Finland
nomic interest of such applicant creditor. Administration proceedings may, however,
be initiated if a group of creditors represent- ing at least one-fifth of the known debts of the company files the petition together with (or with the support of) the debtor company. Administration proceedings may, however,
not be initiated if: • the company is insolvent and it is unlike- ly that the administration will be success- ful in resolving the company’s financial problems other than on a temporary basis;
• it is likely that the company will be unable to pay its obligations arising after the commencement of the proceedings;
• there are sufficient grounds to presume that the main reason for the petition is to prevent a creditor from enforcing its claim or other infringement of a right of a creditor or of the debtor; or
• there are sufficient grounds to presume that an administration programme will not be proposed or accepted.
Process Company administration is a two-step process, consisting of the administration pro- ceedings leading to the approval of the administration programme, and the imple- mentation of the administration programme. The court will appoint the administrator,
who looks after the creditors’ interests in the administration proceedings, prepares an inventory of the company’s assets and administration debts and prepares a proposal for the administration programme. In respect of large companies, the court will appoint a creditors’ committee to assist and supervise the administrator. The administrator submits the proposal
for the administration programme to the court that invites the creditors eligible to
vote, as earlier determined by the court, to notify the court as to whether they accept or reject the proposed programme. The formal administration proceedings will end on the approval of the administration programme by the court, and the debtor company will then start to carry on its business and pay its administration debts pursuant to the administration programme under the super- vision of the administrator (and the creditors’ committee, when appointed).
Administration programme The administration programme includes the measures considered necessary or desirable to rehabilitate the company, and identifies the debts to be included in the programme and the amounts to be paid thereunder (adminis- tration debts). The administration programme may include changes in the busi- ness operations of the debtor, changes in production procedures and development, investment, and disposal plans, as well as improvement of employee relations. After the approval of the administration programme, the debtor may pay its administration debts only as provided by the programme. Pursuant to the Administration Act, the administration programme may include any of the following reorganisation elements on the administration debts: • changing/deferring payment schedules; • reducing payment obligations (principal and/or interest); and/or
• making payments with unusual means (if reasonable from the creditors’ point of view). The principal and interest of secured
claims included in the administration debts may not, however, be unreasonably reduced beyond the fair market value of the relevant collateral asset, nor can the payment
schedules be extended to an unreasonable extent. The administration programme may provide that secured claims may be paid pre- maturely and that the collateral assets may be replaced by other assets of sufficient value.
Moratorium In general, the commencement of adminis- tration proceedings triggers a moratorium, providing the company with interim protec- tion from its creditors, both secured and unsecured (regarding claims which have fallen due before the commencement of the administration proceedings). The moratorium is in force until the administration programme is either approved or rejected. A bankruptcy petition by a creditor made
during administration proceedings will be stayed until the administration is terminated.
Duration The duration for the implementation of the court approved administration programme varies depending on specific circumstances, but can take years. The administration pro- gramme generally expires when it has been fully consummated – when all administration debts have been paid as provided for in the programme, and other actions set out in the administration programme have been com- pleted. Administration may, however, turn into bankruptcy proceedings where unsuc- cessful, or may be terminated by the court on grounds specified in the Administration Act, such as the debtor not honouring its liabilities under the administration programme.
Select cross-border issues In bankruptcy proceedings that are initiated in Finland, the assets of the Finnish debtor located in another jurisdiction on the commencement of bankruptcy proceedings
About the author Timo Lehtimäki is a partner in the Waselius & Wist’s banking and finance practice group, which also covers financial restructuring and distress scenarios. He has a particular focus on complex, cross-border transactions and has advised many leading international banks in their Finland-related matters, including the largest distress/restructuring situations involving Finnish borrowers. He joined Waselius & Wist in 2007 and was appointed partner as of January 1 2013.
Contact information
Timo Lehtimäki Waselius & Wist
Eteläesplanadi 24 00130 Helsinki Finland T:+358 9 668 9520 F: +358 9 668 95 222 E:
timo.lehtimaki@ww.fi W:
www.ww.fi
www.iflr.com
IFLR|RESTRUCTURING & INSOLVENCY 031
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