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The Finnish Ministry of Justice appointed a working group in 2001 to prepare a complete reform of the Finnish Companies Act. In May 2003 the working group published its report, including a proposal for a new Companies Act. The aim of the comprehensive company law reform is to improve the competitiveness of Finnish limited liability companies by making the Finnish company law more flexible and explicit with fewer mandatory provisions.

The report includes, among other things, a proposal for the abolition of the par value of shares. The par value does not indicate the real value of a share and has been mainly a cause of confusion. The abolition of the par value would also result in the abolition of the connection between shares and share capital. This would enable shares to be issued without increasing the share capital and share capital to be increased without issuing new shares.

The report also suggests that directed repurchases of a company's own shares should be permitted. This is possible at present only through public trading or when all shareholders consent to the repurchase. Further, the report proposes that so-called reverse splits would be permitted through redemption procedure in order to increase the market value of a single share (often in response to stock exchange requirements for maintaining admissibility for public trading). Companies would also be allowed to accept their own shares as collateral more easily.

As regards provisions on defining the share price in a squeeze out procedure of minority shareholders, the report suggests that the price be determined on the basis of the market price prior to the commencement of the procedure. However, in a squeeze out of listed companies the presumption price would be the price determined in the preceding public tender offer under the Securities Market Act. The aim is to harmonize the price determination in cases where the squeeze out procedure is preceded by a public tender offer.

The report also includes proposals for quicker and more simple merger and liquidation procedures. Further, the new Companies Act would permit a limited liability company to be transformed into a limited or unlimited partnership or a cooperative or the business of the company to be continued in the form of a private enterprise.

According to the report, restrictions on the publicity of the ownership of limited liability companies would be imposed. Only information on shareholders controlling more than 0.1% of the total votes in a public company would be publicly available. Information on holdings in private companies would be available only to other shareholders in the company. However, the authorities would have access to all ownership data. The publicity of ownership is already subject to the provisions of Finnish securities law regarding disclosure of significant ownership and insider regulation. According to the report the aim of the proposed restrictions is to bring the Finnish regulation in line with international practice.

The report will be subject to extensive comments. Based on these, the Ministry of Justice will, as required, review and revise the proposal for the new Companies Act. The government will probably issue the bill for the new Companies Act to Parliament in 2004 or 2005.

Dimitrios Himonas

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