A recent amendment to the Finnish Securities Markets Act modifies the definition of a 'security', making it more flexible. The act now partially applies to private limited liability companies and their shares, and consequently to offerings of private limited liability company shares. However, the definition of 'public offering' has not been amended. In other words, an offering of private limited liability company shares is subject to a prospectus requirement if these shares are offered to the public.
Another notable amendment is the revision of Chapter 3 of the act, which includes provisions on the public trading of securities. In addition to trade on a stock exchange or other public trade in securities, the revised Section 16 of Chapter 3 adds a new public trading forum defined as other 'professionally organized trade', which is intended to become a platform for trading and liquidity of private company shares or shares of foreign companies.
Such trade will not be subject to the act's specific provisions on:
- the issuer's continuous and regular disclosure obligations;
- flagging obligations;
- the mandatory definition of insiders; and
- tender offer and duty of redemption.
In addition, private companies whose shares are traded through professionally organized trade are not obliged to incorporate their shares into the book-entry system. Nor are these companies required to convert their corporate structure into public companies (only shares of a public company may be listed).
Nevertheless, the revised Section 16 outlines certain requirements for the issuer and the security, if traded in professionally organized trade. A foreign or private company security may be traded in professionally organized trade only if sufficient information concerning the issuer and the security is made available to investors, and if the security is not simultaneously traded on the stock exchange or in other public trade.
Only the stock exchange and securities intermediaries (eg, authorized investment firms and credit or financial institutions) are authorized to execute a professional organized trade. The organizer must adopt and publish rules concerning the trade, which must include provisions on clearing and depository procedures. Although these rules need not be approved by any authority, the Financial Supervision Authority must be notified of the trade.
The amendments are designed to facilitate the adoption and trade of new financial instruments and to improve liquidity and financing alternatives of private limited liability companies. Further, the amendment is designed to increase competition between Finnish and international securities intermediaries providing services in the Finnish securities markets.
For further information on this topic please contact Ari-Pekka Saanio at Borenius & Kemppinen by telephone (+358 9 615 333) or by fax (+358 9 61 53 34 99) or by email ([email protected]).