FINLAND Law and Practice Contributed by: Timo Lehtimäki, Niklas Thibblin, Essi Hietaoja and Oona Honkamaa, Waselius
To address concerns regarding corporate ben - efit, it is beneficial to be able to structure the transaction so that at least the key guarantors and security grantors receive a direct benefit from the transaction – eg, via on-lending of loan proceeds. The corporate benefit related to certain individ - ual actions may be difficult to assess or prove. When assessing the existence of corporate ben - efit in retrospect, the analysis is to be made with - out hindsight and based on the circumstances current at the time when the relevant action was taken (and not, for example, on subsequent events that the board of directors could not reasonably foresee, or which were statistically remote, when making the decision). Unlawful Distribution of a Company’s Assets The concept of unlawful distribution of a com - pany’s assets included in the Finnish Companies Act in essence entails any acts that diminish the company’s assets or increase its debts with - out a business rationale. Since the concept of unlawful distribution of a company’s assets is linked to the concept of business rationale, it is much entwined with the concept of corporate benefit, though they are two separate issues. Consequently, provided that a Finnish company receives adequate corporate benefit from enter - ing into the relevant transactions, it is less likely that the rules on unlawful distribution of assets would be breached as well. 5.4 Restrictions on the Target Financial Assistance Under the mandatory provisions of the Finnish Companies Act, Finnish limited liability compa - nies are prohibited from providing loans, funds or guarantees/security for the purpose of the acquisition of shares of the company or of any of its direct or indirect parent companies. This
prohibition extends to the acquisition of exist - ing shares, subscription of new shares as well as option or subscription rights (and similar), and applies before, during and after the time of the acquisition. Therefore, any refinancing of acquisition debt is also generally considered to fall within the scope of the financial assistance prohibition. To mitigate the risks where, for example, a facil - ity has multiple purposes (such as acquisition financing, working capital and refinancing), from a Finnish perspective it would be advisable to divide the facility into tranches, with the acqui - sition debt being its own tranche. The relevant loan and security documentation also typically includes an appropriate Finnish law limitation clause. There are no set whitewash procedures available in Finland or specific time limits after which the limitation would cease to apply, though there is an understanding in the market that the financial assistance cannot prevent refinancing forever. However, while no whitewash procedures are available, post-closing legal mergers in par - ticular can be used to eliminate or mitigate the effects of financial assistance limitations. 5.5 Other Restrictions Hardening Periods A transaction, series of transactions, arrange - ment or any other act relating to the assets of the debtor can be challenged pursuant to the Act on Revocation of Transactions in Insolvency, if made during a critical period preceding insol - vency or foreclosure proceedings, provided that the conditions described below are met. The critical period is calculated backwards from the filing for insolvency proceedings or enforce - ment of a claim by foreclosure, and depends on the type of transaction. These are discussed in
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