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. BUSINESS FORMS 1 2 or more 1 + 1 or more 1 or more - Business form
PRIVATE
ENTERPRISE
PARTNERSHIP
LIMITED
COMPANY
Owner
Entrepreneur
Partner
Personally liable partner and
silent partner
Shareholder
Number of
Owners 1
2 or more
1 + 1 or more
1 or more
Founding
documents -
Founding contract
Deed of formation,
articles of association
Owner’s liability for the company’s obligations
Owner is liable with his entire personal property
The partners have unlimited primary, joint and several liability
The personally liable partner: as in partnership,
the silent partner: liability limited to his contribution
Shareholders’ liability limited to their contribution
Acting on behalf of the company
Each partner independently
Liable partner: as in partnership
Board of Directors
Profit shareing
All the proceeds of the enterprise belong to the entrepreneur
1) According to the contract
2) Interest to the partners’ contributions
First the silent partner’s share of profit,
the liable partner’s as in partnership
The non-restricted equity capital can be distributed as dividends among the shareholders

4. PROFIT PROFIT PROFIT TAX TREATMENT OF FINNISH BUSINESS FORMS PROFIT
Company
tax
Company tax
PRIVATE
ENTERPRISE
PUBLIC
LIMITED
COMPANY
OYJ
PARTNERSHIP
LIMITED
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.

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

6. 70% taxable capital income
TAXATION OF SHAREHOLDERS OF PUBLIC LIMITED COMPANIES
DIVIDEND
70% taxable capital income
30% tax free income

7. TAXATION OF SHAREHOLDERS OF PRIVATE LIMITED 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%

8. 1. PRIVATE ENTERPRISE / PRIVATE PROPRIETORSHIP
Not a juristic person
=> the entrepreneur and his enterprise are legally the same
Owner
One natural person
Must have his habitual residence in the European Economic Area, unless exempted by the Patent and Registration Office
Acts on behalf of the enterprise
Is liable for the commitments of the enterprise with his entire personal property
Bookkeeping is required
No auditing required

9. 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 be registered, if a juristic person) in the European Economic Area, unless exempted by the Patent and Registration Office
Contractual freedom as to management, division of power, right to veto, share of profit
Partners’ liability
Unlimited primary, joint and several liability
Liability restrictions are invalid

10. Partners’ authority
Each partner may represent the company
Restrictions:
Company’s line of business
Partners’ agreement => effective if the third party knew => best to register
Each partner has a veto right => effective toward a third party who knew

11. Position of the partners 1. General partner
3. LIMITED PARTNERSHIP
Setting up
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 Patent and Registration Office
Other provisions like with general partnership
Position of the partners
1. General partner
Same as in general partnership
2. Silent partner
Liability for debts is limited to the amount of the investment
No managerial power
No right to represent the company
Certain decisions can’t be made without his approval

12. 4. LIMITED COMPANY Setting up Share capital One or more founders
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 Patent and Registration Office
Share capital
Minimum € fixed
Public limited company: Minimum € fixed or
Variable with min/max limits

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

14. Shareholders’ liability limited to their investment
Board Members and Managing Director are liable for damage caused by negligence
Signing on behalf of the company
By virtue of
1. Law => The Board of Directors
2. Articles of Association => E.g. Board Members individually or jointly, Managing Director
3. Articles of Association => May entitle the Board to grant the right to a named person

15. 1. Shareholders’ Meeting
Decision-making:
Election of Board Members and auditors
Discharge from responsibility
Approval of financial statements
Disposal of profit
Changes in Articles of Association
1. Ordinary General Meeting
2. Extraordinary General Meeting
By decision of the Board of Directors
On demand of the auditors or the shareholders

16. Voting Equality of the shareholders
Each shareholder has as many votes as he has shares, unless otherwise stipulated in the Art. of Assoc.
The general rule
=> Simple majority of votes
Exceptions in law / Articles of Association
=> Qualified majority
E.g. Amendment of the Articles of Association:
2/3 of the votes cast and
2/3 of the shares represented in the meeting

17. Possible only in companies with share capital > € 80,000
2. Supervisory Board
Possible only in companies with share capital > € 80,000
By virtue of the Articles of Association
Supervises the Board of Directors and other company directors
Elects the Board of Directors, unless otherwise stipulated by the Art. of Assoc.
May have extensive decision-making power stipulated by the Art. of Assoc.

