Finnish corporate governance is based primarily on the Finnish Companies Act (624/2006, the Companies Act). The Companies Act regulates the governance of companies, such as the role of the board of directors, the managing director and the shareholders as well as their duties and responsibilities. For listed companies also the Finnish Securities Markets Act (746/2012, the Securities Markets Act) plays an important role, governing for example disclosure and transparency issues. Listed companies must also comply with the rules of Nasdaq Helsinki Ltd (the Helsinki Stock Exchange) as well as with the regulations and guidelines issued by the Finnish Financial Supervisory Authority (FIN-FSA). In addition to national laws, directly applicable EU legislation has increasing importance in regulating the governance of listed companies. The European Securities and Markets Authority (ESMA) also issues guidelines and technical standards for listed entities.

In addition, self-regulation is central to Finnish corporate governance. The Finnish Corporate Governance Code of 2015 (the Code), issued by the Finnish Securities Market Association and applicable as of 1 January 2016, is the main regulation in this respect, together with the Helsinki Takeover Code (applicable as of 1 January 2014). Both codes are applied on a ‘comply or explain’ basis (i.e., the codes are not mandatory but any deviation from the regulations of the codes shall be disclosed with an explanation).

Enforcement of regulations applicable to listed companies may be carried out by the FIN-FSA or the Helsinki Stock Exchange through disciplinary procedures. In addition, the law may be enforced through actions in local courts.


i Board structure and practices
Structure alternatives

The Finnish corporate governance structure lies between the Anglo-Saxon one-tier model and the two-tier model traditionally more common in continental Europe. A company can choose between having both the board of directors and a supervisory board, or just the board of directors. If the company has a supervisory board, this organ supervises the administration of the company, which in turn is the responsibility of the board of directors and the managing director. In early 2017 less than 4 per cent of Finnish listed companies featured supervisory boards. Boards of listed companies typically consist of five to 10 members.

Legal responsibilities of the board

The board is responsible for the overall management of the company’s affairs and the appropriate organisation of its operations. The board is also responsible for ensuring adequate surveillance of the company’s accounts and finances, as well as for several administrative decisions specified in the Companies Act. A key task of the board is the appointment and dismissal of the managing director (the chief executive), who in turn is responsible for the executive management of the day-to-day operations and financial matters. Board members and the managing director have a general duty to act with due care and in the interest of the company in all matters.

The chairman of the board is responsible for convening the board, but does not otherwise have specific statutory duties beyond those of ordinary board members.

Decision-making and representation

The board shall take all the major decisions affecting the company. The specific limits of the board’s general competence in relation to the authority of the managing director can depend on the size of the company and its established governance practices. In addition, the board has certain administrative responsibilities that cannot be delegated, such as in relation to the registration of new shares.

In individual cases the board may make a decision in a matter falling under the competence of the managing director. The board may also submit a matter falling under its general competence to the general meeting to decide. In listed companies this latter option has at times been used when approving significant acquisitions or divestments.

The board takes all its decisions as a whole, and its decision-making power may not be delegated to the managing director or board subcommittees. The board can, however, authorise the executive management or another party to for example negotiate, finalise and execute within set parameters the final decision concerning a particular matter. Typically such authorisations are in force only for a limited period.

In the Companies Act a distinction is made between decision-making authority and the right to represent the company. By law, the board as a whole is entitled to represent the company in all matters. In practice, the articles typically provide that, for example, the managing director or the chairman, each alone, as well as two board members or other designated representatives together, can represent the company.

Board committees

Efficient organisation of the board’s work may require the establishment of board committees for handling certain matters. The Code includes a description and division of tasks for audit, compensation and nomination committees. Following the implementation of the Audit Directive and Regulation,2 the Companies Act recognises the preparatory role of the audit committee in listed companies. However, the board as a whole is responsible for the eventual decisions even when the board has delegated preparatory responsibilities to committees.

The board of a listed company is required to monitor the company’s financial reporting process, as well as the effectiveness of internal control, audit and risk management systems. The board is also responsible for the proposal on the selection of the statutory auditor. In addition, the board must review and monitor the independence of the auditor and, in particular, the provision of non-audit services to the audited entity. The preparatory work for discharging these responsibilities can be delegated to the board’s audit committee. The Companies Act requires that the audit committee of a listed company consists of non-executive board members and that at least one member of the audit committee has competence in accounting or auditing. Another board committee may be tasked with the aforementioned duties provided that its composition meets the requirements set for the audit committee.

