FINLAND Law and Practice Contributed by: Tarja Wist, Wist Attorneys
4.3 Role of Hedge Counterparties Hedge counterparties are usually included as parties to the intercreditor agreement. Whereas the ranking of the hedging liabilities is always a matter of negotiation between the finance par- ties, it is common that the claims of the hedging counterparties rank equal to those of the senior creditors. 5. Security 5.1 Types of Security Commonly Used In leveraged transactions, in particular in the private equity market, the security package would typically include everything that there is to have, including a pledge of the shares of the target and its subsidiaries, any intercompany loans between the borrower and obligors, bank accounts and potential M&A insurance receiva- bles. In addition, a business mortgage would typically be registered over the target’s assets. In a real estate transaction, the security package would encompass a real estate mortgage and a pledge of any shares of any real estate compa- nies owned by the target, as well as a pledge of the rental income deriving from the target’s real estate holdings. It is also possible to grant security over patents and other transferrable registered IP rights as well as over other specific assets of the target company. 5.2 Form Requirements The applicable form requirements depend on the type of security. For a pledge of shares, bank accounts or loans and receivables, no specific form requirements exist, and a duly executed written pledge agreement including an appropri- ate pledge undertaking by the pledgor in favour
of the pledgee(s) would suffice to meet any form requirements. One of the few substantive requirements of a pledge agreement is, however, that the benefi- ciaries of the pledge should be the actual credi- tors, whilst the security agent may well act as their representative and hold the pledged assets on their behalf. A real estate mortgage is created by means of a pledge of an electronic mortgage certificate in favour of the security agent. Whereas the elec- tronic mortgage certificate is in a standard elec- tronic form, no form requirements apply for the agreement creating a pledge over the electronic mortgage certificate. For business mortgages, no electronic mortgage certificates exist. Instead, the security documen- tation would include a standard form promissory note which is registered against the encumbered company and pledged in favour of the securi- ty agent. Again, while the business mortgage promissory note has a standard form, no spe- cific form requirements apply for the agreement creating a pledge over such business mortgage promissory note. 5.3 Registration Process For the pledge of private shares, bank accounts or loans and receivables, no registration require- ments (or possibility) exist. In order for the secu- rity interest to be enforceable in relation to third parties, including bankruptcy creditors of the pledgor, specific perfection measures are, nev- ertheless, required. These include, in the case of shares and other movable property, the transfer of the possession of the share certificates or such other movable property from the pledgor to the security agent or its representative, and in the case of bank accounts, loans and receiv-
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