Company law in Finland
Finnish law makes a distinction between private limited companies (Oy) and public limited companies (Oyj). The private limited company is the basic form, its economic function being the equivalent of the GmbH in Germany and the Ltd in England.
The Oyj is a special form designed for listed companies or such companies that want to be prepared for the option of going public. In Finland, there are around two hundred public limited companies. Their structure accounts for the special requirements of stock market legislation and therefore allows for less flexibility. The Oyj is not generally an option for a foreign enterprise establishing a subsidiary.
The law does not require any protected share capital for a private limited company. In a public company, the minimum share capital is EUR 80,000.
The company’s articles of association may provide for a nominal share value, but this is not required. Furthermore, the share capital itself does not need to be fixed in the articles. Therefore, the number of shares, the total share capital, and even the amount of share capital per share can be changed without changing the articles by taking the appropriate resolutions and registering the changes in the commercial register.
The central managing organ of the company is the board of directors (hallitus), consisting of one or more members. If fewer than three regular members of the board are nominated, one substitute member must also be appointed.
Board members do not necessarily have to work in the company on a continuous basis. The board is, however, the organ actually responsible for the management of the company. It has responsibility for supervising the managing director and giving the managing director instructions as to how to fulfil his or her duties. The prominence of the board also has consequences as to liability.
In addition to the board, the company may appoint a managing director (toimitusjohtaja). In practice, the majority of Finnish companies have a managing director. If a managing director has been appointed, he or she runs the day-to-day business of the company. The managing director is also responsible for ensuring proper accounting.
The authority of the managing director is limited to the usual course of business, insofar as the articles of association do not provide otherwise.
The top organ of a limited company is the shareholder assembly. The meeting decides on the accounts, the discharge of directors and management, as well as on the handling of profit or loss (e.g. distribution of dividends). The law no longer requires the shareholder assembly to convene at an actual meeting. Instead, the shareholders can make their decisions in writing, as long as they are made unanimously, dated and signed.
The appointment of a supervisory board (hallintoneuvosto) is optional for all limited companies. If the articles of association provide for a supervisory board, it may entrust the latter with the appointment of the board and/or tasks falling within the scope of competences of the board. However, the supervisory board cannot legally represent the company.
Relationships between the shareholders
In many cases, the details of the relationships between the shareholders are regulated in a shareholders’ agreement. It is normal practice to agree on such issues as pre-emption rights, regulations about financing responsibility, distribution policy, prohibition of competition, and the means of settlement of litigation. In this area there is usually large freedom of contract, limited only by certain mandatory legal regulations concerning limited companies’ obligations for the protection of creditors.
The Finnish law on limited companies contains a number of regulations to protect the minority shareholders. The most important of these concern the distribution of dividends. A shareholder holding at least 10% of the company shares can demand – after certain deductions – the distribution of half of the confirmed profit for the fiscal year. However, the articles of association may provide for exceptions to this right.