FINLAND Law and Practice Contributed by: Christoffer Waselius, Jaakko Huhtala and Niko Markkanen, Waselius
common for manager shareholders. Veto and control rights, as well as rights of control over exit, are usually held by the private equity investors. 9. Portfolio Company Oversight 9.1 Shareholder Control and Information Rights Typically, provisions on shareholder control are included in a shareholder agreement between the shareholders of the target. Such provisions typically include, for example: • the right to appoint a certain number of board members (including the chairperson) and the man - aging director; • control over the exit; • veto rights in relation to the commencement of litigation proceedings; • the execution of new share issuances; and • other financing arrangements of the target, among other matters. 9.2 Shareholder Liability At the outset, Finnish law does not impose any share - holder liability for the actions of the portfolio company and thus far the corporate veil has only been pierced in exceptional circumstances. The typical holding period for private equity transac - tions before the investment is sold or disposed of is around five to ten years. Dual-track processes have become increasingly popular in recent years, and are sometimes even run in parallel during the whole pro - cess. 2021 saw record-breaking activity in relation to the number of IPOs in Finland. However, Finnish IPO activity slowed down markedly in 2022, with the num - ber of IPOs halved in 2022 compared to 2021. The IPO market all but stopped in 2023 and 2024, with only a few new entrants to the main list of Nasdaq Helsinki. However, several companies are preparing for IPOs in 2025 and optimistic estimates predict that 2025 will see a significant increase in listings. 10. Exits 10.1 Types of Exit
Generally, most dual-track processes have resulted in trade sales in recent years, and trade sales can also be considered the most common form of private equity exit, but the increased IPO activity in 2021 led to many IPO exits for private equity investors. Private equity sellers occasionally reinvest upon exit, while it is customary for private equity sellers to remain as investors for brief lock-up periods after IPOs. Apart from private sales to other private-equity- backed investors or corporates and IPOs, any other forms of private equity exit have recently been uncom - mon. Triple-track exit processes where a recapitalisa - tion is prepared in parallel are not common in Finland. 10.2 Drag and Tag Rights Drag rights are typically included in a shareholder agreement entered into between the shareholders of the target in connection with the transaction. Typi - cally, this would entail a shareholder being contrac - tually forced to sell – eg, upon the occurrence of a triggering event such as the sale of the target – on substantially the same terms and conditions as the other shareholders of the target. Private equity sell - ers usually decide on the exit under the shareholder agreement and, as private equity sellers commonly have drag rights, they may indirectly utilise the rights even if they do not formally exercise them. Tag rights are typically included in a shareholder agreement entered into between the shareholders of the target in connection with the transaction. Typically, this would entail a majority shareholder who is sell - ing their shares being contractually forced to offer the remaining shareholders the possibility to also sell their shares in the target, on substantially the same terms and conditions as the majority shareholder. 10.3 IPO The typical lock-up term for a private equity fund is 180 days. Relationship agreements between the pri - vate equity seller and the target company are rarely seen in the Finnish market.
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