Deals are generally not blocked in Finland, and are reviewed mostly when in the defense and dual-use sectors
The Finnish government views foreign ownership positively as a catalyst for increasing internationalization and competitiveness. Deals are restricted only when they meet very specific criteria.
Deals not related to defense or security may also be covered by the Monitoring Act if the company being acquired is considered critical for securing vital functions of society.
The objective of the Finnish Act on Monitoring Foreign Ownership (172/2012, as amended, the "Monitoring Act")1, is to assess foreign investments for their potential impact on national interests. When doing so is deemed necessary to protect national defense and safeguard public order and security, the government may restrict the transfer of influence to foreigners, foreign organizations and foundations.
The Monitoring Act has a special focus on defense industry companies, including dual-use companies, and companies operating in the security sector. The Ministry of Economic Affairs and Employment (the "Ministry") handles matters concerning the monitoring and confirmation of corporate acquisitions and also serves as the national contact point in the cooperation between Member States and the EU.
FILING OBLIGATIONS AND CONSEQUENCES IN THE EVENT OF BREACH
Under the Monitoring Act, a "corporate acquisition" occurs when a foreign owner gains control of at least one-tenth, one-third or one-half of the aggregate number of votes conferred by all shares in a Finnish company—or otherwise secures a holding that confers decision-making authority.
All corporate acquisitions concerning the defense and dual-use sectors require advance approval by Finnish authorities. Advance approval must also be acquired for corporate acquisitions concerning companies operating in the security sector that provide products or services to authorities that are deemed vital for the security of the society.
Deals not related to defense or security may also be covered by the Monitoring Act if the company being acquired is considered critical for securing vital functions of society. In such cases, investors are however not required to submit an application prior to completing a transaction. But in practice, applications are always submitted prior to completion.
The government intentionally does not define the phrase "company considered critical for securing vital functions of society" because the definition evolves over time. The Ministry may also oblige a foreign investor, for a particular reason and after processing the matter, to submit an application concerning a measure that increases the foreign investor's influence but which does not result in exceeding the abovementioned limits. For the defense and dual-use sectors, monitoring covers all foreign owners.
For security sector companies and companies considered critical for securing vital functions of society, monitoring applies only to foreign owners residing or domiciled outside the EU or the European Free Trade Association. The Ministry may also impose mandatory conditions for the confirmation of a corporate acquisition and, where necessary, enforce compliance with the application of a conditional fine. If the Monitoring Act is breached, the transaction can be declared null and void.
The review process starts when an investor submits an application to the Ministry. There are no formal requirements for the layout of the application, but the Ministry has published instructions for preparing one. It is critical that the application be made by the potential foreign owner, not a Finnish holding company already set up by the potential new owner.
After receipt of the application, the Ministry asks for input from other authorities and, if necessary, the Ministry may disclose confidential documents and information to these authorities. The Ministry may also decide not to review a submitted application for prior approval if it determines that the acquisition does not fall within the scope of the Monitoring Act. Where it is apparent that the purpose of an acquisition or an equivalent measure is to circumvent the provisions of the Monitoring Act, the Ministry has the right to examine the acquisition at its request.
If the Ministry finds that the transaction may endanger a key national interest, it transfers the matter to the government's plenary session for resolution. The government's plenary session then makes the decision about whether to restrict or approve the deal, depending on whether it believes the deal poses a threat to the national interest. However, if the Ministry believes that a transaction does not endanger a key national interest, it approves the transaction. The vast majority of transactions submitted to date have been approved by virtue of this rule.
All applications are urgently processed by the Ministry. The Monitoring Act states that a transaction is deemed to have been approved if the Ministry does not make a decision on an in-depth review within six weeks, or if the application has not been transferred to the government's plenary session within three months dating from the day when all necessary materials were received. In practice, the process usually takes six to eight weeks.
1 New amendments to the Monitoring Act entered into force on October 11, 2020. This review includes the planned amendments as we expect that the Finnish Parliament will not make any significant changes to the Finnish Government proposal.