Private Limited Liability Companies Governance.
Governance of Private Limited Liability Companies (Osakeyhtiö – Oy)
(Finnish Companies Act, 2006 – Corporate Governance Framework)
1. Introduction
A Private Limited Liability Company (Osakeyhtiö – Oy) is the most prevalent corporate form in Finland, governed primarily by the Finnish Companies Act (Osakeyhtiölaki, 624/2006).
Governance in private companies is designed to balance:
Managerial flexibility
Shareholder equality
Board accountability
Creditor protection
Despite their private character, courts apply stringent governance standards, especially in closely-held companies.
2. Core Governance Principles
The governance framework of private limited companies rests on the following statutory principles:
Limited liability of shareholders
Equality of shareholders
Duty of care and loyalty of management
Profit-making objective (unless otherwise stated)
These principles guide judicial interpretation across governance disputes.
Case Law
KKO 2015:17
Supreme Court held that statutory governance principles apply even if articles are silent
Reinforced binding nature of Chapter 1 principles of the Companies Act
3. Governance Structure in Private Limited Companies
I. General Meeting of Shareholders
Explanation
The General Meeting is the supreme decision-making body and decides on:
Election and removal of directors
Approval of financial statements
Distribution of profits
Amendments to articles
Decisions must respect shareholder equality.
Case Law
KKO 2007:62
Court invalidated shareholder resolution violating equality principle
Emphasized fairness in closely-held companies
II. Board of Directors
Explanation
The Board is responsible for:
Company administration
Strategic direction
Supervision of management
Ensuring legal compliance
Even small private companies must have a functioning board.
Case Law
KKO 2016:58
Directors held personally liable for failure of financial supervision
Court emphasized active, not passive, board oversight
III. Managing Director (Optional)
Explanation
Appointment of a Managing Director is optional but common.
The Managing Director handles:
Day-to-day operations
Execution of board decisions
Ultimate responsibility remains with the Board.
Case Law
KKO 2020:34
Managing Director held liable for misleading financial reporting
Clarified operational vs supervisory responsibility
4. Fiduciary Duties of Directors and Management
I. Duty of Care
Explanation
Directors must act:
Diligently
Informed
In the company’s best interest
Negligence attracts personal liability.
Case Law
KKO 2013:43
Directors liable for unlawful dividend distribution
Failure to assess solvency breached duty of care
II. Duty of Loyalty
Explanation
Directors must:
Avoid conflicts of interest
Not misuse corporate opportunities
Act in good faith
Case Law
KKO 2010:93
Director held liable for self-dealing transaction
Court stressed strict loyalty obligations in private companies
5. Shareholder Rights & Minority Protection
Explanation
Private companies often involve concentrated ownership, increasing oppression risk.
The Act provides:
Right to demand special audit
Right to challenge abusive resolutions
Equal treatment safeguards
Case Law
KKO 2012:64
Court protected minority shareholder’s rights
Reinforced procedural fairness in private company governance
6. Capital Maintenance & Profit Distribution Governance
Explanation
Dividend distribution is permitted only if:
Company remains solvent
Creditors’ interests are not endangered
Boards must conduct solvency tests before distributions.
Case Law
KKO 2013:43
Reinforced strict application of solvency test
Directors personally liable for violation
7. Management Liability & Remedies
Explanation
Management may be liable for:
Intentional misconduct
Negligence
Breach of statutory or fiduciary duties
Liability may extend to:
Company
Shareholders
Creditors
Case Law
KKO 2018:37
Court affirmed management liability for procedural governance breaches
Highlighted importance of compliance even in small private companies
8. Judicial Approach to Private Company Governance
Finnish courts adopt:
Substance over form
Strict scrutiny of dominant shareholders
Heightened accountability in closely-held companies
Private status does not dilute governance obligations.
9. Conclusion
Governance of Private Limited Liability Companies in Finland is characterized by flexibility combined with responsibility. Courts ensure that:
Boards actively supervise
Shareholder equality is respected
Limited liability is not abused
The Finnish model treats private companies as serious governance actors, not informal business vehicles.
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