Remuneration of directors and executive management

The remuneration for the board members and the basis for its determination are set by the annual general meeting. The Code recommends that non-executive directors should not participate in share-based remuneration schemes. The remuneration for the executive management is set by the board. The board may establish a remuneration committee to prepare matters pertaining to management and employee remuneration.

According to the Code, the company shall issue on its website a regularly updated remuneration statement containing a description of remuneration within the company. The statement describes the financial benefits granted to the board and the managing director, and contains information on the decision-making process and key principles for determining remuneration.

Board and company practice in takeovers (takeover defences, share issuance and repurchase, etc.)

Just as in all other matters, the board has a general duty in takeover situations to act with due care in the interest of the shareholders. According to the Securities Markets Act, a listed company must directly or indirectly belong to a body that has issued a recommendation on takeover situations. For this purpose, the Finnish Securities Market Association has issued the Helsinki Takeover Code. The Helsinki Takeover Code is based on the ‘comply or explain’ principle and contains recommendations on the actions of the target board and the bidder. With regard to defensive measures adopted in relation to a proposed takeover, the Securities Markets Act requires that a share issue or any other measure by the target company that may prevent or materially hamper the completion of the bid must, as a main rule, be resolved upon by the general meeting.

The articles of association of some listed Finnish companies feature provisions that may act as a priori takeover defences, such as differentiated shares classes or vote cutters that limit the number of votes that any one shareholder can cast. Some listed companies also feature in their articles a Finnish version of a ‘poison pill’, which provides for a mandatory redemption by the bidder of the other shares upon exceeding a set threshold (typically one-third or half of all shares or votes) at a price determined as specified in the articles.

ii Directors
Appointment, nomination and term of office

In Finland, the annual general meeting typically elects all the directors. However, fewer than half of the board members can be appointed in some other manner, if so specified in the articles. In listed companies, the term of a director generally ends with the conclusion of the next annual general meeting following appointment. However, the general meeting can remove a director that it has appointed at any time during the term. The prevailing practice, as recommended by the Code, is to have all board seats up for election each year. The number of a director’s terms has not been limited by legislation or in the Code.

The board has traditionally handled the nomination of the director candidates has usually been handled by the board, with the board’s nomination committee undertaking the preparatory work. However, during the recent years the establishment of an external nomination board has become more commonplace. A nomination board typically consists of representatives of the largest shareholders and often includes the chairman of the board as well. In early 2017, around 30 per cent of listed companies had established a nomination board.

In addition to the above-mentioned formalised nomination procedures, any shareholder can present a competing proposal on director nomination in the general meeting.

Competency and diversity

The Companies Act provides the minimum requirements that all board members must fulfil: a director must be an adult natural person who is not bankrupt or under guardianship and whose legal competency has not been restricted. The Code recommends that a majority of the directors shall be independent of the company, and that of the said majority at least two directors shall be independent of significant shareholders. The Code recommends that the managing director should not be elected the chairman of the board. There is no statutory duty to include employee representatives in the board, and such representatives are very rare in listed companies.

The Code recommends that both genders should be represented in the board. According to a survey published in 2016, 90 per cent of the boards of Finnish listed companies featured both genders, with females constituting 25 per cent of all directors.

Legal duties and right to information

The boards of Finnish listed companies are typically composed of non-executive directors. In some companies the managing director is also a board member, but other executive directors are rare. Finnish corporate law does not generally make a distinction between executive and non-executive directors in terms of their rights, duties or liability.

According to the Code the company shall provide the board with sufficient information for the board to discharge its duties. The board has generally broad authority to require executive management to compile and prepare information to form a basis for the board’s decision-making and the discharging of its supervisory duties. Executive and non-executive directors have the same right to information. It is considered good practice to ensure that in particular the chairman of the board is always kept well-informed of any new developments, as the chairman is responsible for convening the board when necessary.

Although the board has the authority to request information from the management and employees in relation to its supervisory role, it is considered good practice to organise such information-gathering in a formalised and coordinated fashion.

