Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties - if they keep a close eye on the financial situation of their business.
Under the Bankruptcy Act, the imposition of bankruptcy may be demanded by a creditor, whose receivables from the debtor are based on a judgment or solution with legal force, other grounds for execution or an agreement signed by the debtor which clearly cannot be contested by the debtor.
A debtor is declared bankrupt by a court decision which comes after a bankruptcy application has been submitted by either the debtor or the creditor. The purpose of bankruptcy is to bring about the liquidation of the debtor's assets.
The Bankruptcy Act is applied in bankruptcy proceedings.
The Bankruptcy Ombudsman is an official who monitors the administration of bankrupt estates and who works in collaboration with the Ministry of Justice.
The company's management and/or Board of Directors is responsible for the company's commitments. Even if debt reorganisation is the intended solution for private finance problems, a debtor who pursues a trade may also be granted debt reorganisation as a private individual.
Coping with bankruptcy
Business owners can prevent bankruptcy by predicting difficulties and turning to experts as early on as possible.
Information on bankruptcy procedure can be found on the bankruptcy ombudsman's website.
Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.
In Finnish law, there are three similar insolvency procedures: bankruptcy, debt reorganisation for a private individual and corporate reorganisation. The insolvency of the debtor and collective execution are common to the different procedures.
The aim of reorganisation is for a debtor in financial difficulties to reorganise his viable business activities, or to ensure the requirements exist for this, and to ensure that the debt is reorganised.
It is possible to apply for deferral of tax payments on the basis of a temporary reduction in solvency caused by illness or unemployment, or on the basis of other special reasons.
Bankruptcy procedure: a step-by-step guide
Entrepreneurs who are obliged to submit accounts for their business activities may apply for bankruptcy rather easily and quickly. For example, overdue, unpaid invoices may be sufficient grounds for applying for bankruptcy on the eighth day after the due date.
The processing of credit data is regulated by the Credit Data Act. Missed payments connected with overdrafts or credit cards, and those connected with one-off loans or instalment agreements are recorded in the credit register for two years. General signs of missed payments in debt cases are a unilateral debt judgment and a lack of resources established in a recovery procedure.
A request to initiate bankruptcy proceedings is usually made to the district court.
The administration of assets is supervised by the bankruptcy ombudsman.
If a company's activities cease in Finland, the Tax Administration Office will delete the company from the prepayment register. The company should provide information about the cessation of business activities on the Y form.
The Tax Administration Office may delete a company from the prepayment register if it fails to fulfil its taxation obligations.
Enterprise Finland's Restructuring section provides information about corporate reorganisation and insolvency.
The Ministry of Justice website contains further details of the legal aspects related to debt reorganisation.
Information on corporate reorganisation can be obtained from the Reorganisation Society.
The Legal Register Centre keeps different judicial administration registers, such as criminal records and debt reorganisation registers, and it is responsible for the reliability of such information.
The district courts handle criminal, civil and appeal cases.