1. Gerhardt Schmidt has an excellent business idea: He will start importing and installing computer technology designed especially for domestic users. He plans to establish his company in Helsinki. He has no idea how to start and he is wondering
WHAT ISSUES ARE THERE TO CONSIDER
before he can get to
the business?

2. INTRODUCTION TO FINNISH COMPANY LAW

3. FINNISH TRADE ACT Main principle: freedom of trade Exceptions:
Concerns most trade
=> No permission required nor any other regulations
Exceptions:
E.g. Banking, insurance, security companies, travel agencies, restaurant and catering services
=> Permission of or a notification to the appropriate authority before beginning the trade activity

4. TRADE ACTIVITIES BY FOREIGNERS1)
Natural persons who are permanent residents in the EEA
and
Juristic persons based in the EEA area:
=> no need of a special permission 2)
Others:
=> need a permission from the National Board of Patents and Registration of Finland (NBPR)

5. Owner’s responsibility for the company’s liabilities
Business form
PRIVATE
ENTERPRENEUR
Yksityisyritys
Tnmi
GENERAL PARTNERSHIP
Avoin yhtiö
LIMITED
PARTNERSHIP
Kommandiitti-
yhtiö Ky
LIMITED LIABILITY
COMPANY
Osakeyhtiö
Oy, Oyj
Owner
Number of
Owners
Founding
documents
Owner’s responsibility for the company’s liabilities
Acting on behalf of the company
(Within the line of business)
Profit sharing
Entrepreneur
Partner
Personally liable and silent partner
Shareholder 1
2 or more
1 + 1 or more
1 or more -
Founding contract
Founding contract
Contract,
Articles of Assoc.
Owner liable with his entire personal property
The partners are personally, jointly and separately responsible for the company’s liabilities
Personally liable partner: as in partnership,
silent partner: liability limited to his contribution
Shareholders’ liability limited to their contribution
Entrepreneur
Each partner independently
Personally liable partner: as in partnership
Board of Directors
All the proceeds of the enterprise belong to the entrepreneur
1) According to the contract
2) Interest to the partners’ contributions
First silent partner’s share of profit, liable partner’s as in partnership
Non-restricted equity capital can be distributed as dividends among the shareholders

6. 1. PRIVATE ENTERPRENEUR (PRIVATE PROPRIETORSHIP)
Not a juristic person
the entrepreneur and his firm are not separate
Owner
One natural person
Must have his habitual residence in the European Economic Area, unless exempted by the National Board of Patents and Registration of Finland (NBPR)
Acts on behalf of the firm
Is responsible for commitments made on behalf of his firm
Liable with his entire personal property
Bookkeeping is required
No auditing required

7. 2. GENERAL PARTNERSHIP Setting up
By an agreement between 2 or more founders
juristic person
At least one of the partners must have his habitual residence (or if a juristic person, be registered) in the European Economic Area, unless exempted by the NBPR
Contractual freedom as to management, division of power, right to veto, share of profit

8. Partners’ liability
Each partner is liable for all corporate obligations of the company toward a creditor
Jointly and separately
Even with his/her personal property
Agreements on liability restrictions have binding effect only between the partners

9. Partners’ authority
Each partner may represent the company within the company’s line of business
Deviations:
Partners’ agreement => effective if the third party knew => best to register
Each partner has a veto right => effective toward a third party only if he knows about the veto

10. 3. LIMITED PARTNERSHIP Setting up Position of the partners
One or more general partners and one or more silent partners
At least one of the general partners must have his habitual residence (or be registered, if a juristic person) in the European Economic Area, unless exempted by the NBPR
Other provisions as with general partnership
Position of the partners
1. General partner
Same as in general partnership
2. Silent partner
Responsibility for liabilities of the company is limited to the amount of the investment
No managerial power
No right to represent the company
Certain decisions can’t be made without the silent partners’ approval

11. COMPANY (LIMITED COMPANY BY SHARES)
LIMITED LIABILITY
COMPANY (LIMITED COMPANY BY SHARES)
Limited Liability Companies Act 624/2006:
Setting up
One or more founders
The company must be registered => juristic person
At least one of the founders must have his habitual residence (or be registered, if a juristic person) in the European Economic Area, unless exempted by the NBPR
Share capital
Private limited liability company: Minimum € 2 500
Public limited liability company: Minimum €
Shareholders’ liability for the company’s debts is limited to their investment

12. FOUNDING PROCEDURE MEMORANDUM OF ASSOCIATION ARTICLES OF ASSOCIATION
Date
Names of the shareholders and subscription list
Price for subscription
Term of payment for shares
Members of Board of Directors, Managing Director (if any)
Auditors (if none, must be indicated)
Financial period
Shareholders sign the Memorandum of Association
Subscription for shares
ARTICLES OF ASSOCIATION
Mandatory contents:
Name of the company
Domicile
Branch of industry
Financial period (if not in the founding agreement)
Becomes part or appendix of the Memorandum of Association
BASIC NOTIFICATION WITH THE TRADE REGISTER
Auditors’ certificate of the payment for the shares
A statement of the members of the Board of Directors (and the Managing Director) confirming that the company has been formed in compliance with the provisions of the Companies Act, and a certificate of the auditors confirming that the provisions of the Companies Act on the payment of shares have been complied with
Filed within three months from the signing of the Memorandum of Association

