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Doing Business in Finland

Finding the Right Law Firm

Legal System

The Republic of Finland joined the European Union on 1st January 1995. As of 1st January 2002 the national currency is the EURO. Finnish law is statutory law and is based on a constitution. The development of its own legal system began in 1809 and its legislation and jurisprudence has been influenced by Swedish land German law and legal thought prevailing in Europe during the 19th century. Finland is bilingual (Finnish and Swedish) and has mostly ratified EU Directives in due course and EU law is directly applicable and supersedes national law.

Foreign Businesses and Investments

Finnish law provides for an equal treatment of Finnish and foreign nationals. The law does not impose any general restrictions on foreign businesses and investments except for certain areas and types of activities that are subject to permits or authorisations by reason of special national or public interest. Capital may be transferred to and from Finland with practically no restrictions subject to the provisions on money laundering being obeyed. Except for provisions relating to money laundering exchange control or currency regulations are not imposed on investments and payments. To a certain extent, foreign investors may obtain funding or state subsidies, depending on the area, location and kind of the investment.

Contracts and commercial

Finnish and foreign parties are free to enter into agreements and business relation at their own discretion. Finland has signed the UN Convention of the international sale of goods. The EC Directive on product liability has been implemented by the law of product liability and provides for an obligation to compensate personal injury and damage to private property.

As regards agency agreements, Finland has implemented the European Council Directive on commercial agents of 1983 and the Finnish law on sales representatives and salesmen contains certain mandatory provisions on the termination of agency agreements, compensation, competition restrictions and information rights of the parties.

Regarding distributor agreements there are no statutory laws or regulations on re-sellers as such. Distribution agreements thus require an examination of the relevant laws on contracts, trade marks, competition and EU or other international treaties.

In the case of exclusive distribution or agreements that contain agency characteristics, the Finnish courts tend to apply certain principles on the protection of agents under the law on sales representatives and salesmen also upon distribution relations in which case the distributor may, for example, be entitled to compensation at the termination of the agreement.

Franchise agreements are not regulated by any special law but again various laws and regulation have an impact on franchise arrangements, such as laws and regulations on licensing, leasing, competition.

Internet and e-commerce is regulated by the law on information services and offering of July 2002 and on electronic signatures of February 2003 by which the respective European Council Directive 2000/31 and 1999/93 were implemented and contain regulations on the conduct of business by electronic means. Further, the law on the protection of personal data of 1999 and for example, the law on consumer protection or the law on the privacy and protection of telecommunication contain regulations relevant for internet and distance selling and marketing.

Company and corporate

Forms of businesses are the private or public limited liability company, as the only legal entity of "limited liability" with its capital divided into shares (osakeyhtiö or Oy/Oyj ), the limited liability partnership (kommandiitiyhtiö or Ky), general partnership (avoin yhtiö) and the sole entrepreneurship (toiminimi, tmi.). The private limited liability company is the most common form to conduct business and often compared with an English Limited company or a German GmbH. Foreign companies may also establish a branch office in Finland which is as common as establishing a subsidiary. All forms of business entities are registered with the National Board of Patents and Registration and basic data are available free of charge also in English under www.ytj.fi.

Establishing a private business entity requires only few formalities, including but not limited to the memorandum of association and the articles of association which must be drawn up. The registration is applied for by submitting a registration form. Notarization is not required, but the documents must be signed and the persons elected members of the board of directors, managing director or auditor must give their consent in writing. At least one member must be resident in the EEA. The minimum capital of a private limited liability company is 8.000 €, and the capital must be paid into a bank account in Finland. The minimum capital of a public limited liability company is 80.000 €. Shares may also be issued and subscribed against a consideration in kind in which case the value of the consideration must be evidences and confirmed by an independent and sufficiently qualified source as, for example, a licensed auditor. The company is incorporated upon its registration but may conduct business as of being established. The shares have equal rights but the articles of association may also provide for certain preferences and differences regarding voting rights and the participation in dividends. The Finnish Act on Companies was renewed and amended during 2006 and removed most of the requirements as to the content of the articles of association and other formalities related to running the company.

In principle, all of the shares of a limited liability company may be foreign owned. In the case the share capital is less than 80.000 € the company is represented by a board of directors of at least one member and a deputy member. The appointment of a managing director is mandatory only as of a share capital of 80.000 € in which case the board of directors must consist of at least three members, a further supervisory board is optional.

Labour and employment

Finland belongs to one of the most organized countries in Europe and labour and employment matters are thoroughly regulated by various laws, collective agreements and ministerial decrees, national policies and practices providing for a wide scope of protection to employees and are applicable upon all employers. As a consequence of the various regulations and collective agreements it is necessary and worth the effort to diligently review the legal environment and mandatory provisions of the law or collective agreements relevant to employment prior to negotiating terms and conditions or entering into employment contracts. Mandatory provisions are likely to exist related to salary, holidays, over-time, safety of and health at work and termination. However, EU and internationalisation have a considerable influence on the development of the law, and the current restrictions on the free movement of labour from the new member states of the EU will end in May 2006. Finnish law is applied on all national and foreign employees (permanently) working in Finland, in certain cases foreign law may be applied. Finnish companies hiring labour from abroad are obliged to ensure that the mandatory provisions of the applicable laws and collective agreements are obeyed by the foreign employer.

A written agreement is not mandatory unless the employee so requests, however, the employer shall provide the employee with a confirmation of the terms and conditions of employment in.