The cross-border business conversions directive will enter into force next year

Finnish legislation is being prepared to comply with the cross-border business conversions directive that will enter into force in the end of January 2023. The directive removes the obstacles that hinder the freedom of establishment of companies in the European Union.

Legislative amendments under preparation to the Limited Liability Companies Act

The Finnish government is proposing amendments to the Limited Liability Companies Act, which are intended to implement the EU directive on cross-border business conversions. The directive aims to facilitate the freedom of limited companies to choose their domicile in the EU. The proposal proposes amendments to the provisions of the Limited Liability Act regarding mergers and divisions.

According to the proposal, the company can in the future move its registered office to another EEA state and change its corporate form to that of another EEA state.

The most significant amendments are related to those situations where the company is merging, dividing, or moving its headquarters abroad. The upcoming law requires that, prior to a business conversion, the Patent and Registration Office ensures that all procedures and formalities have been organized or completed and that the business conversion is not conducted with intention of abuse or fraud. After this, if the conditions are met, the Patent and Registration Office submits a certificate to the authority of another state.

Legislative amendments to secure the position of employees

The aim of the EU directive on cross-border business arrangements is to secure the participation and representation of personnel in the company. For this reason, the Finnish government is proposing amendments to the Finnish laws regarding status of personnel in the company. The amendments secure the continuation of the rights of the personnel based on the employment relationship and the personnel existing right to representation of employees. The amendments also secure that employees are consulted and informed when the employer is preparing a business conversation. After the end of January 2023, the company should inform the personnel and consult them before the position of the personnel in the business conversion is discussed at the general meeting.

According to the valid Finnish legislation, personnel have the right to nominate their representatives to the management of the employer company if they wish, if the company has more than 150 employees. The personnel management representation is already secured in Finland in the case of company mergers and divisions. With the amendment in the law, the representation would have been secured also in the situation, when the headquarter is moving abroad. In companies created as a result of cross-border conversions with their registered office in Finland, Finnish legislation would be applied.

The employer’s obligations include salary as well as obligations related to labour law, labour protection, occupational health and safety, social security funding. The legislative amendments ensure the continuation of employer obligations in cross-border business conversion.

The legislative amendments are supposed to enter into force from the end of January 2023, when the directive must also begin to be applied.

More information and references

Directive (EU) 2019/2121 as regards cross-border conversions, mergers and divisions. EUR-Lex – 32019L2121 – EN – EUR-Lex (europa.eu)

Author:

Elias Laitala

Legal Trainee, Oulu

Contact information

Tel: +358 45 782 00305

Email: elias.laitala@lexia.fi

We at Lexia are happy to answer any questions you might have related to the cross-border business conversions.

Send your questions our way!

Senior Associate Marko Moilanen, email: marko.moilanen@lexia.fi, tel: +358 40 517 0002