FINLAND Law and Practice Contributed by: Timo Lehtimäki, Niklas Thibblin, Essi Hietaoja and Oona Honkamaa, Waselius
The filing for regular company restructuring proceed - ings usually triggers a moratorium on enforcement against the debtor. The moratorium generally prohib - its: • the enforcement of security; • the repayment and enforcement of debts that have fallen due before the commencement of the restructuring proceedings; and • the seizure of assets. The moratorium is in force until the company restruc - turing programme has been confirmed by the court (or the proceedings are terminated early – for exam - ple, due to a lack of funds). Debts arising after the filing for restructuring proceedings must be paid as they fall due. The restructuring proceedings leading to the commencement of the actual restructuring programme generally take several months, with the duration depending on the complexity of the debtor company. After the restructuring programme is approved by the court, and for the duration of the programme, the enforcement of security is only possible pursuant to the terms of the court-approved programme, which commonly entails that enforcement will not be pos - sible in practice during the duration of the programme. During the moratorium, the court may, however, permit a secured creditor to enforce its security interest, if: • the security asset is clearly not necessary for the restructuring programme to succeed; or • the debtor has failed to pay interest on the secured debt, compensate any depreciation of the respec - tive security asset due to its use during the mora - torium, or maintain proper insurance on the secu - rity asset in question. The moratorium does not restrict the payment of accrued interest on secured debt if the interest is paid on the original terms of the loan and falls due during the restructuring proceedings. Although the secured creditors are subject to the moratorium on most enforcement actions, the Finnish Restructuring Act provides them with special protec -
tion in respect of their claims and rights as secured creditors during the proceedings. However, a creditor is considered a secured creditor only to the extent that, at the time at which the reorganisation proceed - ings are commenced, the value of the security asset is sufficient to cover the debt so secured. As such, any amount of the debt in excess of this is considered unsecured and can be subject to the same haircuts as other unsecured debt. In the early proceedings, a general moratorium is imposed, unless it is likely that a moratorium will not be necessary. However, a general moratorium shall not be imposed if the debtor so requests. If a general moratorium is imposed, it is in force for three months, and can be extended to a maximum of 12 months. Also, the court may, on application, impose a tem - porary moratorium before the actual proceedings are initiated. Upon the expiry of the maximum period, the early restructuring proceedings should be completed; how - ever, if that is not the case, it is possible to commence regular proceedings or, if the company is insolvent, to apply for bankruptcy. 7.2 Waterfall of Payments The Act on the Ranking of Claims determines the order in which debts are settled. As a main rule, creditors with similar priority have an equal right to a disburse - ment from the funds of the bankruptcy estate in pro - portion to the amount of their claims, unless otherwise provided by law. However, the following creditors have precedence over unsecured creditors to receive disbursement for their claims, in this order. • Secured creditors (excluding floating charge hold - ers) and holders of rights of retention have priority for the proceeds relating to the relevant security asset. • Creditors of the administrative expenses of the bankruptcy estate, and creditors with claims on the basis of contracts that the bankruptcy estate (rather than the debtor) has entered into, as well as any liabilities for which the bankruptcy estate is responsible by operation of law.
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