Amendments to the Finnish Bankruptcy Act Approved
The Finnish Bankruptcy Act has now been amended and amendments will take effect on 1 July 2019. The main objectives of these amendments were to simplify, digitise and speed-up bankruptcy proceedings. This was a rather extensive process that started already in 2015 when the Finnish Ministry of Justice appointed an expert group comprising specialists in insolvency law. The aim of this group was to solve bankruptcy related environmental and efficiency problems and propose necessary legislative changes. The group published its report in April 2018, and later in November that year, they submitted a Government bill to the Parliament.
The Parliament approved the Government bill, except the amendments to the environmental liability of the bankruptcy estate, on their second reading in March 2019 for the Act Amending the Finnish Bankruptcy Act and certain related laws. The President of the Republic of Finland approved the bill today 17 May 2019.
Please find below a more detailed description of the key changes set out in these amendments:
One of the most important objectives of the reform was to clarify the bankruptcy estate’s environmental responsibilities. The legal status of the bankruptcy estate’s environmental liabilities has been unclear, and the conflict between environmental and bankruptcy legislation is apparent. The Government bill included a new chapter to the Finnish Bankruptcy Act regarding bankruptcy estate’s environmental liabilities, stipulating the extent to which the bankruptcy estate is required to bear environmental responsibility at its own expense, and to what extent there is no obligation to act or no liability for costs. However, the Parliament rejected the parts of the bill regarding the bankruptcy estate’s environmental liability due to the statement provided by the Constitutional Law Committee. The provisions on the environmental liabilities will be further prepared in the legislative process.
The content requirements for the estate inventory were alleviated with relation to the entering of creditors and debts into the estate inventory. It is no longer necessary to specify all the debtor’s debts in the estate inventory. Now, the minimum requirement is that the estate inventory must include at least the debtor’s largest creditors and their receivables, the most significant other commitments and an estimate of the total amount of other debts and liabilities. The purpose of the amendment is to improve the administrator’s ability to concentrate on identifying the debtor’s assets and drafting debtor description, which are usually the most important factors in the early stages of bankruptcy. The amendment may speed up the bankruptcy proceedings, especially in lapsing bankruptcies.
The administrator may still include all the debtor’s debts in the estate inventory. This would be appropriate in particular when it is assumed that the bankruptcy proceedings will continue in full.
Creditor’s right to disbursement
In practice, bankruptcy claims are currently being dealt with in two stages: first, in the drafting of the estate inventory and later, with some exceptions, in the claim lodgement procedure. Such a procedure often causes unnecessary costs and loss of time for both the creditors and the bankruptcy estate. From now on, the bankruptcy estate administrator must take into account certain claims without lodgement of a claim. If a large number of creditors have claims in bankruptcy based on the same or similar grounds, and the basis and amount of their claims are clear, the administrator must take the claims into account in the draft disbursement list without lodgement of a claim. However, the bankruptcy estate administrator has to inform the creditors of this in advance.
In addition, the amended act now explicitly provides that a claim made before the setting of the lodgement date is taken into account. A creditor may receive disbursement in bankruptcy if the creditor has notified its claim to the administrator in writing before the setting of the lodgement date. This would typically be the case when largest creditors have already declared their claims for the estate inventory’s drafting. However, the notification must fulfil the requirements of a letter of lodgement. Once the amendment comes to force, the creditors will most probably inform the bankruptcy estate of their debts only once, and do this by sending a letter of lodgement in the early stages of the bankruptcy.
The deadline for the draft disbursement list will be shortened, which means that now the estate administrator must draw up the draft disbursement list within one month of the lodgement date or, if the bankruptcy estate is extensive, within two months of the lodgement date.
A more specific time limit for the request for lapse of bankruptcy was also passed. If the bankruptcy is bound to lapse, the bankruptcy estate administrator must file a request for lapse of bankruptcy in one month after the estate inventory has been drafted.
The bankruptcy estate’s liability for rental of premises was also clarified. It is not considered as a use of premises when the bankruptcy estate solely leaves the assets belonging to the debtor at the premises. In such case, the bankruptcy estate is not liable for rent for that period. The costs that are incurred to the property owner, due to cleaning of the premises or disposing of the assets belonging to the debtor, which the bankruptcy estate leaves behind, are considered debts that shall be lodged in the bankruptcy.
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