SECURITAS AB Annual Report 2011

Note 37. Contingent liabilities
MSEK 2011 2010 2009
Sureties and guarantees 1 56.9 56.2 56.2
Guarantees related to discontinued
operations 20.7 18.9 36.9
Total contingent liabilities 77.6 75.1 93.1
1 The comparatives have been restated since guarantees on behalf of related parties are accounted for
in note 7 as of 2011.
In addition to the contingent liabilities accounted for in the table above, the
following contingent liabilities, for which no amount can be determined, also
exist:
Brazil – Estrela Azul
In connection with the efforts of Securitas to expand its activities in Latin
America, Securitas entered into an agreement in 2005 with respect to the
possible acquisition of a guarding company in Brazil. In order to support this
company while required governmental approvals were sought, Securitas
provided a bank guarantee for the benefit of the subject company. The governmental
approvals took much longer than anticipated to obtain and during
such period the financial condition of the target company substantially deteriorated.
Given the decline in the financial condition of the company, in
December 2006 Securitas exercised its right not to complete the acquisition.
The governmental approval had then been received. In view of the
decision not to complete the subject transaction, a provision in the amount
of the bank guarantee was recognized as of December 31, 2006.
The company filed for protection from its creditors under Brazilian legislation
providing for a judicial restructuring process. Securitas, being a creditor
in the insolvency matter, objected to the company’s restructuring plan
proposed in the judicial restructuring process. The insolvency judge
decided against Securitas’ objections and this decision was appealed by
Securitas in 2008. The Court of Appeal upheld the lower courts’ decision.
The company has thereafter, on November 9, 2009, been declared bankrupt
and the restructuring process has been replaced by bankruptcy proceedings.
In connection with the judicial restructuring process, the company (now
in bankruptcy) asserted a claim of MUSD 140 against Securitas, alleging
that Securitas is responsible for the company’s financial failure. Securitas
denies all responsibility for such claim. The defense of these cases has been
entrusted to one of the leading law firms in Brazil. In a decision by the first
instance court in Brazil the claim was fully rejected. The judgment has been
appealed by the bankruptcy estate.
In addition, several employees of Estrela Azul who claim to be owed inter
alia wages have named Securitas in addition to other parties in pending
labor suits. The number of labor law cases involving Securitas stabilized in
2010 and the number of new cases where Securitas is a named defendant
decreased significantly in 2011. The claimed amounts are in average
relatively low. The defense of these labor cases has been entrusted to one
of the leading labor law firms in Brazil – specializing in labor law matters.
Securitas denies all responsibility for such claims.
Spain – tax audit
The Spanish tax authority has in connection with an audit of Securitas Spain
challenged certain interest deductions and in a tax resolution in June 2009
decided to reject interest payments made for the years 2003–2005. If
finally upheld by Spanish courts, the resolution by the Spanish tax authorities
would result in a tax of MEUR 10 including interest. Securitas has during
2011 lost at first level court (Tribunal Económico Administrativo Central)
and appealed the case to the national court Audiencia Nacional.
Securitas believes it has acted in accordance with applicable law and will
defend its position in court. However, the tax resolution causes some uncertainty
and it may take a long time until a final judgment is made. To avoid
future challenges of interest deductions the Group has in 2009 adjusted the
capitalization of Securitas Spain.
Annual Report
Notes and comments to the consolidated financial statements
USA – the events of September 11, 2001
A detailed account of the developments surrounding the events of September
11, 2001 has been presented in press releases and interim and annual
reports for 2001 to 2010.
Globe Aviation Services Corporation (“Globe”) and other Securitas companies,
together with the relevant airline and other parties, remain defendants
in one lawsuit regarding property and business damage pertaining to
the events of September 11, 2001. In 2011, the last wrongful death case
pending against Globe and other Securitas companies was dismissed and a
settlement of the majority of the property damage plaintiffs’ cases was confirmed
by the appeals court and became final. The remaining claims in the
outstanding case are such that the aggregate estimated value of the claims
filed can exceed the insurance coverage estimated to exist as a potential
source of recovery. The potential exposure has been reduced due to court
decisions (which in some cases are subject to appeal) limiting the liability of
the defendants. Due to the statutory liability cap in relation to the events of
September 11, 2001, any such liability would also be limited to the amount
of liability insurance coverage maintained at the time of the incident.
Globe and the other companies in the Group named as defendants in the
property damage case are challenging these claims. In all the suits, a number
of persons other than Globe and Securitas companies are co-defendants.
All coverage disputes with the relevant September 11, 2001 insurers
have been resolved. The proceedings against the Securitas companies
other than Globe have, with the consent of the Court and the plaintiffs, been
temporarily stayed. Any liabilities arising out of the September 11, 2001
litigation are not expected to materially impact Securitas’ business operation
or financial position.
USA – tax audit
The U.S. tax authorities have, after finalizing an audit of Securitas USA for
the years 2003–2004, issued a notice on July 1, 2010 disallowing certain
deductions for insurance premiums. Securitas is of the opinion that it has
acted in accordance with the law and will defend its position in U.S. Tax courts.
It may take several years until a final judgment is awarded. If the notice is
finally upheld by the U.S. Tax courts a judgment could result in a tax of
MUSD 60 plus interest.
Other proceedings
Over the years, Securitas has made a number of acquisitions in different
countries. As a result of such acquisitions, certain contingent liabilities of
the businesses acquired have been assumed. The risks relating to such
contingent liabilities are covered by contractual indemnification, insurance
or adequate reserves.
Companies within the Securitas Group are also involved in a number of
other legal proceedings and tax audits arising out of the business. Any liabilities
arising out of such proceedings are not expected to be material to the
business operations or the financial position of the Group.
Securitas Annual Report 2011
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