital and the meeting does not decide on liquidation, the board must, according to Chapter 25, Section 17 of the Swedish Companies Act, apply to the court for liquidation.

The application must be made within two weeks from the second shareholders' meeting or, if it was not held, from the day it should have been held at the latest.