18. 3. Board of Directors
Responsible for administration and organisation of company operations
Represents the company
Min 3 members if share capital > €
Elected by the Shareholders’ Meeting
Art. of Assoc. can stipulate that less than 50% can be appointed some other way
Duly convened when 50% of members present

19. 4. Managing Director
Responsible for day-to-day operations and administration
Represents the company by virtue of his position in the company
Compulsory if share capital €
Appointed by Board decision, unless otherwise stipulated by Art. of Assoc.

21. ESTABLISHING A BUSINESS 1. The Trade Act
- governs the general provisions for carrying out a trade
2. Specific Acts
- govern the different legal forms of corporation
Private Enterprise
General Partnership
Limited Partnership
Limited Company
Private Limited Company
Public Limited Company
Cooperative Society
Foundation
Economic society

22. The main principle: Freedom of trade Forms of Trade: 1) Free
THE TRADE ACT
(Elinkeinolaki)
The main principle: Freedom of trade
Forms of Trade:
1) Free
- no permission required nor any other regulations
- most trade is unrestricted
2) Regulated
- a permission is required or a notification to the appropriate authority before beginning the trade activity
- governed by Trade Act and specific legislation
E.g. Banking, insurance, private security companies, travel agencies, restaurant and catering services

23. Trade Activities by Foreigners 1)
Natural persons resident in the European Economic Area (EEA)
and
Juristic persons of the EEA countries
do not need a special permission 2)
Others
need a special permission from the Ministry of Trade and Industry

24. CHOOSING FORM OF BUSINESS normally free choice Issues to consider:
- tax considerations
- number of owners
- decision-making
- amount of capital needed
- liability for the obligations of the enterprise
- acting on behalf of the company
- amount of obligatory paper work

25. Conversion of business form:
- private enterprise can be converted to any type of business
- partnership can be converted to any other type of business
- limited company can’t be converted
Dissolution of business:
- simple, except limited company

26. PROFIT PROFIT PROFIT TAX TREATMENT OF FINNISH BUSINESS FORMS PROFIT
Company
tax
Company tax
PRIVATE
ENTERPRISE
PUBLIC
LIMITED
COMPANY
OYJ
PARTNERSHIP
LIMITED
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.

27. TAXABLE CAPITAL INCOME
Example:
TAXATION OF PRIVATE ENTREPRENEUR
INVESTED CAPITAL
PROFIT IN YEAR XX
70.000
18%
ENTERPRISE
TAXABLE EARNED INCOME
34.000
TAXABLE CAPITAL INCOME
36.000
Modified from: Hulkko - Hyvärinen - Varjola-Vahvelainen - Ohvo Henkilöstöoikeus. Helsinki. WSOY

28. 1. PRIVATE ENTERPRISE / PRIVATE PROPRIETORSHIP Not a juristic person
=> the entrepreneur and his enterprise are legally the same
=> enterprise is classified a natural person
Setting up
- the simplest form
- no written document needed
- no minimum capital
Owner
- one natural person
- acts on behalf of the enterprise
- is liable for the commitments of the enterprise with his entire personal property
Bookkeeping is required but no auditing required

29. 2. GENERAL PARTNERSHIP Setting up Partners’ liability
- by an agreement between 2 or more founders
=> juristic person
- no minimum capital required
- must be registered
Partners’ liability
- each partner is liable for the commitments of the enterprise with his entire personal property
- unlimited primary, joint and several liability
- liability restrictions are invalid

