[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN FINLAND]
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KEY FACTS OF BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS UNDER FINNISH LAW
In Finland, insolvency legislation provides for two distinct statutory processes: bankruptcy and corporate restructuring, each with separate proceedings. Both proceedings are briefly summarized in this text. Corporate Restructuring in Finland The purpose of restructuring is to rehabilitate the viable parts of a business, facilitate their operation, and enable debt adjustment. Corporate restructuring in Finland can be conducted through formal legal proceedings or out-of-court processes. As is common in other countries, in Finland, voluntary out-of-court proceedings are typically used by large companies. In the SME sector, formal restructuring proceedings based on legal statutes are more popular. This text focuses on formal corporate restructuring proceedings in Finland. Three Steps of the Process Corporate restructuring in Finland is divided into three steps: 1. Application
Under proceedings, restructuring debts are defined as those existing on the day the application is filed with the district court. Debts incurred before that date are considered restructuring debts. Once the application has been filed, the company can apply for a court order to protect it from debt collection actions. Initiating debt collection after the debtor has filed for restructuring is generally futile and may result in additional costs for the creditor. the restructuring Since corporate restructuring in Finland is legally mandated, the court almost always appoints an administrator to oversee the proceedings. In nearly every case, the appointed administrator is an attorney. 2. Restructuring Proceedings The administrator’s role is to monitor and supervise the debtor’s activities during the restructuring proceedings, as well as to audit the debtor’s activities prior to the proceedings. The administrator is responsible for taking action if illegal activities are discovered or if the company starts incurring debts again and is unable to pay debts incurred after the filing of the application. In such cases, the administrator will file an application with the court to terminate the restructuring proceedings. If it appears that the restructuring proceedings can continue, the administrator prepares a report on the debtor’s assets, liabilities, and other obligations, as well as the circumstances affecting the debtor’s financial position. This report is sent to all known creditors by the administrator. The report is typically written in Finnish, but the administrator can usually provide a translation or summary in English if needed.
2. Restructuring Proceedings 3. Restructuring Programme
1. Application The corporate restructuring process in Finland begins when the debtor or a creditor files an application for restructuring with a district court. The decision to initiate a corporate restructuring process is made by the district court that has jurisdiction over the debtor’s general administration. The court will hear the largest creditors regarding the application, and any objections must be justified with barriers based on the Finnish Restructuring Act.
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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