Amendments will be made to the Act on the Monitoring of Foreign Corporate Acquisitions in Finland (172/2012), which provides the basis for the monitoring and confirmation of corporate acquisitions made by foreign citizens or entities.
If a corporate acquisition is potentially in conflict with vital national interests, the Finnish authorities will make an assessment and confirm whether or not it can go ahead. The authorities may restrict a foreign owner’s acquisition of a company if a key national interest, such as securing national defense or safeguarding public order and security so requires. The foreign owner may give notice of an acquisition of a monitored non-defense industry entity if seeks confirmation that the authorities will not interfere with the acquisition. In relation to an acquisition of a company in the defense sector, a foreign owner is obliged to apply for advance confirmation.
In June, the Finnish Parliament passed a government bill (no 73/2014) on the amendment of the Act on the Monitoring of Foreign Corporate Acquisitions. The outset of the Act, which entered into force in 2012, will continuously be to promote foreign investment in Finnish companies, and the authorities shall only interfere with foreigners’ corporate acquisitions in exceptional situations. The amendments are aimed at refining the Act in order to tackle some of the problems which have arisen from its practical application — for example, by giving the authorities the ability to take company-specific differences into account.
The legislation on foreign corporate acquisitions ensures that the authorities are able to prohibit acquisitions which might endanger a key national interest, such as national defense or the protection of public order and safety. Acquisitions of Finnish non-defense industry companies are only monitored by the authorities, if the said companies are crucial for securing the vital functions of society.
Foreign Authority in a Monitored Company
The Act is concerned with corporate acquisitions wherein through purchase or other transaction a foreign owner obtains influence over a monitored company. Such influence is gained when the foreign owner acquires a certain amount of shares with voting rights in a monitored limited liability company or otherwise gains an equivalent actual influence in the company. The Act also considers as foreign corporate acquisitions situations in which an existing Finnish owner having an influential role in the monitored company becomes a foreign owner.
In view of the objective of promoting foreign investment, foreign acquisitions should not be restricted only on a precautionary basis if the corporate acquisition at hand does not give rise to restrictions. The current voting threshold gives the foreign owner the chance to give notice of its acquisition when it acquires influence equivalent to 10 % of the voting rights in the company. This voting threshold has, in practice, been relatively low. An influence exceeding this threshold does not necessarily endanger a vital national interest, which by law would mandate the restriction of the acquisition at hand. In some companies, such foreign ownership does not raise any problems at all.
After the amendment to the Act, a notification of a foreign acquisition as provided in the Act may be given when a foreign owner acquires at least 10 %, 30 % or half of the total voting rights in a limited liability company or when the owner otherwise gains an equivalent actual influence of the company or another monitored entity. By staggering the voting threshold in this manner, it is easier for the monitoring authority to take company-specific differences into account, for example in situations where restrictions would be justified only when the foreign influence of the company draws closer to majority rule. Nevertheless, should there be special reason for it to do so, the relevant authority may oblige the purchaser to later make an application or a notification of such influence-building measures that are taken later on, also when such measures would not result in the voting threshold being exceeded. The provisions of the voting thresholds do not apply to acquisitions in the defense industry as these are subject to a mandatory process where the foreign purchaser needs to apply for the advance confirmation of an acquisition.
Monitoring of Foreign Corporate Acquisitions
The Ministry of Employment and the Economy is the authority responsible for the monitoring and confirmation of foreign corporate acquisitions. If a corporate acquisition is potentially in conflict with vital national interests, the Finnish Government will confirm whether or not the acquisition may be approved and subsequently confirmed. According to the current Act, a matter requiring confirmation shall be considered in a government plenary session only if the Ministry considers the acquisition to conflict with a key national interest. The amendments will make it easier to transfer a matter to be deliberated by the government. The amended provision states that matters shall be resolved by the government, whenever there is a possibility that the foreign acquisition might conflict with a key national interest. A matter can thus be transferred to be considered by the government, even if the Ministry does not consider a key national interest to be endangered, provided that there is a possibility it might be and the Ministry thinks it should be considered by the government plenary session.
A notification of a non-defense industry acquisition can be made to the Ministry also before the acquisition has been completed, provided that the notification is made immediately prior to closing. The corporate acquisition will be considered confirmed if the Ministry neither decides to undertake a further examination of the matter within six weeks, nor, within three months of receiving the information, submits a proposal that the matter should be considered in a government plenary session.
The aim of the amendment is to clarify the provisions that regulate the authorities’ ability to monitor and restrict the foreign ownership of companies that are crucial for national security and the security of emergency supply. Interference with corporate acquisition will also in the future only be possible in exceptional situations. The Act is meant to enter into force as soon as possible. The legal provisions in force at the time of the entry into force of this Act will apply to corporate acquisitions carried out before the Act’s entry into force.