Finnish Corporate Governance

Originally publised in European Lawyer magazine April 2004.

Finnish Corporate Governance Framework

The Finnish regulatory framework for corporate governance and directors' duties is governed by the following three Acts: the Companies Act, the Securities Markets Act and the Accounting Act. In addition, the decisions of the Ministry of Finance on listing particulars and the rules of the Financial Supervision Authority and the Helsinki Exchanges impose several requirements and obligations applicable to publicly listed companies. The aforementioned laws, which contain mainly mandatory provisions, cover a number of issues that in many other jurisdictions are stipulated in corporate governance codes. Therefore, it can be stated that the Finnish corporate governance codes in many cases provide a commentary on mandatory provisions of law.

The most important source regulating corporate governance issues in Finland is the Companies Act that is currently undergoing a reform. The new Act will not, however, have any significant new effect on corporate governance issues but it will, as previously, establish the corporate governance platform in Finland.

In addition to the legislation in Finland, there are two sets of guidelines of best practise that can be characterised as corporate governance codes: "Corporate Governance Recommendations for Listed Companies" that was issued in December 2003 ("Recommendation") and "Handling Corporate Governance Issues in State-Owned Companies and Associated Companies" that was issued in 2000 ("Ministry Report").

The goal of the Recommendation is to inter alia harmonise the practices of the listed companies, to improve transparency of their operations and harmonise and improve the of the information given to shareholders. This will, according to the working group, increase investors' interest in Finnish listed companies and promote trust in the functioning of the Finnish securities markets.

Structure and main issues of the Recommendation

The provisions of the Recommendation will be enacted as an integral part of the rules of the Helsinki Exchanges. The Recommendation enters into force on 1 July 2004. Thereafter all companies listed on the Helsinki Exchanges are required to comply with the Recommendation, provided that it is not in conflict with any mandatory legislation applicable in the domicile of the company. To be precise, the Recommendation has been drafted in accordance with the "comply or explain" principle...