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The Finnish Council of State has recently published a bill to implement the EU Directive on company law into the Finnish Companies Act. The bill also contains several amendments that fulfil specific Finnish concerns.

The bill introduces as a new concept the division of companies into two categories: private limited liability companies (yksityinen osakeyhtiö or 'Oy'), with a minimum capital requirement of Fmk50,000 (US$16,400), and public limited liability companies (julkinen osakeyhtiö or 'Oyj') with a minimum capital requirement of Fmk500,000. Only shares or other securities issued by a public limited company can, under the bill, be publicly traded.

The bill also contains proposals for three new financial instruments: subscription warrants, subordinated loans and preference shares.

The present Companies Act permits the issue of subscription warrants only if linked to loans. The bill would permit companies to issue subscription warrants without linking them with loans. Subscription warrants could thus be connected with any securities issued by the company and with other agreements or obligations entered into by the company.

There is not yet any rule of law regulating subordinated loans in Finland although they are frequently used and even recognized by the Supreme Court. Under the bill, subordinated loans would be recorded as a separate item under equity in the borrowing company's balance sheet as long as the interest and principal of the loan were subordinated to other debts claimed in the bankruptcy or dissolution of the borrowing company. Before the bankruptcy or dissolution it would, under the bill, be permitted to pay accrued interest only from the non-restricted equity as shown in the audited and approved balance sheet for the latest fiscal year.

The bill also introduces the concept of non-voting preferential shares, to be implemented into the Companies Act. At present a limited liability company can, under its articles of association, have different classes of shares with different voting rights. The bill proposes that this be amended to make it possible for a company to issue shares the voting rights of which would be limited to certain matters as defined in the law or the articles of association of the company.

The bill proposes, in addition, amendments to, among other things, the disclosure obligation, the definition of a group of companies and the provisions applicable to the merger, division and liquidation of a company as well as the payment of the share capital and division of company's assets.

It is expected that the amendments contained in the bill will enter into force, at the earliest, as of January 1 1997.

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