Conflicts of interest

The Companies Act prohibits a director from participating in the consideration pertaining to a contract, a transaction or legal proceedings between that director and the company. Such participation is also prohibited in a matter between the company and a third party if the director is to derive a material benefit therefrom that may be contrary to the interests of the company. The fact that a director may derive benefit from a decision as a shareholder of the company does not, by itself, lead to a conflict of interest.

Each director must in all matters independently evaluate whether a conflict of interests is at hand. Directors should also provide the board with the relevant information to assess the situation if the director in question ultimately deems himself or herself as not conflicted despite factors that can generally indicate a possible conflict of interest. In practice, directors sometimes excuse themselves from participating in relation to matters where an outside influence or interest could be perceived to exist regardless of whether it would meet the statutory definition of a conflict.


The Companies Act provides for remedies when a board member has failed to fulfil his or her duties or tasks, including the general duty of care. The basis for liability is wider with regard to damage caused to the company itself. Firstly, a director is liable for damages for the loss that he or she has negligently caused to the company in violation of the general duty of care. Secondly, a director is also liable to the company, a shareholder or a third party for damage caused either deliberately or negligently in violation of the provisions of the Companies Act (other than just the duty of care) or the company’s articles of association.

Generally, the burden of proof lies on the person claiming a breach and loss. However, there is a presumption of negligence in cases of a violation of a detailed provision of the Companies Act (i.e., other than the general principles) or of the articles of association, as well as in the event of an act to the benefit of a related party, in which case the director in question must prove that he or she acted with due care.

The provision of directors and officers (D&O) insurance paid by the company to cover the civil liability of board members or executive officers is allowed. D&O insurance is commonly used in listed companies.

The Companies Act also provides criminal sanctions for the violation of certain of its provisions, such as those concerning the distribution of funds or voting limitations. Actions of directors in this capacity may also result in criminal liability under, for example, the Finnish Penal Code (39/1889) (the Penal Code) and the Securities Markets Act.


i General

The EU Market Abuse Regulation (MAR)3 has been directly applicable in Finland since 3 July 2016. The MAR sets out the key rules that apply to issuers’ disclosure requirements, administration of inside information and managers’ transactions, among other things.

The MAR requires issuers to publicly disclose inside information as soon as possible. Under the MAR, information is deemed to be inside information if (1) it is of a precise nature and has not been made public, (2) it relates, directly or indirectly, to one or more issuers or to one or more financial instruments, and (3) if it were made public, the information would be likely to have a significant effect on the prices of those financial instruments, or on the price of related derivative instruments.

Information is precise in nature if it is specific enough to enable a conclusion as to the possible effect of the event or circumstance on the price of the relevant financial instrument. In a lengthy process such as negotiations or corporate investments, information concerning intermediate steps in the process, such as the stage of negotiations, may also be deemed precise information.

The MAR allows delaying the disclosure of inside information if (1) immediate disclosure is likely to prejudice the legitimate interests of the company, (2) the delay is not likely to mislead the public, and (3) the company is able to ensure the confidentiality of the information. At the time of public disclosure of inside information, issuers are required to record reasons for delaying the disclosure and to notify the FIN-FSA that the disclosure was delayed.

The Securities Markets Act and related government decrees set requirements for listed companies’ disclosure obligations in relation to regular financial reporting. To promote consistency in disclosures, listed companies are recommended to prepare a written disclosure policy, specifying the company’s guidelines and procedures applied in communicating with the capital markets and investors. Further regulations related to disclosure obligations are set forth in the rules of the Helsinki Stock Exchange and the regulations and guidelines of the FIN-FSA and ESMA.

Pursuant to the MAR, listed companies have an obligation to maintain insider registers of persons having access to inside information. Unlawful disclosure of inside information is prohibited. Engaging or attempting to engage in insider dealing, recommending that another person engage in insider dealing, and inducing another person to engage in insider dealing are also prohibited. Unlawful disclosure of inside information (such as tipping) is sanctioned in the Penal Code and may result in up to two years’ imprisonment. The Helsinki Stock Exchange has issued guidelines regarding the management of insider issues, as well as the procedures regarding disclosure requirements applicable to insiders and the trading of securities by insiders.

