Amendments to insolvency regulation in Finland: the introduction of debt-to-equity conversion

Other than the implementation of an early restructuring proceeding in line with EU initiatives the laws governing restructuring proceedings in Finland have remained largely unchanged since the enactment of the Restructuring of Enterprises Act in 1993 (47/1993) (REA). In contrast other Nordic countries have updated their legislation to align with creditor expectations including the implementation of debt-to-equity conversion – an option not currently available under Finnish law.

Debt-to-equity conversion allows debt to be converted into shares in a distressed company enabling creditors and debtors to reduce the overall debt burden while incentivising creditors to support the company’s future profitability. Under the REA existing restructuring methods include modifying repayment schedules cancelling outstanding debt reducing interest rates and repaying debt. However these methods are often seen as disproportionately burdensome to...