The two most popular ways of concluding M&A deals in Finland involve selling shares or selling entire companies. Signing an M&A agreement in the Republic of Finland can be affected by a number of factors, including the structure of a deal, the sector in which a target company is operating, and the need to secure approval of the regulatory authorities.
Acquiring a company in Finland usually requires the purchaser to sign a NDA agreement & perform due diligence of the target company. Concluding a deal is preceded by a comprehensive audit, following which the parties proceed to the negotiation phase. The entire process may take from several weeks to several months & depend on the terms of the deal & the need to get permission from a regulatory authority.
Finland’s M&A Regulation
The two main pieces of legislation governing M&A deals in the Republic of Finland are the country’s Contract Law & Company Law. If either party happens to be a PLC, then the deal is governed by two other laws - the Securities Market Act & Securities Market Abuse Regulations.
In case the turnover threshold is exceeded, Finland's Competition Law or EU M&A regulations are applied. According to them, the purchaser must notify Finnish regulators (or the EU Commission) of the competition of a transaction & any existing consumer protection issues. If a deal is concluded between competing companies, then it is normally governed by relevant competition acts & regulations.
An M&A agreement in Finland isn’t always governed by Finnish rules & regulations. Sometimes, transferring assets or selling businesses may require signing additional agreements on asset transfer. As far as M&A deals are concerned, general provisions of Finland’s Company Act are applicable.
What Ownership Rights Do Purchasers Have?
Finnish law draws no distinction between equitable & legal ownership. Therefore, after signing a contract on the transfer of stakes in Finland, purchasers gain full ownership of the stakes or enterprises. However, to be able to enjoy voting rights that come with the stakes, purchasers are required to inform a target company of the transferring of the stakes.
Ordinarily, the purchaser must secure consent of all shareholders so they could buy the stakes of these shareholders. If there are several sellers, their rights & obligations are frequently regulated by a shareholder agreement. Under the Company Law, shares of a shareholder that owns a 90% stake in the company can be repurchased, which includes a right to vote on the repurchase of the remainder of the shares. If there’s a right to buy back shares, minority shareholders can also require majority shareholders to repurchase their stakes.
Buying Companies in Finland: Limitations
There may be limitations on acquiring a business in Finland if the target company is involved in activities essential to the country’s security & wellbeing or if foreign purchasers acquire a controlling stake in a company. Under Finnish legislation, EU purchasers are regarded as foreign buyers & may be denied the right to acquire a company if it operates in the defense sectors or manufactures dual-purpose products.
Acquiring a defense sector entity in the Republic of Finland or dual-purpose products requires prior notification & approval of the regulatory authorities. Under Finnish legislation, Finnish regulatory bodies can use their own judgement while determining what businesses & companies are essential to the country’s security & wellbeing.
There can be various industry-specific regulations applicable to a particular deal. For example, changing the rights of ownership in lending establishments requires purchasers to inform relevant supervisors. Under some conditions, regulators may prevent buyers from obtaining a banking license in Finland, if the latter do not satisfy established criteria for owning lending institutions.
Need legal assistance with concluding an M&A deal in the Republic of Finland? Looking for legal advice on M&A legislation in Finland? IQ Decision UK is at your service.