The MAR requires transactions by issuers’ managers and persons closely associated with them to be notified promptly (and no later than three business days after the date of the transaction) to the issuer and the FIN-FSA. The issuer shall then make the information public. The threshold for the notification is €5,000 within a calendar year for each person. Once the threshold has been reached, all further transactions in the issuer’s financial instruments must be notified and published.

The Securities Markets Act requires that listed companies disclose a yearly corporate governance statement in which the company shall present information on its governance framework and corporate bodies and state its compliance with the Code. If the company chooses to deviate from a certain provision of the Code, it must state its reasons for doing so (the ‘comply or explain’ principle). Moreover, the company shall keep available a remuneration statement with full disclosure at the individual level of the remuneration of the board members and the managing director. With regard to other executives, disclosure of the main principles for remuneration and the related decision-making process is sufficient.

Both the Companies Act and the Securities Markets Act require that certain disclosed information is kept available on the company’s website. The Code also includes more detailed guidance on publishing the information in an easy-to-find, investor-friendly manner. All information published under the regulatory disclosure requirements shall be disseminated to the media and the release storage of the stock exchange and kept available on the company’s website for at least five years. However, the financial statements, half-yearly financial reports and corporate governance statements shall be kept available on the website for at least 10 years.

ii Financial reporting and accountability

Listed companies shall prepare annual financial statements and reports by the board of directors as well as an interim report for the first six months of the financial year. The consolidated financial statements shall be prepared in compliance with international financial reporting standards. Pursuant to the amended Transparency Directive,4 implemented in Finnish legislation in November 2015, listed companies are no longer required to publish quarterly financial information for the first three and nine months of the financial year. However, most of the listed companies have continued publishing financial information on a quarterly basis.

The financial statements must be published within four months from the end of the financial year and at the latest three weeks before the annual general meeting. In addition, a financial statement release, as required by the rules of the Helsinki Stock Exchange, must be published within three months from the end of the financial year. The financial statement release shall contain the material contents of the financial statements.

Listed companies are required to publish their future prospects in the report by the board of directors once a year. However, most Finnish listed companies have chosen to include their future prospects also in the interim reports and the financial statement release. The FIN-FSA has emphasised that future prospects should be presented together with relevant analysis and linked to risks and uncertainties that may prevent these prospects from being realised. The description of risks and uncertainties should cover company-specific issues associated in particular with the company’s business, industry and operating environment. If it becomes likely that the financial performance will differ materially from previously disclosed future prospects, a profit warning shall be issued without undue delay.

According to the Securities Markets Act, the FIN-FSA may impose a penalty payment for any failure to comply with the ongoing disclosure obligation, disclosure of periodic information and publication and storage of regulated information. A breach of the disclosure obligations set forth in the Securities Markets Act may also result in criminal sanctions under the Penal Code.

iii Auditors

Listed companies must appoint at least one auditor or an audit firm approved by the Finnish Patent and Registration Office. The length of an engagement of a particular auditor or audit firm may not exceed 10 years. The engagement may last longer provided the requirements are met concerning a public tender process for the statutory audit, and the process is conducted in compliance with the amended Audit Directive and Regulation.5 The auditor shall submit annually to the company’s board of directors a written confirmation of his or her independence, a notification regarding threats to independence as well as measures taken to safeguard independence, and a notification regarding engagements other than the statutory audit performed for the company.

Restrictions apply in relation to the provision of non-audit services for listed companies by their auditors and audit firms. The first set of restrictions concern services that involve the management or decision-making of the audited entity. Bookkeeping and the preparation of accounting records and financial statements for the audited entity are also prohibited. Furthermore, the total fees for non-audit services by the auditor or the audit firm are limited to no more than 70 per cent of the average of the fees paid for the statutory audits of the audited entity in the most recent three consecutive financial years. According to the Code, the company shall disclose the fees paid to the auditor during the financial year, separating fees paid for non-audit services.


The Code sets out the main responsibilities of the board of directors relating to internal control and risk management. According to the Code, the board shall ensure that the company defines the operating principles of internal control and shall monitor the functioning of that control. The Code further provides that the company shall disclose the major risks and uncertainties that the board is aware of and the principles along which the risk management of the company is organised. The company shall also disclose the manner in which the internal audit function of the company is organised.

