FINLAND Law and Practice Contributed by: Timo Lehtimäki, Niklas Thibblin, Essi Hietaoja and Oona Honkamaa, Waselius
7.4 Rescue or Reorganisation Procedures Other Than Insolvency Finnish law does not provide for formal procedures for preventative financial restructuring of a company, apart from the regulations for a preventative reorgani - sation of debt set out in the Restructuring Act. However, a debtor and creditor may voluntarily agree on arrangements, such as payment plans, in order to avoid insolvency proceedings under the general principle of freedom of contract. A voluntary con - tractual payment arrangement between a creditor and a distressed debtor often results in a faster and more inexpensive process than a bankruptcy or regu - lated restructuring process. Nonetheless, there is an inherent risk in such voluntary arrangements, as they may be rendered moot by the mandatory provisions of applicable insolvency laws if they fail. Addition - ally, there is an increased risk of claw-back in such arrangements. 7.5 Risk Areas for Lenders If the borrower, security provider or guarantor were to become insolvent, most typical risks for lenders are the value-destructive effects of insolvency and delays, including a moratorium on enforcement – this may trap a lender in an insolvency process that can last several years, with the final recoveries being paid only at the end of the proceedings. 7.6 Transactions Voidable Upon Insolvency A transaction, series of transactions, arrangement or any other act relating to the assets of the debtor can be challenged pursuant to the Revocation Act, if made during a critical period preceding insolvency or foreclosure proceedings, provided that the condi - tions described below are met. The critical period is calculated backwards from the filing for insolvency proceedings or enforcement of a claim by foreclosure. General Grounds for Revocation Transactions may be revoked pursuant to the Revo - cation Act where the arrangement can be deemed as improper or inappropriate from the point of view of the other creditors of the debtor, and where the coun - terparty of the debtor knew or ought to have known of the debtor being, or by virtue of the transaction becoming, unable to pay its debts when due. The
• If the company has undergone company restruc - turing proceedings prior to the bankruptcy: (a) a) fees and expenses of the restructur - ing administrator and the supervisor of the restructuring programme, with penalty interest accrued until the time of payment of the fees and expenses; and (b) b) after satisfaction of payments mentioned in (a), creditors of a debt that has arisen between the commencement and discontinuation of restructuring proceedings, with penalty interest accrued until the time of payment of the debt. • Creditors with claims that are secured by a floating charge will receive (prior to other unsecured claims) a disbursement of 50% of the net proceeds of the assets (after the claims of creditors with a better priority position have been satisfied). There are no material statutory security interests or priming liens under Finnish law. For example, tax, employee and pension claims do not enjoy any super- priority but instead rank pari passu with normal, unse - cured debt. In practice, the bankruptcy trustees’ fees and costs have a super-priority. 7.3 Length of Insolvency Process and Recoveries The timeframe for the completion of the bankruptcy proceedings and the distribution of the net proceeds depends mostly on the practicalities, such as how quickly the assets of the bankrupt estate can be real - ised. Generally, this may take years, especially if the bankruptcy estate becomes involved in lawsuits. The usual duration of a restructuring programme is five to seven years. However, the early company restruc - turing proceedings should be completed within 12 months, though may be followed by the commence - ment of regular company restructuring proceedings or, if the company is insolvent, bankruptcy proceed - ings. Through a company restructuring, creditors are typi - cally able to recover a larger portion of their debts compared to what would be possible in bankruptcy.
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