Deals are generally not blocked in Finland

The Finnish government views foreign ownership positively as a catalyst for increasing internationalization and competiveness. Deals are only restricted when they meet very specific criteria. The objective of the Finnish Act on Monitoring Foreign Ownership (172/2012), also known as the "Monitoring Act," is to assess foreign investments for their potential impact on national interests. When it is deemed necessary to protect national defense and safeguard public order and security, the government may restrict the transfer of influence to foreigners, foreign organizations and foundations. The Monitoring Act has a special focus on defense industry companies, including dual-use companies.

Filing obligations and consequences in the event of breach

Under the Monitoring Act, a "corporate acquisition" occurs when a foreign owner gains control of at least one tenth, one third or one half of the aggregate number of votes conferred by all shares in a Finnish company—or otherwise secures a holding that confers decision-making authority.

All corporate acquisitions concerning the defense and dual-use sectors require advance approval by Finnish authorities. Deals not related to defense may also be covered by the Monitoring Act if the company being acquired is considered critical for securing vital functions of society. In such cases, investors are not required to submit an application prior to completing a transaction—but in practice applications are always submitted prior to completion. The government intentionally does not define the phrase “enterprise considered critical for securing vital functions of society” because the definition evolves over time.

For the defense and dual-use sectors, monitoring covers all foreign owners. For enterprises considered critical for securing vital functions of society, monitoring only applies to foreign owners residing or domiciled outside the EU or the European Free Trade Association.

If the Monitoring Act is breached, the transaction can be declared null and void.

Review Process

The review process starts when an investor submits an application to the Ministry of Economic Affairs and Employment. There are no formal requirements for the layout of the application, but the ministry has published instructions for preparing one. It is critical that the application is made by the potential foreign owner, not a Finnish holding company already set up by the potential new owner. After receipt of the application, the Ministry of Economic Affairs and Employment asks for input from other branches of government.

If the Ministry of Economic Affairs and Employment finds that the transaction may endanger a key national interest, it transfers the matter to the Government's plenary session for resolution. The Government's plenary session then makes the decision about whether to restrict or approve the deal, depending on whether it believes the deal poses a threat to national interest.

However, if the Ministry of Economic Affairs and Employment considers that a transaction does not endanger a key national interest, it approves the transaction. The vast majority of transactions submitted to date have been approved by virtue of this rule.

All applications are urgently processed by the Ministry of Economic Affairs and Employment. The Monitoring Act states that a transaction is deemed to have been approved if the Ministry of Economic Affairs and Employment does not make a decision on an in-depth review within six weeks, or if the application has not been transferred to the Government's plenary session within three months dating from the day when all necessary materials were received. In practice, the process with the Ministry of Economic Affairs and Employment usually takes six to eight weeks.