In addition to audit committees, it is also becoming more common to have separate compliance functions in listed companies. In recent years, some listed companies have also established responsibility and ethics committees.

Corporate social responsibility reporting is common. Certain responsibility disclosure matters shall be included in the company’s annual report. Many Finnish companies use report formats such as those of GRI.6 The Finnish government has made a resolution to commit to promote corporate social responsibility and issued an action plan relating to social responsibility. Listed companies are required to include in their corporate governance statement a description of the applicable policies regarding diversity, including gender balance and educational background of the board and the supervisory board. Listed companies also need to disclose information on policies, risks and outcomes regarding environmental matters, social and employee-related aspects, and respect for human rights, as well as anti-corruption and bribery issues.

Furthermore, the MAR requires that listed companies set up appropriate whistle-blowing procedures in line with existing rules applicable to financial institutions.


i Shareholder rights and powers

Shareholders exercise their decision-making powers and participate in the supervision and control of the company through general meetings. The most significant share-related rights include the right to vote in a general meeting, the right to submit a matter dealt to the general meeting and the right to ask questions at a general meeting.

Usually, the general meeting convenes once a year in the annual general meeting. An extraordinary general meeting may be convened if the board of directors deems it necessary, if shareholders with at least 10 per cent of the shares so demand in writing, or if this is otherwise required by law.

Finnish law does not provide for special rights for long-term shareholders, such as extra votes or extra dividend rights.

ii Matters to be brought to the general meeting

The general meeting decides on matters falling within its competence pursuant to the Companies Act and the company’s articles of association. Unanimous shareholders may also make decisions on matters falling within the competence of the board of directors or the managing director of the company unless otherwise explicitly specified in the Companies Act.

Matters that, according to the law, shall be decided upon by the general meeting include the election of board members and determining their compensation, the election of the auditor of the company, and the amendment of the company’s articles of association. In addition, all decisions relating to the shares or share capital of the company shall be approved by the general meeting, including share repurchases, share issues and issues of rights entitling the holder to shares. However, the general meeting may authorise the board of directors to decide on a share issue, a repurchase of the company’s own shares or an issue of special rights entitling the holder to shares. Such an authorisation must specify the maximum number of shares that may be issued and, in the case of share repurchases, the price range for the repurchase. The board of directors may be authorised to decide upon all the other conditions. Dividend distributions shall also be decided upon by the general meeting. The dividend distribution may not exceed the proposal made by the board of directors. The only exception is that shareholders holding at least 10 per cent of the shares in the company may request the payment of a minimum dividend corresponding to half of the profits of the financial year but not more than 8 per cent of the equity of the company. The general meeting shall also resolve upon certain corporate restructurings, such as mergers and demergers, as well as the dissolution of the company.

iii Decision-making at the general meeting

Each shareholder has the right to participate in a general meeting and to use voting rights at the meeting. Unless otherwise provided in the company’s articles of association, all shares carry equal rights. Shares with multiple voting rights or differing dividend rights are permitted, as are shares that do not have any voting rights. Some Finnish listed companies have share classes with multiple voting rights.

Resolutions by a general meeting usually require a majority of the votes cast. However, certain resolutions require a qualified majority so that the underlying proposal is supported by at least two-thirds of votes cast and shares represented at the meeting.

Decisions requiring a qualified majority in a listed company include:

  • a amendment of the articles of association;
  • b directed share issues;
  • c issuing option rights and other special rights entitling to shares;
  • d acquisition and redemption of own shares;
  • e mergers and demergers; and
  • f a decision to enter into liquidation or terminate a liquidation procedure.

Foreign shareholders commonly use proxy voting to participate in general meetings of Finnish listed companies, and the recommendations given by proxy advisers have during recent years become more relevant for listed companies with a large number of foreign shareholders.

iv Dissenting shareholders

Dissenting shareholders may require that a vote be passed on a matter under consideration by the general meeting. However, voting at general meetings is uncommon in practice. The key rights of a shareholder include the right to have matters submitted to the meeting and the right to ask questions at the meeting. In practice, these rights give the shareholders an effective tool for raising issues for discussion with the board of directors and management of the company.

v Objecting to a decision by the general meeting

Shareholders may also object to a decision by the general meeting by bringing an action against the company. However, this would require that a procedural provision of the Companies Act or the articles of association had been breached. Furthermore, the breach would need to have had an effect on the contents of the decision or the rights of a shareholder or otherwise be contrary to the Companies Act or the articles of association. An action based on the breach must be brought within three months from the decision.

