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Beyond Borders: Eversheds Sutherland's ICR insights series. EU Mobility Directive – Legal Update – Finland

  • Finland
  • Corporate
  • Labor law and trade union issues

24-11-2022

Country specific - Finland

This country specific outline contains further information regarding the implementation of the provisions of the EU Mobility Directive into Finnish law and provides further local insight.

For further information and to access any of our other country-specific briefings that we have prepared, please refer to the bottom section of our general briefings page here.

Cross-border mergers, divisions and conversions

Status of implementation

The Finnish Government proposal (Hallituksen esitys) HE 146/2022 (the “Proposal”) implementing Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions (the “Directive”) was given to the Parliament of Finland (Eduskunta) on 19 September 2022. The Proposal is currently pending, and it has been sent to the Commerce Committee (Talousvaliokunta) on 27 September 2022. The Commerce Committee is currently considering the matter and consulting experts. . After that, the Commerce Committee will draft a report, and the Proposal  returned to the plenary session of the Parliament for a first hearing. This hearing comprises a general discussion during which the Parliament may refer the Proposal to the Grand Committee (Suuri valiokunta). The contents of the Proposal are decided on in a detailed consideration. Then the Parliament either adopts or rejects the Proposal in a second hearing.

The Proposal is intended to enter into force on 31 January 2023. It includes transitional provisions to regulate transactions that have commenced prior to, but implemented after, the law takes effect. If not  implemented in a timely manner, certain provisions of the Directive – i.e. only those that are unconditional or sufficiently clear and precise, shall have direct legal effect.

Summary of Finnish current and future legal landscape

Finland already has legislation in force relating to cross-border mergers and divisions but lacks a clear unified framework for conversions (kotipaikan siirto) across borders. To date, only domestic conversions are regulated under Finnish law.

In the absence of a harmonised cross-border legal framework (apart from the European company or SE), however, we do regularly see cross-border transactions being implemented, both inbound and outbound, by applying EU case law regarding freedom of establishment and movement (notably, Luxembourg Court of Justice in Cartesio, Vale and Polbud). The Directive (and the Proposal) currently provide for guidance on the formalities for implementation of such cross-border conversions. However, to date, cross-border divisions involving Finnish companies have been rare. With the implementation of the Directive, Finland will have a unified legal framework for mergers, divisions and conversions across borders within the EU/EEA, safeguarding rights of creditors, employees and (minority) shareholders. We expect these important structuring tools will further facilitate cross-border transactions.

Permitted companies and geographic scope

In the Finnish context, the cross-border transaction can take place between Finnish limited liability companies; Finnish private limited company (yksityinen osakeyhtiö) and Finnish public limited company (julkinen osakeyhtiö)) and limited liability companies from the other EU/EEA Member States. Other entities, such as foundations, may need to rely on the freedom of establishment and relevant EU case law as a basis or, alternatively, convert into a limited liability company. Under the Directive, these cross-border transactions are principally limited to EU/EEA Member States and Finland does currently not permit those transactions with limited liability companies outside of the EU/EEA.

Timing

With implementation of the Directive, the Finnish side of a simplified, non-complex cross-border transaction (i.e. a transaction involving companies with (each) only one shareholder, no employees and no secured assets) takes approximately 4 months to complete at minimum, given the prescribed 3.5 month creditor opposition period. More complex cross-border transactions could take up to 6-12 months for actual implementation, particularly as formalities in the EU/EEA Member State of exit and entry will both need to be complied with.

The Directive provides for an extensive legal framework and (largely) harmonised legal process for these cross-border transactions and introduces specific safeguards for creditors, employees and (minority) shareholders. For any further guidance and advice on these matters, please do reach out your local Eversheds Sutherland contact.

Competent authority, pre-transaction certificate and anti-abuse check

As for any domestic Finnish conversion, merger or division, in Finland, the Finnish Patent and Registration Office (Patentti- ja rekisterihallitus) is the designated competent authority that supervises and executes the Finnish realisation of the cross-border transaction. In that capacity, the Patent and Registration Office must attest, by means of the issuance of a so-called pre-transaction certificate, that all the Finnish requirements for the cross-border transaction have been complied with and that the cross-border transaction has successfully been executed so far. This is a formality in the end stage of the Finnish part of the cross-border transaction. As part of its pre-transaction certificate due diligence, the Patent and Registration Office will have to conduct an anti-abuse check. The Patent and Registration Office will not issue the pre-transaction certificate and will not authorise the cross-border transaction if it determines that the transaction has been set up for unlawful or fraudulent purposes aimed at evading European or national law.

In case of an outbound cross-border transaction, meaning a transaction whereby a Finnish company converts to or transfers (assets) (in)to a company based in another EU/EEA Member State, the cross-border transaction shall subsequently be finalised in the other Member State involved. Based on the pre-transaction certificated issued by the Finnish Patent and Registration Office, the designated competent authority of the other Member State is able to proceed and legally complete and effect the procedure locally.

In case of an inbound cross-border transaction, meaning a transaction whereby a company (or companies) based in another EU/EEA Member State transfers (assets) (in)to or is converted into a Finnish company, the cross-border transaction shall subsequently be finalised in Finland. To be able to legally complete and effect the procedure in Finland, the Finnish Patent and Registration Office will require a pre-transaction certificate from the designated competent authority of the other Member State(s) involved.

Effective date, method and manner of inbound cross-border transactions

Inbound cross-border transactions (i.e. inbound conversions, mergers and divisions) become effective in the form, manner and on the date as prescribed by Finnish law.

Upon registration of the execution of the cross-border transaction by the Finnish Patent and Registration Office, the conversion, merger or division will become legally effective.

Miscellaneous

For cross-border transactions involving a company that is engaged in regulated business it must be also cleared that the company meets the requirements based on Finnish business legislation. The Finnish Financial Supervisory Authority (Finanssivalvonta) is responsible for such supervision.

Key local contacts

Should you have any questions or in case you require any assistance in this regard, please do not hesitate to contact us.

Other country specific

For reference, please find other country-specific information we prepared as part of this Insight Series here.