Company’s financial difficulties and their prevention

Even if termination seemed to be your only option, do not file a bankruptcy petition until you have determined if any other options, such as corporate restructuring or a debt arrangement, would help. Consider also whether you could interrupt your business if, for example, the increase in costs has made it unprofitable only temporarily. Contact the Financial counselling for entrepreneurs so that experts can help you assess whether your company is still viable.

If your company is still solvent but does not have sufficient prerequisites for profitable business, it is usually worth closing down business activities voluntarily. The company's company form affects how business activities can actually be closed down.

If the company is insolvent, heavily in debt and unprofitable, it may have to be dissolved through bankruptcy proceedings.

Regardless of how you terminate activities, make sure you take care of the following: 

• Submit a notification of termination to the Business Information System (BIS)
• Notify and pay taxes and other charges throughout the year of termination
• Keep records until the end date of business activities
• Cancel the insurance policies and other agreements connected to your company
• Amortize or transfer company mortgages
• Keep accounting records for 6-10 years

Instructions for submitting notifications can be found on the BIS website.

Discuss with your accountant whether you should give up your company's assets. The assets shown in the balance sheet may result in tax consequences if they are taken into private use.

Even if your company is experiencing severe financial difficulties or a risk of bankruptcy, it may be possible to sell it. Although giving the company up may seem difficult, it is often a better option than continuing. 

You can try selling the company by submitting a notification on the Yrityspörssi Business ExchangeOpens in a new window.. There are also numerous companies in Finland that specialise in buying companies with problems and may buy even badly indebted companies.

Download a free guide for selling a company on the website of the Federation of Finnish Enterprises (in Finnish)Opens in a new window.

Corporate restructuring is a means of changing ownership.

Restructuring could include

• merging. This means that your company merges into another company. Its assets and liabilities are transferred to another company. In return, the owners of your company receive shares in the receiving company. 
• divestment. In this case, your company will be dissolved without a liquidation procedure because its assets and liabilities will be transferred to two or more recipient companies.
• business transfer. In this case, your company will transfer all assets, liabilities and provisions related to one or more of its business entities to the company that will continue its operations. In return, the owners of your company can, for example, receive shares in the receiving company.

Please note that corporate restructuring is a lengthy process and it costs money. The arrangements must also take into account company legislation, tax legislation and accounting. It is therefore advisable to plan and implement the arrangements with experts.

It is easy to terminate the operations of a private trader because you do not need a formal procedure or a special reason to terminate your business. If closing down private trader operations incurs substantial one-off income, you can request income spreading from the Finnish Tax Administration.

Read more about terminating a business name

If all partners agree to close down the company, you may terminate business through a mutual agreement. If there is no consensus on terminating, the other partners may redeem the shares of the partner wanting to terminate the business.

If there is no unanimity or no agreement on the redemption of shares, the partnership may be put into liquidation. However, the general partner may demand the dissolution of the partnership if they have valid reasons for doing so.

For more information on dissolution and the stages of the liquidation procedure, see the page Dissolving a general partnership or a limited partnership.

A limited liability company may be dissolved voluntarily only by means of a liquidation procedure. In the liquidation procedure, the company's assets are liquidated, debts are paid and a surplus is paid to shareholders or other parties in accordance with the Articles of Association.

More information on the dissolution of a limited liability company and what to consider in the liquidation procedure

Bankruptcy is the best way to terminate business activities when

• the company's financial difficulties have lasted a long time
• every effort has been made to make the company profitable
• all other forms of debt restructuring have been identified. 

If the actual relationship between the company's assets and liabilities is not clear, it must be put into liquidation before bankruptcy in order to clarify the financial situation. The Finnish Patent and Registration Office (PRH) may also order the company to liquidate.

Bankruptcy proceedings can last for years and in them, an insolvent and unprofitable company is closed down at the end of court proceedings. A court decides on the initiation of the bankruptcy proceedings on the basis of a bankruptcy petition. 

The entrepreneur is responsible for all the debts and commitments of the business, meaning that the entrepreneur has to pay the company's debts using personal property. 

If you are no longer able to receive sufficient income due to bankruptcy, you may receive assistance from the bankruptcy estate until the time the bankruptcy judgment is issued. Payment of the assistance requires that the estate has funds to pay for it.

Read more about your responsibilities and position in bankruptcy on the Bankruptcy Ombudsman's website (in Finnish).Opens in a new window.

All responsible partners are liable for all debts and commitments of the company, i.e. they have to pay the company's debts with their personal property. 

Silent partners lose their capital invested in bankruptcy but do not have to pay debts with their personal property.

Read more about your responsibilities and position in bankruptcy on the Bankruptcy Ombudsman's website (in Finnish).Opens in a new window.

The entrepreneur is not personally responsible for the company's debts. In case of a bankruptcy, the entrepreneur loses only the capital they have invested. 

The entrepreneur will only have to pay the debts using personal property if it is provided as a security for the debts or as a guarantee for corporate financing.

If the company's operations have violated the law, actions for violations and damages based on the Limited Liability Companies Act may be brought against the members of the Board of Directors.

Read more about your responsibilities and position in bankruptcy on the Bankruptcy Ombudsman's website (in Finnish).Opens in a new window.

The liability of members shall be limited to the contribution paid, unless otherwise provided for in the rules.

Read more about your responsibilities and position in bankruptcy on the Bankruptcy Ombudsman's website (in Finnish).Opens in a new window.