FINLAND Law and Practice Contributed by: Christoffer Waselius, Jaakko Huhtala and Niko Markkanen, Waselius
7.7 Irrevocable Commitments In order for a tender to be successful, obtaining irrevo - cable commitments from the principal shareholders of the target company may be conclusive and, thus, it is common to aim to ensure the involvement of the principal shareholders in the tender. Negotiations with shareholders are made before public disclosure of the offer. It should be noted that such shareholders will subsequently usually become subject to regulations on insider trading. The undertakings are usually con - ditional in that they provide an out for the shareholder if a better competitive offer is made, by reserving the shareholder’s right to attend to the competitive offer instead. 8. Management Incentives 8.1 Equity Incentivisation and Ownership Equity incentivisation is a fairly common feature of pri - vate equity transactions. The level of equity depends on the circumstances at hand, but generally, manage - ment is allocated somewhere between 5% and 15% of the ordinary equity. However, this amount may be even higher, especially in smaller deals. 8.2 Management Participation It is rather common to structure management par - ticipation by using sweet equity pots. The equity allocated to management usually consists of either ordinary or preferred shares. Generally, management is allocated somewhere between 5% and 15% of the ordinary equity, but this may be even higher, especially in smaller deals. 8.3 Vesting/Leaver Provisions Manager shareholders’ ownership of shares is usually subject to a vesting period whereby the shares allo - cated to the management vest over time. If a manager shareholder leaves the company before exit, it is likely that the maximum share of equity allocated to them will not have vested by the time of their departure. A manager shareholder’s shares are, further, usually subject to a redemption right, but not obligation, for the private equity fund, the other shareholders and the company.
Disclosure of Financing Arrangements Prior to making a takeover bid public, the offeror must ensure the availability of the necessary financing. The availability of the finance may be agreed on a condi - tional basis, such as that no material adverse change takes place on the financing markets or in the target company, or on the takeover bid being completed in accordance with its terms. Conditions and elements of uncertainty relating to the financing arrangements that are essential to the evaluation of a bid must be made public at the time the bid is disclosed. Additional deal security measures may include, for example, break fees (as discussed in 6.6 Break Fees ) or non-solicitation provisions, if they are considered to be in the interest of the target company. 7.6 Acquiring Less Than 100% If a bidder obtains more than 90% of the target’s shares and votes, the bidder has the right to squeeze out remaining shareholders at a fair price. In such a squeeze-out situation, a minority shareholder is also entitled to require the majority shareholder to redeem their shares. The redemption price is the fair price preceding the initiation of the squeeze-out procedure, and is finally determined in statutory arbitration in the case of dispute. A majority shareholder’s possibility to control a com - pany’s board and operations is limited by minority protection provisions such as the right to demand a minimum dividend (being at the outset one half of the profits of the company of the preceding accounting period). A shareholder holding in excess of 33.3% of the shares or votes can prevent all changes to the arti - cles of association and any directed share issuances in deviation from the shareholders’ pre-emptive rights, as well as most mergers, de-mergers, share buybacks and other resolutions requiring a two-thirds majority. The use of holding companies in third-party acquisi - tions has been widely accepted in Finnish taxation practice, and the prevailing view is that the deduct - ibility of the interest on the acquisition loan generally cannot be denied by applying anti-avoidance rules.
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