Establishing a new enterprise during and after debt arrangement

You can usually set up a new enterprise also during or after the debt arrangement process. A payment default entry is always made in the credit information register on the debt arrangement process, but your old company's default entries will not be transferred to your new enterprise. So, in principle, your new enterprise can have a fresh start for its operations.

However, when you are setting up a company, your background as well as that of other persons in charge will be carefully checked. Both personal payment default entries and links to companies with default entries may impair the creditworthiness of the new enterprise and hinder its operation. Such matters as how old the payment default entry is and what it was based on have an impact on the case.

If your old company has tax debts, your new enterprise may not be approved to the Tax Administration's registers. It may also be difficult to open a bank account or take out insurances. The situation is particularly difficult if all responsible persons in your new company have payment default entries or links to companies with payment defaults.

It is possible that your new enterprise

• will not be approved to Tax Administration's registers
• cannot open a bank account, at least with credit facility
• cannot obtain external funding
• cannot obtain the permits required for certain trades
• cannot obtain voluntary insurance policies
• cannot enter into necessary agreements
• cannot rent or buy business premises
• cannot obtain telephone or internet subscriptions
• cannot make purchases against invoice but is required to pay in cash.

The reputation of your new company may also suffer. This may make it more difficult for your company to get customers or sell products, and the profitability may stay low.

However, the impacts always depend on the case. In some cases, it may be quite easy to run a new business even if there were a history of payment default entries. In other cases, however, it may prove impossible.

It may be difficult to obtain a bank loan if you or someone else in charge of your new company has a payment default entry or a link to a company with payment defaults. However, it is always worth checking the matter on a case-by-case basis. Different banks may also have different practices.

Usually, a guarantee is required to be granted a corporate loan by a bank. Please note that although Finnvera offers guarantees to start-up companies, it is critical of persons in charge of companies having payment defaults. Finnvera may, therefore, reject your new company's application on that basis.

If your company is not granted a bank loan, you can consider applying for an unsecured loan from companies offering them. Please note, however, that their interest rates are often quite high and the other terms of the loan hard.

Make sure that you are able to properly manage both your new company's loan management fees and your old company's debt arrangements.

You can also get external funding for your new enterprise from venture capital investors, such as business angels.

If your old company is in a corporate reorganisation process or in accelerated reorganisation proceedings, you can contact the Office of Bankruptcy Ombudsman for specific questions related to the establishment of a new enterprise.

If you are in debt arrangement for a private trader, you can also get help with these questions through free financial and debt counselling of legal aid offices.

You can also contact the free Yrittäjän talousapu counselling service and the Enterprise Finland telephone service for help. In addition, you can ask for advice from the development company of your region or make use of the paid services provided by legal experts.

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