[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
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. Under the restructuring 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. 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.
The purpose of restructuring is to rehabilitate the viable parts of a business, facilitate their operation, and enable debt adjustment. As is common in other countries, in Finland, voluntary out-of-court corporate restructuring 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. In Finland, there are two different statutory corporate restructuring proceedings: the so-called ordinary corporate restructuring proceedings and the early restructuring proceedings. A company that is already insolvent may apply for the ordinary procedure, or the procedure may be initiated if a sufficient number of creditors support the debtor’s application. The early restructuring procedure, on the other hand, may be initiated if the debtor is only at risk of insolvency. In both the ordinary and early restructuring procedures, the process is largely identical, and therefore these two types of proceedings are not addressed separately in this text. Three Steps of the Process Corporate restructuring in Finland is divided into three steps: 1. Application
2. Restructuring Proceedings 3. Restructuring Programme
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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