13. LIMITED LIABILITY COMPANY
BODIES OF THE
LIMITED LIABILITY COMPANY
SHAREHOLDERS’ MEETING
(=GENERAL MEETING
=STOCKHOLDERS’ MEETING)
AUDITOR(S)
SUPERVISORY BOARD
BOARD OF DIRECTORS
MANAGING DIRECTOR
(=CEO)

14. 1. Shareholders’ Meeting
Ordinary General Meeting, decisions on:
Election of Board Members and auditor(s)
Discharge from responsibility
Approval of final accounts
Disposal of profit
Changes in Articles of Association
Extraordinary General Meeting
Board of Directors convenes on its own initiative, or
On demand of the auditors or shareholders

15. Shareholders’ Meeting (cont.)
Each shareholder has as many votes as he has shares, unless otherwise stipulated by the Art. of Assoc.
Voting
Main rule: Simple majority of votes cast
Exceptions:
Qualified majority is required
E.g. Amendment of the Articles of Association:
2/3 of the votes cast and
2/3 of the shares represented in the meeting
Equality of shareholders
A decision, which treats shareholders unequally or limits current shareholders’ rights or increases their duties in the company, may require their consent
Liability for damages
Shareholders are liable for damages caused intentionally or by gross negligence
Shareholders’ Meeting (cont.)

16. 2. Board of Directors 1-5 members
At least one of the members must have his habitual residence in the EEA
Responsible for administration and organisation of company operations
Represents the company
The right to sign on behalf of the company can be extended by the Articles of Association
Elected by the Shareholders’ Meeting
Art. of Assoc. can stipulate
that the Board is appointed by the Supervisory Board or
less than 50% of members can be appointed some other way
Duly convened when 50% of members present
Liability for damages
Each Board member is liable for damages caused in company administration, unless he can prove having acted with due diligence

17. 3. Managing Director Liability for damages
By virtue of the Articles of Association
Responsible for day-to-day operations and administration
Responsible for financial administration and accounting
Represents the company in matters within his authority
Appointed by Board of Directors
Accountable to the Board of Directors
Liability for damages
The Managing Director is liable for damages caused in company operations, unless he can prove having acted with due diligence

18. 4. Supervisory Board By virtue of the Articles of Association
Supervises the company administration run by the Board of Directors and the Managing Director
May have decision-making power stipulated by the Art. of Assoc.
E.g.
Appointing the members of the Board of Directors
General administrative issues
Liability for damages
Each Supervisory Board member is liable for damages caused in company administration, unless he can prove having acted with due diligence

19. AUDITOR Auditing Act, 13.4.2007: Requirements for qualifications
The auditor has to be an auditor authorised either
by the Central Chamber of Commerce of Finland => a KHT auditor or
by a regional Chamber of Commerce in Finland => an HTM auditor
A deputy auditor has to be elected if the ordinary auditor is not a KHT firm of auditors or an HTM firm of auditors

20. AUDITOR (cont.) Auditing Act, 13.4.2007: Auditor not necessary
A company may under certain conditions decide not to elect an auditor:
If no more than one of the following conditions is fulfilled both during the accounting period that has ended and during the accounting period immediately preceding it:
1) the balance sheet total is in excess of 100,000 euros;
2) turnover or comparable net sales is in excess of 200,000 euros; or
3) the average number of employees exceeds 3

21. Auditor’s tasks Auditor
Submits an auditor’s report in each accounting period to the owners of the company
Makes an entry into the accounts to this effect with reference to the auditor’s report
Must give notification to the board of directors if he finds something significant to remark
Specific statements in various situations

22. TAX TREATMENT OF FINNISH BUSINESS FORMS
PROFIT
PROFIT
PROFIT
PROFIT
Company
tax
Company tax
PRIVATE
ENTERPRENEUR
PUBLIC
LIMITED LIABILITY
COMPANY
OYJ
PARTNERSHIP
LIMITED LIABILITY
COMPANY OY
dividend
dividend
dividend
dividend A P A P A P A P A P P P
ENTREPRENEUR
PARTNER
PARTNER
SHARE
HOLDER
SHARE
HOLDER
SHARE
HOLDER
SHARE
HOLDER
A = EARNED INCOME
P = CAPITAL INCOME
Lähde (soveltaen): Kivelä – Nordell Yrittäjän oikeutta. Helsinki. WSOY.

23. TAXABLE CAPITAL INCOME
Example:
TAXATION OF PRIVATE ENTREPRENEUR
INVESTED CAPITAL
PRIVATE
ENTERPRISE
20%
PROFIT IN YEAR XX
70.000
OWNER
TAXABLE EARNED INCOME
30.000
TAXABLE CAPITAL INCOME
40.000
Modified from: Hulkko - Hyvärinen - Varjola-Vahvelainen - Ohvo Henkilöstöoikeus. Helsinki. WSOY

24. TAXATION OF SHAREHOLDERS OF PUBLIC LIMITED LIABILITY COMPANIES
DIVIDEND
70% taxable capital income
30% tax free

25. TAXATION OF SHAREHOLDERS OF PRIVATE LIMITED LIABILITY COMPANIES
DIVIDEND
9 % of the mathematical
value of the share
Capital Income
Tax free until € / shareholder
Of the exceeding part::
1) Capital income 70%
2) Tax free 30%
Earned Income
=>
Taxable 70%
Tax free 30%