In addition, a decision by the general meeting may be deemed void irrespective of time limits if there has been a grave breach of the law. Examples can include situations where the provisions regarding the notice to a general meeting have been materially breached, and where decisions clearly in breach of the principle of equal treatment of shareholders have been made.

Board decisions are not subject to shareholder approval. However, the board may transfer matters in its decision-making power to be decided upon by the general meeting. Board decisions may not be contested by a shareholder unless the decision is based on an authorisation by the general meeting, such as with regard to a share issue.

vi Shareholders’ duties and responsibilities
Protection of minority rights

The Companies Act provides for the protection of the interests of minority shareholders through the requirement of equal treatment. This means that no corporate body, including the general meeting, may make decisions giving an undue advantage to some shareholders or other persons at the expense of other shareholders or the company. Although, according to the main rule, the general meeting shall adopt decisions supported by a majority of votes, the minority may also force certain decisions, such as requiring the distribution of a minimum dividend out of the company’s profits.

Controlling shareholders and institutional investors

Neither Finnish legislation nor self-regulation specifically regulate controlling shareholders or institutional investors, or establish any particular duties for them. However, there is a general obligation to launch a takeover bid when a shareholder’s ownership exceeds certain levels (30 per cent or 50 per cent of the voting rights in the company). There is also an obligation to redeem all the minority shares when a shareholder holds more than 90 per cent of all the shares and voting rights in the company. The proposed amendment to the Shareholders’ Rights Directive (SHRD II),7 which is currently in the EU legislative process, contains rules that require institutional investors and asset managers to publicly disclose their engagement policies and how they are implemented.

A shareholder of a Finnish company is liable for damages only if he or she has through a wilful or negligent act or omission violated the Companies Act or the articles of association.

Shareholder activism

Shareholder activism has been fairly moderate in Finland. However, there is a growing tendency, especially among the institutional investors, to take a more active role. Institutional shareholders are also more frequently publishing ownership policies and thus publicly setting out their role as shareholders.

Except for the provisions of the law relating to shareholder liability, shareholders are not governed by any code or other corresponding regulation.

Say on pay

The general meeting decides on the remuneration payable for the board and committee work, as well as the basis for its determination. The board of directors decides on the remuneration and other compensation payable to the managing director.

There are no say-on-pay rules as such in Finland. That is, there is no requirement to bring a remuneration programme or an item relating to the remuneration of the executive management to the general meeting, nor is there any requirement to seek the opinion of the general meeting in this respect. Shareholders may, however, use their right to ask questions at the general meeting in relation to the information contained in the remuneration statement of the company that shall be held publicly available on the company’s website. This right is specifically set forth in the Code.

The proposed adoption of SHRD II would subject the company’s remuneration policy and remuneration report to a shareholder vote; Member States can implement this requirement either through a binding vote or an advisory vote framework.

Contact with shareholders

As described in Section III above, Finnish listed companies are subject to the MAR’s general disclosure requirements. Shareholders also receive information on all matters proposed to be decided upon by the general meeting. The notice to a general meeting shall be published and made available to the shareholders no later than three weeks prior to the general meeting and shall include information on the decisions proposed to be taken. Shareholders also have the right to ask questions at the general meeting, and in practice often do so in connection with the managing director’s presentation of the results of the company.

The company may generally contact individual shareholders as long as the contact is in the interest of the company and in accordance with the principle of equal treatment. The contact may not be aimed at giving one shareholder undue benefit at the expense of other shareholders or the company. Situations where the company engaging in discussions with a major shareholder can be in the interests of all shareholders may include planned share issues or other corporate restructurings. In such instances, the company would have to have due confidentiality arrangements in place, and the shareholder in question would be prevented from trading with the securities of the company upon receiving inside information.

