FINLAND Law and Practice Contributed by: Tarja Wist, Wist Attorneys
ables, a notification of the pledge to the bank or, respectively, debtor. Ideally, such instruction should provide that any withdrawals from the bank accounts must be authorised by the secu- rity agent and, respectively, that any payments under the pledged loans or receivables should be made to the security agent. This requirement is often not feasible in operative companies and is not always fully complied with. A security interest over listed shares or other de-materialised securities issued in the Finn- ish book-entry securities system is perfected by registering a pledge against the book-entry securities account in which the securities are held. To have a duly perfected real estate mortgage, an electronic mortgage certificate must be reg- istered in favour of the security agent in the Title and Mortgage Register of the Land Register. The registration application may be submitted electronically by the party holding the title to the real estate. A business mortgage is perfected by first regis- tering a standard form promissory note, signed and executed by the encumbered company, in the Business Mortgage Register maintained by the Finnish Patent and Registration Office, and by then delivering the registered promissory note to the possession of the security agent or its rep- resentative. The registration application may be filed by the company or, subject to due authori- sation by the company, by, for example, the security agent. To meet the possession require- ments for perfection, the registration application usually provides that the promissory note, once its registration is completed, must be delivered directly to the security agent.
The pledge of patents and other registered IP rights is perfected by means of registration in the relevant register maintained by the Finnish Patent and Registration Office. 5.4 Restrictions on Upstream Security There are two main Finnish law considerations relating to upstream security: financial assistance and corporate benefit. These are addressed in 5.5 Financial Assistance and 5.6 Other Restric- tions , respectively. 5.5 Financial Assistance Financial assistance is defined by Finnish com- pany law as the granting of a loan, funds, or a security for the purpose of financing the acqui- sition of shares of the company or of its parent company. Financial assistance is strictly prohibited, and no “whitewash” procedures apply. However, there is an exemption for loans granted to the company’s personnel for the purpose of their purchases of shares in the company, provided that the total amount of such loans does not exceed the amount of the distributable funds of the company. The strict financial assistance rules effectively prohibit the target company and its subsidiaries from providing security for the acquisition facil- ity. This restriction calls for a clear separation of the acquisition facility from the working capital facility, which the target may freely guarantee and secure. A post-acquisition merger of the target and the bidco, which effectively allows the use of the target’s assets to service the bidco’s acquisi- tion loan, as discussed in 3.1 Senior Loans , is, however, generally allowed and not deemed to breach the financial assistance provisions. This
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