Finances of entrepreneurs and companies

A viable company can apply for corporate restructuring for correcting its financial situation. Entrepreneurs with financial difficulties can be granted debt adjustment as private persons. If a company is declared bankrupt, it will be dissolved and its assets will be used to pay for its debts. An insolvent company can also apply to be declared bankrupt voluntarily.

Corporate restructuring

If a company is insolvent or in danger of becoming insolvent, it can apply for corporate restructuring from a district court. This requires that the company’s business activities can still be considered viable.

Corporate restructuring should be applied for in advance, before the company’s payment difficulties grow to a level where business activities can no longer be made viable even with the restructuring.

• Debtors can apply for early restructuring if they are not yet insolvent but are in danger of becoming insolvent. Early restructuring can only be applied for by the debtor themself.
• Regular corporate restructuring can be applied for if the company is insolvent but the situation can still be corrected with corporate reorganisation. Regular restructuring can be applied for by the debtor, a creditor or several creditors jointly.

Restructuring programme

The debtor or the creditors apply for corporate restructuring with a written application from a district court. If the company is granted restructuring, the district court will appoint an administrator for the company. The administrator will draw up a restructuring programme for the company, which a court will confirm.

The restructuring programme will steer the debtor’s activities and handling of its assets and debts. The debtor is responsible for complying with the programme, meaning for continuing the company’s business activities and paying its debts according to the agreed payment scheme, for example.

A supervisor may be appointed, who will supervise compliance with the restructuring programme on behalf of the creditors. The programme usually lasts several years. After a programme ends, the supervisor or the debtor will submit a report on the implementation of the programme to the creditors.

Entrepreneur’s debt adjustment

Debt adjustment for private persons is a less severe and more affordable process than corporate restructuring.

Debt adjustment for self-employed persons

A self-employed person may apply for debt adjustment from a district court in relation to debt from their business activities and/or private debt.

To apply for debt adjustment, the self-employed person requires a statement from an expert on the financial state of their business activities and their viability in the future.

Debt adjustment for an entrepreneur with a registered company

An entrepreneur with a general partnership, a limited partnership or a limited liability company can apply for debt adjustment from a district court for their private debt. In this case, the debt adjustment does not apply to debt related to the business activities.

Previous or discontinued business activities

Debt incurred from previous business activities is considered private debt if the business activities have been discontinued and the liabilities of the debtor have been sorted out.

Bankruptcy

A district court can declare a debtor bankrupt if the debtor is found to be permanently insolvent. In a bankruptcy, all of the debtor’s assets are used to pay for their debt in one instance. The debtor can be a natural person, a death estate, a company or another organisation.

Debtors themselves or creditors can apply a debtor to be declared bankrupt.

Bankruptcy process

In a bankruptcy, the debtor loses their right to control their assets. A district court appoints an administrator for the bankruptcy estate. The administrator prepares an estate inventory of the debtor’s assets and debts and a report of the debtor’s business activities and the reasons for the bankruptcy. The debtor must attest to the correctness of the estate inventory.

The next stage of the bankruptcy is securing the claims in the bankruptcy. In this process, the administrator decides on a date by which the creditors must declare how much the debtor owes them. If a creditor does not declare the amount by the deadline, they usually cannot get a share (disbursement) of the estate’s assets. The administrator uses the creditors’ declarations to create a distribution list, which must be confirmed by a district court. The distribution list determines how the assets of the estate will be distributed among the creditors.

If the value of the estate’s assets is low or if it has no assets, a district court may order the bankruptcy to lapse. After this, the National Enforcement Authority may collect the remaining assets.

The debtor is not released of their liabilities after a bankruptcy, and they are responsible to pay their debts with assets they acquire later as well if the debtor continues its operations. However, a company declared bankrupt is usually dissolved after a bankruptcy.

At the end of the bankruptcy proceedings the administrator draws up a final settlement of accounts. This includes a report on the administration of the estate and the disbursements paid to the estate’s creditors. The creditors approve the final settlement of accounts at a meeting of creditors. More information on bankruptcy proceedings (konkurssiasiamies.fi, in Finnish and Swedish only).