FINLAND Law and Practice Contributed by: Christoffer Waselius, Jaakko Huhtala and Niko Markkanen, Waselius
• fundamental warranties, eg, corporate organisa - tional matters and ownership of shares (or assets, in an asset deal); • financial matters, including correctness of the accounts; • agreements; • employees and employee benefits; • intellectual property rights; • litigation; • compliance with laws and permits; • tax; • real estate; and • environmental matters. Typically, the seller strives to limit warranties other than the fundamental warranties (eg, ownership of shares in a share sale) in various ways. Such limita - tions may be structured in the following ways: • qualifying warranties by the seller’s knowledge so that the buyer assumes the risk for unknown breaches of warranties (less so in insured transac - tions); • materiality qualifiers excluding the seller’s liability for minor breaches in the form of monetary de minimis and basket caps; or • time limitations for the indemnity obligation (or a specific survival period for warranties, but the former is preferable). “Fair Disclosure” Regarding disclosure, it is market practice in Finland that a buyer’s right to make a claim under the acquisi - tion agreement is limited by information that has been “fairly disclosed”, meaning that the buyer’s ability to present a claim against the seller for a warranty breach is limited to the matters or risk not sufficiently dis - closed in the data room (or in other disclosure mate - rial). Time Limit The time limit for presenting a claim usually varies between 12 and 24 months, with longer periods for presenting claims under fundamental warranties as well as tax and environmental warranties. Based on their goal to distribute the sales proceeds to investors sooner rather than later, private equity sellers seek to limit the time in which a buyer is able to make a claim
to a shorter period than in deals where the seller is not a fund. The maximum liability of the seller for breaches of busi - ness warranties is typically somewhere between 10% and 30% of the enterprise value. As a general rule, the larger the enterprise value, the lower the percentage. The basket threshold is typically approximately 1% of the enterprise value, and the monetary de mini - mis threshold is typically approximately 0.1% of the enterprise value. In deals where the enterprise value is high, the de minimis thresholds are often adjusted downwards as the typical threshold of 0.1% of the enterprise value could effectively bar relevant claims based on warranty breaches. 6.10 Other Protections in Acquisition Documentation The acquisition agreement may include certain spe - cific indemnity undertakings by the seller for certain risks identified by the buyer or disclosed by the seller during the due diligence phase. It has, in recent years, become increasingly com - mon for the parties to take out W&I insurance in order to provide cover for losses arising out of warranty breaches. W&I insurance typically covers both fun - damental and business warranties, with tax warranties covered from time to time. A more recent development in the W&I insurance space is the occurrence of so-called “synthetic” war - ranty and indemnity insurance. For synthetic W&I insurance, the warranties are not given by the seller and, instead, a synthetic set of warranties is attached to the insurance policy. The wording of the warranties is therefore not dependent on negotiations between the seller and the buyer, but, assuming that it is a buy- side policy, between the buyer and the insurer. Escrow or holdback arrangements, on the other hand, are unusual in deals with private equity sellers. 6.11 Commonly Litigated Provisions Litigation relating to M&A transactions in general and, specifically, private equity transactions is uncommon in Finland, and disputes are usually settled prior to proceeding to arbitration. Provisions that tend to
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