Large shareholders acting together will have to observe the rules relating to acting in concert, which may trigger an obligation to launch a public takeover bid if the joint holding of shareholders acting in concert would exceed 30 per cent or 50 per cent of all votes.

vii Takeover defences
Shareholder and voting rights plans

In Finland a company may have different share classes that may grant different voting rights in the general meeting. The general meeting of the company may resolve to amend the company’s articles of association and set up dual-class stock. However, this is usually done before the company is listed because of applicable qualified majority requirements.

White-knight defence8

The board has a general duty to act in the best interest of the company and its shareholders. According to the preparatory works of the Companies Act, in a takeover bid situation, seeking the best possible outcome for the shareholders means that the board shall undertake the measures needed to achieve as good a bid as possible.

Pursuant to the Helsinki Takeover Code, if the board of the target company is contacted with the purpose of proposing a takeover bid and the board considers the contact serious, the board shall evaluate what measures may be required to secure the interests of the shareholders. The board must take active steps to ensure that the best possible outcome is achieved for the shareholders.

The Helsinki Takeover Code’s explanatory notes state that the board of the target company may also seek competing bids, and that this may, in certain situations, reflect required prudence in a takeover situation. There is, however, no explicit obligation to seek a competing bid. If a potential alternative purchaser is known to the board, it would, for example, be justified for the board to consider whether it would be in the interests of the shareholders to approach that other party.

Staggered boards

In a Finnish listed company, the term of a board member usually ends with the conclusion of the next annual general meeting following his or her appointment. The general meeting may also dismiss board members elected by the shareholders at any time during their term of office.

Staggered boards are generally deemed to have limited use in Finland. Pursuant to the Companies Act, it is possible to stipulate in the company’s articles of association that board members have longer terms than are set forth in the default rule under the Companies Act. The Code recommends that the board shall be elected annually at the annual general meeting. According to the rationale of this recommendation, shareholders should have the option to evaluate the performance of the board on a regular basis. The rationale also states that good corporate governance requires that the entire board is elected annually at the annual general meeting.

It may be stipulated in the company’s articles of association that less than half of the directors are elected in some other manner specified in the articles. The articles may stipulate, for example, that a certain party, appoints those directors. The party eligible to appoint a director also has the power to dismiss that director during his or her term of office.


There is an increasing focus on corporate governance in Finland and an interest in complying with best practices. Efforts have been made to develop uniform corporate governance practices for listed companies in through self-regulation. For example, guidelines for general meetings have been developed by the Advisory Board of Finnish Listed Companies to address practical procedures followed at meetings. As discussed above, the Code and the Helsinki Takeover Code also provide a framework for best practices in corporate governance in general.

The ownership structure of many Finnish listed companies remains relatively concentrated. There has been an increasing awareness of the relationships between large shareholders and listed companies. In particular, there have been concerns regarding shareholders being deemed to be ‘acting in concert’ for the purposes of triggering mandatory bid obligations. The White List for approved shareholder cooperation issued by ESMA in November 2013 has not addressed many of the concerns that often arise in connection with, for example, different types of shareholder cooperation or different corporate transactions. Concerns related to insider information also arise in connection with large shareholders having board representation in listed companies. Special arrangements are often needed to ensure that insider regulation is complied with in certain related-party transactions, or in the planning thereof.


1 Klaus Ilmonen is a partner, Antti Kuha is a senior associate and, Anniina Järvinen and Jesse Collin are associates at Hannes Snellman Attorneys Ltd.

2 Directive 2014/56/EU of 16 April 2014 amending Directive 2006/43/EC and Regulation (EU) No. 537/2014 of 16 April 2014, respectively.

3 Regulation (EU) No. 596/2014 of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC.

4 Directive 2013/50/EU of 22 October 2013 amending Directive 2004/109/EC.

5 Directive 2014/56/EU of 16 April 2014 amending Directive 2006/43/EC and Regulation (EU) No. 537/2014 of 16 April 2014, respectively.

6 International independent standards organization Global Reporting Initiative.

7 Proposal for a Directive on amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement and Directive 2013/34/EU as regards certain elements of the corporate governance statement (2014/0121 (COD)).

8 The white-knight defence relates to a situation where a third party (the white knight) acquires a target company that is being taken over by a party deemed hostile by the target company management.