Bankruptcy of companies will be restrained and the situation with enforcement procedure (debt collection) will be mitigated by temporary changes in the law. Additional time will also be given for the submission of the financial statements.
The Bankruptcy Act is temporarily amended so, that the debtor's bankruptcy at the creditor's request is restricted. The debtor is cannot be considered as insolvent just on the grounds that he has not paid the creditor's request for payment within one week.
The amendment will take effect from the May 1, 2020 and end on October 31, 2020.
- Many companies are temporarily in payment difficulties due to the coronavirus. Thanks to this change in the law, unnecessary bankruptcy situations will be avoided, says Tiina Toivonen, Head of Legislation of Finnish Entrepreneurs (Suomen Yrittäjät).
The petition of bankruptcy can be filed if the problems are not due to the coronavirus
However, this change in the law does not mean that creditors cannot file for bankruptcy at all in the following six months. In case the creditor can justify that this is not a temporary insolvency, but the company has not paid its bills before the situation with coronavirus, then it is possible to file the petition for bankruptcy.
Companies, which file the petition of bankruptcy concerning themselves normally account for between 30% and 40% of the total.
Relief and extra time for those already in the process of enforcement
An entrepreneur or company can get a relief in their payment liabilities concerning enforcement matters due to temporary payment difficulties. The debts in respect of the payment liabilities can also be included into a payment plan.
Due to the coronavirus, the enforcement legislation has been temporarily amended so, that relief can also be obtained directly from payment difficulties due to coronavirus situation. The amendments to the law will take effect on May 1,2020 and are valid until October 31, 2020.
It is important to remember that these reliefs will not come automatically. The debtor must to ask for them from the bailiff, pointing the coronavirus situation.
If the entrepreneur receives a salary from the company, the bailiff can give him time to pay. The payment period can normally be given up to three months, but due to a temporary change in the law it will be given up to six months. With the consent of the creditor, the payment period can normally be given for a maximum of six months, but with the change in the law, 12 months, Tiina Toivonen says.
The total amount of inventory of property may be limited or reduced
Due to reduced solvency, the amount of the salary may also be reduced by a smaller amount than previously prescribed. As a general rule, five-sixths of the recurring income received by a natural person engaged in business shall not be seized. The amount to be collected may be further reduced if the debtor's solvency is substantially impaired.
- Now, due to a change in the law that will come into force at the beginning of May, a reduction in the amount can be requested directly due to the reduced solvency caused by the coronavirus crisis. As for the part of the business income, it is impossible to obtain exemptions in the form of seizure-free months or deferrals, Tiina Toivonen says.
In the case if it concerns the company or an enterprise, the amount of inventory of property may also be limited if the debtor can continue his business in this case. During the coronavirus crisis, it is easier to get reliefs for the business income received by the company.
There is an extra time for the financial statements' preparation
There will also be temporary changes to the Limited Liability Companies Act (osakeyhtiölaki), the Limited Liability Housing Companies Act (asunto-osakeyhtiölaki), the Co-operatives Act (osuuskuntalaki), the Associations Act (yhdistyslaki) and some other Acts.
Normally, the financial statements must be submitted within four months after the end of the financial year. Now the financial statements and the annual report of the Board of Directors for the financial year ended 30 November 2019 – 29 February 2020 must be prepared no later than 30 June 2020.
- The exception only applies to financial statements the deadline for the preparation of which has expired or is about to expire during the exceptional circumstances caused by the epidemic, explains Atte Rytkönen, a Suomen Yrittäjät expert, lawyer.
There will also be relief and extra time for meetings:
- The shareholders' meeting of the limited company, the meeting of the co-operative, association and other similar meetings referred to in the law can be held by the end of September 2020, even though the law, articles of association or rules provide stricter deadlines, says Atte Rytkönen.
The annual general meeting of a public company may be convened by decision of the Board of Directors only as a remote meeting, in which all shareholders participate in advance voting remotely in person or using a representative.
However, the financial statements should be prepared by the end of June 2020 at the latest.
The full information and the source text can be found at Suomen Yrittäjät website.
Published 01.05.2020, FINREPO