An effective legal due diligence review must identify and quantify jurisdiction-specific risks before they are translated into contractual protections. In a Finnish share acquisition, this requires familiarity with, among other things, the Finnish Limited Liability Companies Act (the “Companies Act”), the filing obligations maintained by the Finnish Patent and Registration Office (“PRH”), employment legislation, relevant industry-specific regulation and the way Finnish sellers structure their disclosure.

This article highlights selected red-flag areas that are particularly relevant to legal due diligence in Finnish share acquisitions.

CORPORATE AND TITLE RED FLAGS

Incomplete or outdated Trade Register filings

Missing or late filings at PRH may signal governance weaknesses and can mean that the buyer is relying on inaccurate information about the company’s share capital, board composition or articles of association.

The starting point for any Finnish share sale due diligence is Finland’s Trade Register, which is maintained by PRH. It is the authoritative source for a company’s legal existence, share capital structure, board composition, and signatory rights. The YTJ Business Information System provides basic company details and tax registration status, while Virre is PRH’s online service for obtaining certified extracts and filed documents.

The Trade Register extract and the target company’s articles of association are the main public sources of information and can be retrieved online. They should be compared with the target company’s corporate records to confirm that filings are current, required filings have been submitted on time, and the articles of association do not contain transfer restrictions, redemption clauses or consent clauses that could block or delay the transaction.

Shareholder Register

The shareholder register is a private document maintained by the company’s board, and buyers must cross-check it against Trade Register data and the share transfer chain to confirm clean title. Discrepancies between the shareholder register and the corporate records may indicate unauthorised share or option issues or unregistered transfers.

If a company’s shares are pledged as collateral, this should be disclosed in the shareholder register. In practice, however, this obligation is often neglected. Such non-disclosure creates an immediate title risk for the buyer.

Articles of association

Finnish companies often include redemption clauses (in Finnish: lunastuslauseke) and consent clauses (in Finnish: suostumuslauseke) in their articles of association. These clauses deserve particular attention because, under the Companies Act, they are enforceable and can render a share transfer void if the proper procedures are not followed.

CONTRACT AND THIRD-PARTY CONSENT RED FLAGS

Although a share sale transfers the company as a whole and therefore leaves its contracts in place, many commercial agreements include change-of-control provisions that can be triggered by the transfer of shares.

Key customer and supplier agreements frequently include termination or renegotiation rights triggered by a share sale. Missing even one can eliminate a material revenue stream post-closing.

Loan and leasing agreements usually treat a change of control as an event of default. If no waiver has been sought from the financier in advance, there is a risk of premature termination of the financing arrangement.

Commercial leases for premises in Finland frequently require landlord’s consent for a change of control. Failure to obtain consent can give the landlord the right to terminate.

Enterprise software licences often contain anti-assignment or change-of-control clauses. The same applies to IP assignments and data-processing agreements. Under the GDPR, the target’s role as data controller and the terms of its data-processing agreements must also be reviewed.

GRANTS AND PERMITS

Government grants, licences and sector-specific authorisations may not survive a change of ownership.

Government contracts and public procurement awards may require pre-notification or approval from the contracting authority of the share transfer. Non-compliance can result in contract termination or disqualification from future tenders.

Government grants frequently include change-of-control clauses and may require pre-notification or approval before the share transfer.

EMPLOYMENT AND PENSION

In a share sale, all employment relationships remain with the target company, as the employer entity does not change. The provisions on transfer of business (in Finnish: liikkeenluovutus) or co-operation within undertakings (in Finnish: yhteistoimintalaki) are not engaged by a share sale. However, a share sale may trigger post-closing restructuring that itself constitutes a transfer of business or a co-determination obligation.

Finland’s collective bargaining system is one of the most comprehensive in Europe. The applicable collective agreement, whether generally binding or company-specific, often dictates minimum terms on pay, working time, notice periods, and benefits. If the target has failed to comply with the applicable collective agreement, the buyer inherits that exposure. Back-pay claims can be substantial, particularly where working-time regulations have been breached or holiday pay has been miscalculated.

Finnish employers must maintain accurate working-time records. Non-compliance with working-time record requirements may give rise to claims for overtime or Sunday-work compensation.

Some Finnish companies offer supplementary group pension arrangements in addition to statutory earnings-related pension cover. Statutory pension contributions should be verified as current, and the funding status of any supplementary group pension arrangements, together with any undisclosed commitments, must be quantified. Underfunding or undisclosed supplementary pension commitments may create contingent liabilities for the buyer.

REGULATORY AND SANCTIONS

The Finnish Competition and Consumer Authority can unwind a transaction if mandatory merger-control thresholds are met and merger notification is omitted.

On the sanctions front, the EU Sanctions Compliance Helpdesk provides a practical set of indicators for assessing sanctions risk. Counterparty screening against EU restrictive-measures lists should be carried out early in the process, particularly where the target has cross-border operations, to avoid wasted costs on a deal that cannot close.

Sector-specific regulation adds a further layer of complexity. In regulated industries, failure to obtain the necessary clearances or make the required notifications can block or unwind a completed deal. Share transfers in several industries may trigger regulatory licence-transfer requirements, including in financial services, energy, health care and social services, defence, gaming, pharmaceuticals, electronic communications and digital infrastructure. Such transfers usually require pre-notification or consent, and failure to act can prevent completion or expose the buyer to post-closing enforcement risk.

Under the Finnish FDI Screening Act (Act on the Monitoring of Foreign Corporate Acquisitions in Finland), acquisitions of at least 10%, 33.3%, or 50% of the aggregate number of votes or equivalent actual decision-making power by a non-EU/EEA entity in a company operating in a critical sector — including energy infrastructure and energy production — may require notification to and approval by the Finnish Ministry of Economic Affairs and Employment.

COMMERCIAL AND CONTRACTUAL RESPONSES TO RED FLAGS

Identifying red flags is only half the task. The critical step is translating each finding into a commercial and contractual response. If risks have been identified in the legal due diligence review, they must be properly addressed in the share purchase agreement. Since standard seller warranties do not usually cover risks that the buyer has identified before signing, the share purchase agreement should include additional protection for those specific risks.

The protective mechanisms usually include appropriate conditions precedent requiring the risk to be remedied before closing. Alternatively, the share purchase agreement may include the seller’s post-closing obligation to remedy the issue, together with an obligation to compensate the purchaser for any resulting loss or damage. The parties may also agree on a combination of a price adjustment, an escrow arrangement and targeted indemnities.