Introduction

A court-approved restructuring programme can be amended only if the preconditions provided in the Restructuring of Enterprises Act (47/1993/47) are met. Generally, the contents of a debt arrangement or the payment programme in an approved programme may be amended with the acceptance of all the creditors whose rights would be violated by the amendment. However, the precondition of the debtors' acceptance is problematic when the amount of a restructuring debt or the right of a creditor is later determined to be substantially more than that originally entered into the restructuring programme. An increase in the total amount of the restructuring debts may result in the debt arrangement being insufficient unless all the creditors consent to an amendment. An insufficient debt arrangement is likely to forbid the rehabilitation of the distressed debtor's viable business and eventually lead to the debtor's bankruptcy.

Unclear and unknown restructuring debts

In Finnish restructuring practice, the contents of a debt arrangement programme (ie, cutback of the principal of the debts and scheduled payment in instalments) and the payment programme are based predominantly on the probable total amount of the restructuring debts and the debtor's capability to pay such debts in addition to the liabilities related to its day-to-day business.

If a restructuring debt is unclear regarding the amount or basis, the court dealing with the restructuring programme will order the amount at which the said debt is to be included in the restructuring programme. The amount of an unclear restructuring debt may later be determined to be different from that entered into the restructuring programme (eg, through separate court proceedings between the creditor and debtor). The final court ruling determining the amount of the unclear restructuring debt may be given years after the restructuring programme has been approved.

A restructuring debt that has not been declared by the debtor or creditor, and which has otherwise not come to the attention of the administrator before the approval of the restructuring programme, will lapse on the approval of the restructuring programme. However, the referred unknown debt will not lapse if the creditor did not know and should have not known of it, and it had not come to the attention of the administrator before the approval of the programme. It is relatively common that a debtor under restructuring proceedings is liable for debts (eg, compensation for damages) which are unknown to the creditor, the debtor and the restructuring administrator at the time that the restructuring programme is approved.

Such unknown restructuring debts may be included in the approved restructuring programme afterwards, at the request of the debtor or creditor and without the consent of other creditors. Similarly, if the amount of a restructuring debt or the right of a creditor is determined to be different from that entered into the restructuring programme, the programme may be amended accordingly at the request of the creditor or debtor and without the consent of other creditors. In the amendment of the programme, the creditor (whose claim is based on a referred unknown or unclear debt) will be treated equally with other creditors in the same position, meaning that debt arrangements will be applied correspondingly to the debts that are included in the programme by the amendment.

Amendment of restructuring programme

The implementation of an approved restructuring programme may be endangered if the restructuring debts are increased substantially due to unknown debts or if an uncertain debt is determined to be more from that entered into the programme. In such a case, amendments to the debt arrangement may be required (eg, by increasing the cutback of the debts' principal).

The contents of a debt arrangement or payment programme in an approved programme may be amended only with the acceptance of the creditor whose rights are violated by the amendment. However, no acceptance will be needed if the claim of the creditor is insignificant as to its amount and if the position of the creditor is not affected materially because of the amendment. A creditor's claim may be considered insignificant if the amount of the claim is less than a few thousand euros. It is unclear what kinds of amendment to the debt arrangement would be considered not to affect the position of the creditor in a material respect. It may be assumed that any increase in the cutback of the principal of restructuring debts is likely to constitute an amendment that requires acceptance from the creditor. As the preconditions for amending a debt arrangement without the acceptance of the creditors are strict, it is often the case that when the total amount of restructuring debts is increased, all or most of the creditors' acceptance is required in order to amend a restructuring programme such that the debtor can continue to with the programme.

Creditors are generally reluctant to accept debt arrangements or other measures that will lead to unequal treatment of creditors in the same position. In restructuring practice, creditors often accept debt arrangements only if the same is applied to all the creditors. If some of the creditors' attitudes towards the amendments are unfavourable, the creditors' requirement for equal treatment may cause the restructuring programme to be amended to become more challenging rather than getting a restructuring programme approved in the first place. As such, approval is subject to less strict requirements regarding creditors' acceptance.

For further information on this topic please contact Klaus Majamäki at HPP Attorneys Ltd by telephone (+358 9 474 21), fax (+358 9 474 2222) or email (klaus.majamaki@hpp.fi). The HPP Attorneys Ltd website can be accessed at www.hpp.fi.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.