Vol 4 (2007) - Issue 4

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New Amendments to the Finnish Restructuring of Companies Act – Towards a More Appropriate Selection of Debtors?

General

The Finnish Restructuring of Companies Act (25 January 1993/47, the ‘RCA’) has been an established part of the Finnish legislative landscape for more than a decade. The RCA has in almost all essential respects remained unchanged since it was first introduced to the Finnish legal system in 1993. Thus, it is no surprise that the experience gained from this relatively new legislative feature has given rise to the need for reform in some respects.

Briefly, Finnish insolvency is regulated mainly through the new Bankruptcy Act (2004), the RCA, the Act on the Adjustment of Debts of a Private Individual (1993), the Order of Priority Act (1992) and the Act on Recovery to the Bankrupt’s Estate (1991). The Insolvency Regulation (1346/2000) is also applicable law in Finland. The RCA, which is discussed here, applies only to the restructuring of companies.1 In the insolvency context it can be noted that the RCA is the foremost legislative solution when a company is struck with insolvency but when liquidation means are not sought for.

This article is not an attempt to give a detailed review of all the changes to the RCA that entered into force on 1 June 2007, nor will any concrete predictions on the effects that the changes may or may not have in time be presented. However, as the changes form a tangible effort at resolving some of the main problems that have appeared during the application of the RCA over the years, and as the nature of some of these problems has been of a quite fundamental and basic character, I will here try to shed some light on certain of the implemented ideas in the hope that they may be of interest also from the point of view of a readership of international background not necessarily involved in day-to-day work with the RCA.
As already mentioned, the changes to the RCA have taken effect on 1 June 2007, the Act on the changes having been passed in the Finnish Parliament as one of the last measures taken by the Parliament before the Finnish parliamentary elections held in spring 2007.

It can be noted that the changes in the RCA have taken effect in a time in which the number of companies applying for restructuring has significantly decreased from the peak years shortly after the RCA entered into force in 1993. In 2006, 302 restructuring proceedings were adjudicated and the personnel of the companies in question numbered only 1807. This can be compared to the peak year 1993, when 572 restructuring proceedings were adjudicated.

Background factors for the changes

One of the main motives for the changes that have now entered into force is to try to make the whole restruc-turing process more efficient. With regard to this, the changes, amongst other things, have an effect on the number of District Courts having jurisdiction in re-structuring matters. The number of competent courts has decreased. Such practical issues are nonetheless not of much interest from a wider perspective, as the question of which court is competent has to be tackled separately on each occasion, on a case-by-case basis, where the need for restructuring arises. Also, the ever-changing jurisdictional system and rationalisation measures make it almost certain that these measures will not be final. The new amendments to the RCA also touch upon several other issues that are, perhaps, more technical to their nature. I will not elaborate on these issues further in this context.