Legal Alerts/25 Apr 2024

Tender Offer Regulations and Flagging Obligation Extended to First North Growth Market

Tender offer regulations and regulations concerning the notification of major holdings and proportions of voting rights, or ‘flagging obligation’, have been extended to apply to First North Growth Market Finland (“FN market”). An amendment of the Finnish Securities Markets Act (“SMA”) obliges shareholders of companies listed on the FN market to, among others, launch a mandatory tender offer if their proportion of voting rights exceeds 30 or 50% in the target company, and notify their ownership if it reaches or crosses certain thresholds of shares and/or voting rights, starting at 5%.

In connection with the extension of tender offer regulations and flagging obligation to the FN market, the concept of ‘persons acting in concert’ in tender offer situations is modified and clarified at the level of law.

The amendment of the SMA entered into force on 19 April 2024, but the tender offer obligation only applies to crossings of thresholds that take place after of 19 July 2024. The flagging obligation is subject to a transition period until 19 June 2024 by which all notifiable positions which have not been previously flagged (on the basis of a corresponding flagging obligation in the articles of association) need to be notified to the Finnish Financial Supervisory Authority and the target company. The company shall publish the received notifications without undue delay.

Rules applicable to tender offers

Prior to the amendment, only the most central provisions on tender offers of the SMA applied to tender offers on the FN market, though the guidance of the Finnish Financial Supervisory Authority (“FSA”) and the Helsinki Takeover Code 2022 complemented the law and extended some established practices to the FN market as well.

After the amendment, all provisions of the SMA regarding tender offers apply to tender offers on the FN market, including the mandatory tender offer obligation.

Provisions that from now on apply to the Board of Directors of a target FN company in a tender offer situation include, for example:

  • the obligation to give a public statement (including an assessment) regarding the offer;
  • the obligation to bring certain frustrating action to be decided by the General Meeting of the target company;
  • the right to request the FSA to set a deadline by which the person planning a tender offer has to make a bid public or notify that they will not launch a tender offer (the ‘put up or shut up’ rule); and
  • the right to request the FSA to set competing offers a deadline after which the terms of such tender offers may no longer be amended.

Key changes now applicable to the offeror in an FN market tender offer include the following, amongst others:

  • the tender offer document must be prepared in accordance with the decree of the Ministry of Finance and submitted to the FSA’s approval as in main market tender offers;
  • the tender offer period must last at minimum three and at maximum ten weeks;
  • the offeror has an obligation to promote the success of a tender offer;
  • a cash consideration alternative is required in certain situations, i.e. if the securities offered as consideration are not subject to public trading, or the offeror has acquired securities giving title to at least 5% of the target voting rights against cash consideration.

Flagging obligation

The flagging obligation regarding share ownership and voting rights has been extended to shareholders of companies listed on the FN market. The thresholds for flagging are the same as for companies listed on the main market (5, 10, 15, 20, 25, 30, 50 or 90 per cent or 2/3 of total voting rights or the total number of shares in the company), and same aggregation rules and exceptions apply.

A shareholder will have to make a flagging notification to the company and the FSA without undue delay and within three trading days at the latest when their proportion reaches, exceeds or falls below these thresholds. The company, then again, has a duty to publish these notifications without undue delay. Companies may at their discretion remind their significant shareholders of this new obligation, but there is no requirement to do so. The FSA has the power to impose a penalty payment in case of failures to make a flagging notification.

Rules on acting in concert clarified

Persons deemed to act in concert must make a mandatory tender offer if their proportion of voting rights together surpasses 30 or 50 per cent of total voting rights in a company. The amended SMA links certain flagging exemptions to the concept of persons acting in concert. Certain aspects regarding parent companies and subsidiaries as well as the FSA’s authority to determine upon application that persons assumed by law to be concert parties are not acting in concert, have been revised. The parent company of a fund and the parent company of an investment service provider has a right to notify the FSA that their subsidiaries (funds and investment service providers) exercise voting rights independently, and therefore the parent will not count the subsidiaries’ holdings when assessing whether it needs to flag its holdings. As a consequence of the amendment of the SMA, provided this notification has been made to the FSA, the parties (parent and its subsidiaries) will be deemed to not act in concert for mandatory tender offer obligation purposes.

The amended SMA also expands the FSA’s authority to determine upon application that persons assumed by law to be concert parties are not acting in concert. Additionally, the FSA can now issue general guidance on the grounds on which persons are not considered to be acting in concert, in addition to guidance on the grounds on which persons are considered to be acting in concert.

Amendment enhances investor protection and increases transparency

Many of the tender offer rules now extended to the FN market have already been voluntarily followed in the tender offers made on such market, but their applicability has now been confirmed at the level of law and more detailed provisions apply than before. The change brings predictability to the tender offer process and is welcome, as there is a considerable number of companies listed on the FN market and several tender offers have already been announced and successfully completed.

The application of flagging rules on the FN market brings along transparency and links logically with the introduction of the mandatory tender offer obligation. The obligation to publish flagging notifications may to some extent increase the administrative burden of FN companies, but on the other hand the increased transparency improves investor protection.

It is worth noting that some FN companies currently have flagging and/or mandatory offer obligation provisions in their articles of association which overlap with the corresponding provisions under the SMA. Such companies are recommended to consider removing such provisions to avoid overlapping obligations, complications, and interpretation issues.

We are happy to advise you in tender offer, flagging and disclosure matters and to help you review your disclosure policy or amend your articles of association. Please feel free to contact us for more information.

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Additional information

Mia Mokkila



Jere Onnela