Foreign Investment Screening in Finland Set for Reform – New Act to Replace Current Framework
The purpose of the Act on the Screening of Foreign Corporate Acquisitions (172/2012, the Screening Act) is to monitor and, where necessary, restrict arrangements that result in the control of a Finnish company being transferred to a foreign owner. In accordance with Prime Minister Orpo's Government Programme, the Finnish Government is currently preparing to repeal the current Screening Act and replace it with a new Act on the Screening of Foreign Investments. The new Act seeks to enhance the Finnish FDI Regime in light of the evolving geopolitical landscape and technological developments, while more comprehensively addressing risks related to national security, security of supply and wide-ranging influence activities. In addition, the new Act will nationally implement the new EU FDI Screening Regulation, which is set to enter into force in the summer of 2026.
Key changes
Under the current Screening Act, screening covers acquisitions in the defence and security sectors, as well as acquisitions concerning other critical targets, the assessment of which takes into account, on a case-by-case basis, essential societal functions and security of supply. While the general scope of application under the new Act would remain unchanged, the sectors subject to screening would be defined more precisely. The scope would encompass both critical sectors already subject to established supervision and certain entirely new sectors not currently covered by the screening system. Furthermore, screening under the new Act would, in certain sectors, also extend to investments creating new business (greenfield investments), which do not currently fall within the scope of the Screening Act.
The new screening procedure would consist of a two-stage review process. In the first stage, the National Emergency Supply Agency would carry out a preliminary assessment within 45 days of receiving the application. If the nature or significance of the matter so required, the case would proceed to a second stage for consideration by the Ministry of Economic Affairs and Employment, with no statutory maximum time limit. The Ministry would also retain the right to take over the matter already at the first stage, should it consider this necessary. In addition, the new Act would expand the circumstances in which a permit may be granted subject to conditions.
Under the new Act, a foreign investor would be required to apply for a permit when foreign ownership or effective control in the target company exceeds the threshold value laid down in the Act. The thresholds would be 10%, 33.3%, 50%, 66.6% and 90%. Of these, the 66.6% and 90% thresholds would constitute new additions to the current Screening Act. These thresholds would equally apply to the acquisition of additional shareholdings.
The new Act would require that a permit be obtained for all foreign investments falling within the scope of screening prior to completion, and voluntary notification as provided for under the current system would no longer be available. Under the current Screening Act, a foreign investor is defined as an investor whose registered office is outside the EU or EFTA member states. The new Act would broaden the definition of a foreign investor to cover all investors domiciled outside Finland.
Under the new Act, an investment falling within the scope of the Act that has been completed without a permit could be declared null and void where the foreign investor, despite a request by the competent authority, fails to apply for a permit within the specified time limit. With regard to penalties, the new Act would replace the criminal fine procedure under the current Screening Act with an administrative penalty payment. The maximum penalty payment would be EUR 10 million or 10% of total annual turnover for legal entities, whichever is higher, and EUR 500,000 for natural persons.
In conclusion
The practical implications of the new Act for businesses are twofold. First, the enhanced clarity of the regulatory framework and the more precisely defined time limits are intended to improve the predictability of the investment environment and to strengthen legal certainty. However, the expansion of the scope of the mandatory permit procedure is likely to increase the administrative burden on businesses and give rise to additional costs.
The new Act remains based on a positive attitude towards foreign investment, and the threshold for intervention by the authorities will only be exceeded in situations where a change in ownership structure threatens key national interests. The government proposal is due to be submitted to the Parliament by September 2026 at the latest, and the Act is intended to come into force in early 2027.
