The long-awaited new Bankruptcy Act was approved by the Finnish parliament on February 4 2004 and is expected to become effective over the next six months. The present Bankruptcy Act dates back to 1868 and has become outdated and - because of several partial amendments - difficult to understand. The purpose of the new Act is to enact a regulatory framework that is clear and foreseeable, enabling efficient and transparent bankruptcy proceedings.
The new Act is a general act regulating bankruptcy. It does not include any substantial amendments to bankruptcy proceedings or to the position of the creditors and the debtor. But it introduces several small amendments and implements current practice into written law.
According to the Act, if the debtor has entered into an agreement after the commencement of bankruptcy proceedings, the bankruptcy estate will be bound by the agreement if the counterparty was bona fide. Further, the new Act gives the bankruptcy estate a right to commit itself to the debtor's agreements by providing collateral and so prevent the creditor from terminating the agreement due to bankruptcy.
The Act also introduces a restriction regarding credit institutions' rights to set-off. According to the Act, credit institutions may not use funds on a debtor's account that is used for payment transactions to set-off their counterclaim. However, this prohibition does not apply to any other accounts. Another novelty introduced by the Act is the possibility to conduct a public liquidation of a bankruptcy estate where the bankruptcy ombudsman appoints the liquidator and the costs of the proceedings are borne by the state. The public liquidation proceedings can be initiated upon application by the bankruptcy ombudsman and provided that the district court considers it to be justified:(i) due to lack of funds in the bankruptcy estate; (ii) for discovery reasons relating to the debtor or the bankruptcy estate; or (iii) due to other particular grounds.