News/30 Jan 2018

Borenius Authors International Comparative Study on Debt-to-Equity Conversion

Our Restructuring & Insolvency practice has conducted an international comparative study on debt-to-equity conversions performed by companies with financial difficulties. The study was carried out in cooperation with international law firms.


The financial sector has undergone significant change arising from increased globalisation, regulatory changes in the equity and bond markets, and implementation of restrictive terms for corporate financings as a result of the 2008 financial crisis. These developments must be taken into consideration by Finnish legislation in order to maintain Finland’s competitiveness. The results of our study will be used to assess whether amendments should be made to current corporate and insolvency law provisions.

The study was conducted in order to assess the need for revisions to, and understand the opportunities arising from, national provisions that govern corporate restructuring and corporate arrangements. The study delivers a comprehensive international report covering the legislation of numerous countries that were selected for comparison within the areas of corporate law, insolvency law and other corporate arrangements.

What is debt-to-equity conversion?

In international legal literature, debt-to-equity conversion is defined as an instrument used in corporate restructuring where the creditors of a debtor company swap or convert certain debtor company debt into the debtor company’s shares or share capital. This conversion can be conducted in several different ways depending on the relevant country, but it will always result in the cessation of or a reduction in the amount of unpaid debt. Finnish law does not recognise the concept of debt-to-equity conversion.

The contents of the study

The study was conducted as part of the Government Plan for Analysis, Assessment and Research for 2017. According to the Finnish classification of areas of law, the analysis targeted practice areas related to corporate and insolvency law. The countries selected for comparison were Sweden, Denmark, the United Kingdom, the United States of America, the Netherlands, Germany, France and Switzerland. In addition to the international comparison, the study comprises an introduction describing the current Finnish regulation and a summary discussing considerations in the event that debt-to-equity conversion is incorporated into Finland’s insolvency and corporate law.

The summary of the study

The study’s summary describes features that should be taken into consideration if Finnish insolvency and corporate law provisions would be revised in the event that the legislator chooses to promote the use of debt-to-equity conversion in company restructuring proceedings and in corporate arrangements falling outside the scope of formal insolvency legislation in future. The proposed considerations, as presented below in simple question format, are partly based on observations made with regard to current Finnish legislation and restructuring practice, and partly based on observations concerning the models adopted in the compared countries.

  1. Should the use of debt-to-equity conversion be limited only to companies of a certain size?
  2. Should provisions governing debt-to-equity conversion fall under corporate or insolvency law?
  3. How should issues related to the valuation of restructuring debts and shares, and to the debt-to-equity conversion process itself be clarified?
  4. How would current shareholders participate in debt-to-equity conversion?
  5. Would it be possible to force certain parties to submit to debt-to-equity conversion?
  6. What kinds of provisions should be implemented to regulate the effects of debt-to-equity conversion on debtor companies’ contractual provisions?
  7. Could debt-to-equity conversion be used to tackle the problem of companies choosing to undergo restructuring too late?

Please click here to read the Government’s press release and the study (in Finnish).

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Additional information

Jyrki Tähtinen

Senior Partner


Robert Peldán