Contract Drafting for M&A in Finland
October 2019

Contract Drafting for M&A in Finland

The contract work for a company acquisition in Finland should be done under the rule of Finnish law. While the parties can generally pick the jurisdiction of their choice for their contract, the actual acts of transfer would have to be executed under Finnish law, and many provisions such as conduct of business, tax clauses, etc., would have to be shaped to accommodate Finnish law in any case.

This being said, it is nowadays commonplace in Finland to draft contracts for M&A transactions in the English language and to include sufficiently detailed provisions so as to reduce the possibility of unexpected effects of the applicable law.

Finnish law does not impose excessive formalities on the parties. The transfer of shares in a company can be achieved by simple agreement without the involvement of notaries or authorities. The same is true for the transfer of most assets in an asset deal. Only the transfer of real property requires participation of a municipal officer.

It is not required but common to supplement the sale and purchase agreement with separate transfer deeds for certain types of assets such as shares, real property, licenses, and certain contract relations. This is motivated by various practical considerations, not the least of which being that certain transfers need to be filed to tax authorities or public registers and thus become publicly available. Adding separate transfer deeds prevents commercial details from leaking to the general public.

A typical corporate purchase agreement entails detailed provisions on the seller’s liability, including representations and warranties as well as provisions setting out the extent and limits of liability in case of a breach of warranties.

When drafting the contract, account should be taken of the fact that the Finnish legal system may disregard even explicit contractual stipulations if a court or arbitration tribunal considers them inappropriate. Neither party can fully rely on contract clauses that release such party from the requirement to act diligently. This is one more reason for both parties to engage in adequate due diligence procedures. In turn, the contract should be molded carefully in accordance with the results of such scrutiny.