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In November 1998 the Finnish Ministry of Justice appointed a working group to provide a comprehensive assessment of the need to amend the Finnish Companies Act and other legislation applicable to limited liability companies as well as to propose a procedure for the implementation of amendments.

Although the working group is yet to present its fiindings, certain matters of particular interest can already be identified on the basis of the Ministry of Justice's instructions to the working group. These include an instruction to focus on, among other things, aspects aimed at improving the competitiveness of Finnish legislation regarding investment considerations by multinational companies conducting business in several eurozone countries. Further, the working group is expected to propose adjustments necessary for improving coordination between the Companies Act and Finnish securities law.

Pursuant to the Companies Act, a shareholder holding more than nine-tenths of the shares or the votes in a company has the right to redeem the shares held by other shareholders and, at the request of another shareholder, be obliged to the same. On the other hand the Finnish Securities Market Act sets forth that a shareholder holding more than two-thirds of the votes of a company that have issued shares listed on a public marketplace or securities entitling the holder to subscribe for such shares is obliged to redeem the shares or other securities held by other shareholders.

Certain adjustments to these compulsory acquisitions of minority holdings seem desirable to avoid potential contradictions between the two regimes, to streamline the applicable procedures and to achieve equal treatment of shares and securities entitling the holder to subscribe for shares.

Option rights are granted in connection with employee incentive schemes which are often issued by a parent company to its subsidiary for the purpose of being offered at a later stage to current or future employees of the group. Alternatively, the terms and conditions of the option rights may contain an authorization to the board of directors of the parent company to decide upon future offerings of the option rights issued. Because the acceptability of the above procedures is open to challenge in certain situations under the current legislation, it appears that clarification through legislative amendments would be well-founded.

Pursuant to the Companies Act, the decision by a company to buy-back its own shares requires the consent of the shareholders affected by such a decision. By virtue of this provision it may be argued that consents would also be needed in connection with public tender offers to buy back shares, which would not be a very favourable outcome. Further, it appears that the legal uncertainty in situations where a Finnish company wishes to conclude derivative contracts relating to its own shares would require further clarification.

Under the Companies Act a foreign shareholder in a Finnish company who has appointed a nominee shareholder may not participate in the shareholders' meeting unless their holding has been temporarily transferred to a book-entry account opened in the name of the beneficial shareholder. In case nominee registered shares would entitle their beneficial holder to attend the shareholders' meeting, costs relating to shareholding in Finnish companies would be reduced and the listing of Finnish shares on foreign public marketplaces by means of a nominee registration in Finland would become more attractive.

The effective date of any amended legislation is difficult to estimate as no specified time schedule has been announced at this stage. Gunnar Westerlund

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