Phases of the reorganisation proceedings

If you wish, you can have an outside expert prepare a report of your company’s financial situation before submitting the actual reorganisation application.

With the help of the report, your company can make a good start towards recovery. Furthermore, as an entrepreneur, you will receive advice and support for solving your company’s problems. You can also review the report with your company’s creditors, financiers and other key stakeholders.

Usually, the company ordering the report also pays for it. The creditors may also share the costs.

In practice, applying for corporate reorganisation means that your company submits a written reorganisation application to the district court. The application is free-form and must include details on your company’s business operations, financial situation, creditors, debts and debt securities.

The application also requires several supporting documents, such as an extract from the Finnish Trade Register, articles of association and financial statements. All necessary supporting documents are listed in the Restructuring of Enterprises Regulation (in Finnish and Swedish)Opens in a new window..

You should ask an expert for help with the application.

The application must be accompanied by:

• extract from the trade register
• copy of the articles of association or the partnership agreement
• details of the company's ownership arrangements
• copies of the financial statements for the past two financial years and possibly also the interim financial statements
• report stating the actual industry in which your company operates, number and location of its operating points and employees, its turnover, as well as its assets and debts
• list of creditors
• list of substantial assets
• auditor's report
• whether a bankruptcy petition has been filed for your company
• other necessary information, such as the details of your company's financial situation.

If your company submits the reorganisation application without the creditors’ support, the following information must also be given:

• the main reasons for the company's financial difficulties
• how the company is planning to continue its operations
• how the company is planning to cover the costs resulting from the reorganisation
• how the company is planning to pay the debts accumulating during the reorganisation proceedings.

If the creditors apply for the reorganisation of your company, your company will be given an opportunity to be heard before the court decides on the initiation of the proceedings.

The reorganisation proceedings begin when the court decides to initiate the proceedings.

After the decision has been made, your company cannot pay its debts incurred before the reorganisation proceedings. Also, creditors may not collect them from your company. Moreover, your company may not convert the collateral for its debts into cash without the permission of the court. The purpose is to protect your company and ensure that the reorganisation debts are paid on an equal basis.

Additionally, your company cannot be subject to administrative sanctions for neglecting to pay reorganisation debts. For example, your company cannot be removed from the Prepayment Register. Its transport licenses or alcohol serving licenses may not be revoked either.

In other words, you can continue your business operations. You must deliver the goods to your customers and meet your other contractual obligations. You must pay the wages and salaries of your employees and all other invoices and debts that are generated during the reorganisation proceedings.

The court appoints an administrator for your company. They will be responsible for the practicalities and supervision of the reorganisation proceedings. The court may also appoint a creditors’ committee to assist it during the proceedings.

When the restructuring proceedings begin, the administrator will first prepare a preliminary report on your company and then a proposal for a reorganisation programme.

The preliminary report includes details on your company’s situation and the reasons for the financial difficulties, as well as an assessment of the viability of your business and the means of reorganisation. The administrator shall submit the preliminary report to the creditors within one month of the start of the proceedings.

A proposal for a reorganisation programme will be prepared in cooperation with your company and its creditors. If necessary, outside experts can also take part in the work. The proposal contains concrete and detailed measures to help your company to reorganise and settle its debts.

The aim of the reorganisation programme is to achieve the end result that can best meet the creditors’ demands. However, the programme should also be realistic and feasible. In addition, a good reorganisation programme motivates your company to achieve the objectives, even if it seems difficult.

Once the proposal for a reorganisation programme is ready, it must be presented to the court. If all the creditors have accepted the proposal and it meets the requirements laid down in the law, the court can approve the reorganisation programme. The court can also approve the programme if a majority of the creditors or a specific minimum number is in favour of it.

On average, it takes nine months from the start of the reorganisation proceedings to the approval of the programme.

After the approval of the reorganisation programme, the prohibitions applying to paying debts, debt collection and implementation are no longer in effect. The reorganisation programme will replace the terms and conditions of the debts generated before the reorganisation proceedings. Your company bears the primary responsibility for complying with the reorganisation programme. However, the court may appoint a supervisor to monitor your company’s operation during the reorganisation programme.

A corporate reorganisation usually lasts for between 5 and 10 years in total.

Once your company has made the payments under the reorganisation programme to its creditors and fulfilled its other obligations under the reorganisation programme, the reorganisation will end, and your company can continue its operations as normal. An entry of a corporate reorganisation is added to your company details in the trade register.

If the company neglects its obligations under the reorganisation programme, the reorganisation may be ordered to lapse under certain conditions.

If reorganisation is not possible for one reason or another, the only option is usually bankruptcy.

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