30. Partners’ authority - each partner may represent the company
Restrictions:
1) Legal actions not within company’s line of business => do not bind the company
2) Partner/s entitled to sign on behalf of the company can be subject to agreement => must be registered
3) Restrictions not registered => effective if the third party knew
4) Each partner has a veto right => effective if the third party knew
Contractual freedom as to management, division of power, right to veto, share of profit

31. Position of the partners 1. General partners
3. LIMITED PARTNERSHIP
Setting up
- one or more general partners and one or more silent partners
- other provisions like with general partnership
Position of the partners
1. General partners
- same as in general partnership
2. Silent partners
- liability for debts is limited to the amount of the investment
- no managerial power
- no right to represent the company
- certain decisions can’t be made without his approval

32. 4. LIMITED COMPANY
Setting up
- one or more founders
- must be registered => juristic person
Share capital:
1. Minimum € fixed
2. Public limited company: Minimum € fixed or
Variable with min/max limits

33. Signing on behalf of the company By virtue of
Liability
- the shareholders’ liability limited to their investment
Signing on behalf of the company
By virtue of
1. Law:
- the Board of Directors
2. Articles of Association
- e.g. Board Members individually or jointly, Managing Director
3. Articles of Association
- may entitle the Board to grant the right to a named person

34. SHAREHOLDERS’ MEETING =STOCKHOLDERS’ MEETING)
LIMITED COMPANY BODIES
SHAREHOLDERS’ MEETING
(=GENERAL MEETING
=STOCKHOLDERS’ MEETING)
AUDITORS
SUPERVISORY BOARD
BOARD OF DIRECTORS
MANAGING DIRECTOR
(=CEO)

35. 1. Shareholders’ Meeting
- the highest decision-making body on matters stipulated by law
Decision-making:
- election of Board Members, auditors
- discharge from responsibility
- approval of financial statements
- disposal of profit
- changes in Articles of Association
1. Ordinary General Meeting
- stipulated by law => Articles of Association
2. Extraordinary General Meeting
- by decision of the Board of Directors
- on demand of the auditors or the shareholders

36. The general rule: simple majority of votes
Decision making
- the meeting is duly convened when one shareholder is present
Voting
The general rule: simple majority of votes
When required by law or Articles of Association: a qualified majority
E.g. Amendment of the Articles of Association: 2/3 of the votes cast and of the shares represented in the meeting
Equality of the shareholders
Each shareholder has as many votes as he has shares (unless otherwise stipulated in the Art. of Assoc.)

37. 2. Supervisory Board
Possible only in companies with share capital > € 80,000
By virtue of the Articles of Association
Function is to supervise the Board of Directors and other company directors
Elects the Board of Directors (unless otherwise stipulated by the Art. of Assoc.)
May have extensive decision-making power stipulated by the Art. of Assoc.

38. 3. Board of Directors
Body representing the company
Min 3 members if share capital > €
Normally elected by the Shareholders’ Meeting (Art. of Assoc. can stipulate that less than 50% can be appointed some other way)
Duly convened when 50% of members present (unless Art. of Assoc. stipulate different)
Responsible for administration and organisation of company operations

39. 4. Managing Director
Compulsory if share capital €
Otherwise appointed if
Stipulated in Art. of Assoc.
By Board decision
Represents the company by virtue of his position in the company
Responsible for day-to-day operations and administration

40. The shares Different values: Assignment of shares
- nominal, taxation value, market value, mathematical value
Assignment of shares
- free unless restrictions based on Art. of Assoc.:
1. Consent Clause
- not widely used in Finland
- concerns only certain acquisitions
2. Redemption Clause
- widely used in small companies
- may concern any form of acquisition
- typical content: if shares are assigned to a non-shareholder the shareholders are entitled to redeem the shares
Note: no restrictions on foreign ownership