Legal Alert – Changes to the Squeeze-out Rules under the Finnish Companies Act
The Finnish Government submitted a proposal to Parliament on 13 June 2013 to amend the squeeze-out rules under the Companies Act to, inter alia, change the setup of the Redemption Committee, limit the right to appeal the Redemption Committees decisions and allow the Redemption Committee not to appoint a special representative for the minority shareholders under certain conditions.
Under the Companies Act (the Limited Liability Companies Act, statute 624/2006, as amended), a shareholder with more than nine tenths (9/10) of all shares and votes in the company (redeemer) shall have the right to redeem the shares of the other shareholders at the fair price (right of squeeze-out). A shareholder whose shares may be redeemed (minority shareholder) shall have the corresponding right to demand that the shareholders shares be redeemed (right of sell-out).
In case the squeeze-out process is not amicably settled, any party may request the Redemption Committee of the Finland Chamber of Commerce to appoint a requisite number of arbitrators to settle the dispute concerning the right or obligation to redeem and/or the redemption price. Under the current legislation, the Redemption Committee must submit a petition to the court for the appointment of a special representative to look after the interests of minority shareholders in the arbitration, unless all parties have declared that they consider the appointment of a special representative unnecessary.
Following an initiative by the Finnish Chamber of Commerce and its Redemption Committee, the Finnish Government has on 13 June 2013 submitted to the Finnish Parliament a proposal to amend the Companies Act (and the Act on the Chamber of Commerce) to simplify the procedural rules relating to the squeeze-out process.
The main changes to the rules are:
- The Redemption Committee must include at least one member appointed by parties representing investors and minority shareholders.The parties may not appeal the appointment of arbitrators by the Redemption Committee.
- The Redemption Committee may elect not to submit a petition to the court to appoint a special representative of for the minority shareholders, provided the appointment is unnecessary in light of the legal protection and due process and the interest involved in the case and other factors.
- The decision not to submit a petition to appoint a special representative shall be recorded in the trade register and the parties may not appeal the decision by the Redemption Committee.
- The interest payable on the redemption price shall be calculated from the date falling three weeks after the application was submitted to the Redemption Committee to appoint arbitrators (under the current rules, the redemption price bears interest from the date the arbitration proceedings are initiated, i.e. when the other party is served with the application to appoint arbitrators, meaning that the interest may be calculated starting from different days for different parties).
- The special representative will also be entitled to appeal the arbitral award and all appeals are concentrated to the Helsinki District Court.
The purpose of the amendments is, inter alia, to shorten and simplify the squeeze-out process and to ensure that interest on the redemption price is calculated in the same manner for all parties and irrespective of the actions of the redeemer. The amendment is proposed to come into force on 1 January 2014.