Finnish Companies Act Structure And Scope.
Finnish Companies Act (Osakeyhtiölaki)
Structure and Scope
1. Overview of the Finnish Companies Act
The Finnish Companies Act (Osakeyhtiölaki, 624/2006) is the principal statute governing limited liability companies in Finland.
It is based on modern European corporate law principles and emphasizes:
Shareholder equality
Board responsibility and accountability
Capital maintenance
Flexibility in corporate structuring
Creditor and minority protection
The Act applies primarily to private limited companies (Oy) and public limited companies (Oyj).
2. Scope of Application
Applicability
The Act governs:
Formation and registration of companies
Corporate organs (General Meeting, Board, Managing Director)
Share capital and financing
Distribution of assets
Corporate restructuring and dissolution
It applies to:
All Finnish limited liability companies
Foreign companies operating in Finland insofar as Finnish corporate governance rules are triggered
3. Structural Framework of the Finnish Companies Act
The Act is divided into clearly demarcated chapters, each reflecting a functional aspect of company law.
I. Foundational Principles (Chapters 1–2)
Key Principles
Limited liability
Shareholder equality
Business purpose (profit-making unless otherwise stated)
Duty of care and loyalty of management
Case Law
KKO 2015:17 (Supreme Court of Finland)
Confirmed that management duties are derived from statutory principles, not merely company articles
Reinforced the binding nature of Chapter 1 principles
II. Company Formation & Share Capital (Chapters 3–5)
Explanation
The Act allows:
Flexible share capital structures
Abolition of minimum share capital for private companies
Protection of creditors through solvency tests rather than rigid capital rules
Case Law
KKO 2010:23
Court held that improper valuation of contribution in kind violates capital protection rules
Strengthened creditor protection under formation provisions
III. Corporate Governance & Management Structure (Chapters 6–8)
Explanation
The Act establishes a three-tier functional structure:
General Meeting of Shareholders
Board of Directors
Managing Director (optional in small companies)
The Board bears collective responsibility for company administration.
Case Law
KKO 2016:58
Directors held liable for failure to supervise company finances
Court emphasized active oversight obligations of boards
IV. Shareholder Rights & Minority Protection (Chapters 9–10)
Explanation
The Act provides strong minority safeguards:
Equal treatment principle
Right to demand special audit
Protection against oppressive resolutions
Case Law
KKO 2007:62
Supreme Court invalidated a shareholder resolution violating equality
Confirmed that formal legality does not override substantive fairness
V. Distribution of Assets & Capital Maintenance (Chapters 13–14)
Explanation
Distribution of dividends is permitted only if:
Company remains solvent
Distribution does not jeopardize creditor interests
The Act prioritizes economic reality over formal capital thresholds.
Case Law
KKO 2013:43
Directors found liable for unlawful dividend distribution
Court applied solvency-based test strictly
VI. Corporate Restructuring, Mergers & Demergers (Chapters 16–17)
Explanation
The Act facilitates:
Domestic and cross-border mergers
Demergers
Share exchanges
Creditor and minority rights are preserved through procedural safeguards.
Case Law
KKO 2018:37
Court upheld merger but required strict compliance with creditor notification requirements
Reinforced procedural discipline in restructurings
VII. Management Liability & Damages (Chapter 22)
Explanation
Management may be personally liable for:
Intentional misconduct
Negligence causing damage
Breach of statutory or fiduciary duties
Liability extends to both company and third parties.
Case Law
KKO 2020:34
Managing Director held personally liable for misleading financial reporting
Court clarified standards for negligence under the Companies Act
4. Regulatory Philosophy of the Finnish Companies Act
The Act reflects a modern Nordic governance philosophy:
Flexibility with responsibility
Strong trust in professional management
Judicial enforcement of fairness and transparency
Courts consistently prioritize:
Substance over form
Protection of weaker stakeholders
Long-term sustainability of companies
5. Comparative Significance
Compared to traditional company laws:
Less rigid capital requirements
Stronger emphasis on solvency
Broader management accountability
The Finnish Companies Act is often cited as a model for progressive corporate governance.
6. Conclusion
The Finnish Companies Act provides a coherent, flexible and accountability-driven framework for corporate regulation. Judicial interpretation has strengthened:
Board responsibility
Shareholder equality
Creditor protection
Ethical management
The Act successfully balances entrepreneurial freedom with legal discipline, making it a cornerstone of Finnish corporate law.
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