Bankruptcy proceedings

If your company is permanently insolvent and it can no longer be made profitable, it will be closed down through bankruptcy proceedings.

A court decides on the initiation of the bankruptcy proceedings on the basis of a bankruptcy petition. The petition can be filed by your company or any of its creditors.

In a bankruptcy, your company may no longer manage its assets. Instead, a court appoints an estate administrator for the bankruptcy estate. He or she converts the company’s assets into cash and distributes the funds among the creditors. Even though the estate administrator has extensive powers in the bankruptcy estate, the creditors nevertheless usually have the final say.

After the bankruptcy proceedings have been completed, the Finnish Patent and Registration Office is notified and enters the details into the trade register. In most cases, this also means the dissolution of your company and no separate termination notification is required.

The bankruptcy petition can be free-form and it must be filed in writing. A petition must contain the following information:

• the company is filed for bankruptcy
• the reasons for the bankruptcy petition 
• name, domicile and Business ID of the company in question
• petitioner’s contact information
• why the court in this particular district should consider the matter.

The documents which the petitioner refers to must be appended to the petition. They can include details of the debts that the creditor uses as a basis for the bankruptcy petition. An extract from the trade register must also be appended to the petition.

If you are filing the bankruptcy petition yourself, you must also append the following documents to the petition:

• a decision on filing for bankruptcy made by your company's competent body (such as the board of directors of a limited liability company)
• details of your company's assets and debts
• list of the largest creditors and their contact information.

You can contact your district court or legal experts for advice on how to prepare a bankruptcy petition.

Your company may also file for a bankruptcy on its own initiative. It makes sense when you know that your company is unable to clear its financial difficulties by any other means over any period. In such a case, your company should not wait for the creditors to file a bankruptcy petition.

In other words, do not unnecessarily prolong your unprofitable business operations.

If you are filing the bankruptcy petition yourself and start the bankruptcy proceedings in time:

• Your company will not incur more debts, nor will you as an entrepreneur
• The guarantors of your company's loans, such as your relatives, may avoid losing their property
• Your mental well-being will improve as your concerns about your company and its finances ease off
• Persons in charge of your company may avoid paying damages caused by their unintentional negligence
• In the future, it will be easier for you to start a new business when your debts do not grow too high, and the risk of being prohibited from engaging in business is reduced.

There is nothing to be ashamed of in a bankruptcy. Sometimes it is simply the only way to terminate business operations.

A court appoints an estate administrator for the bankruptcy estate. The estate administrator acts as its representative and manages its administration. A lawyer is often appointed as the estate administrator. A person that has previously managed your company's matters or the matters of its creditors cannot act as the estate administrator.

The tasks of the estate administrator are to:

• determine your company’s debts
• prepare an estate inventory of your company's assets and debts
• prepare the debtor description of your company
• prepare the disbursement list, on the basis of which the debts are paid
• sell your company's assets, pay the debts of the bankruptcy estate and provide the creditors with their disbursements
• ensure that your employees will receive their wages and salaries through the pay security scheme
• be responsible for the bookkeeping of the bankruptcy estate 
• organise the creditors’ meetings
• prepare the final settlement of accounts of the bankruptcy estate.

The creditors decide on the fee paid to the estate administrator. He or she also receives a compensation for managing the bankruptcy estate. The fee and the compensation are paid from the assets of the bankruptcy estate.

The work of the estate administrators is supervised by the Bankruptcy Ombudsman. The work of lawyers is also supervised by a supervisory board acting as part of the Finnish Bar Association.

A bankruptcy can be reversed if a request for the reversal is submitted to a court within eight days of the initiation of the bankruptcy. There must always be a valid reason for the reversal. For example, your company may have paid all its debts and the creditor in question decides not to pursue the bankruptcy any further.

If the bankruptcy petition has been filed by a creditor, the creditor and your company must jointly request the reversal. The other creditors and the estate administrator may be consulted in connection with the request. The consultations may impact the court decision on whether the bankruptcy is reversed or not.

If you have filed the bankruptcy petition, you must also file the request for reversing the bankruptcy. In that case too, the creditors and the estate administrator may be provided with an opportunity to be heard.

The court notifies your company, the creditor filing the bankruptcy petition and the estate administrator of the reversal. The estate administrator will provide you with details of how the assets of the estate have been used. Pay the estate administrator the fee ordered by the court.

After the reversal of the bankruptcy, your company can continue its operations as before.

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