September 30, 2016 | Jon Hautamäki
How to establish an LLC in Finland
The establishing of a limited liability company (LLC) in Finland is a fairly easy procedure even for those residing in different states than Finland. This article aims to simplify and demystify the process of establishing an LLC in Finland by answering the frequently asked questions with easy-to-follow answers.
What is the minimum share capital of an LLC in Finland and what does it mean?
The minimum share capital of an LLC in Finland is 2.500 EUR and the share capital must be paid to the LLC’s bank account prior to the filing of the formation documents.
Do I have to reside in Finland in order to establish an LLC?
No. Irrespective of nationality, one or more natural or legal persons can establish an LLC in Finland.
Nevertheless, even though the founders of the LLC are not required to reside in Finland or even within the European Economic Area (EEA), it is important to notice that the LLC is required to have a Board of Directors. The Members of the Board have to be natural persons and at least one of the Ordinary Members has to be resident within the EEA, unless the registration authority grants an exemption. However, it should be pointed out that the exemption is very rarely granted. Hence, it is good to have one of the founders reside within the EEA. If not, then the founders have to appoint at least one Ordinary Member to the Board who resides within the EEA.
It is also essential to note that if the Board consists of less than three Ordinary Members, the Board should also have at least one Deputy Member. The same above mentioned rule also apply to Deputy Members meaning that if the appointed Deputy Member is not residing within the EEA, the Board should have a second Deputy Member residing within the EEA.
Thus, you do not need to reside in Finland but should you reside outside the EEA, you should keep in mind that at least one of the Members of the Board of Directors has to reside within the EEA.
What documents do I need to fill out?
The mandatory documents that are always required when establishing a Finnish LLC are the Memorandum of Association (MOA), the Articles of Association (AOA) and the Start-Up Notification provided by the registration authority.
By signing a written MOA, the shareholders subscribe for a quantity of shares as indicated in the MOA. The term and duties of the management and the auditors shall begin as of the signing of the MOA. The MOA shall always contain the date of contract, all shareholders and the shares subscribed, the subscription price, the time when the shares are to be paid to the LLC and the elected Members of the Board of Directors.
The Articles of Association (AOA) shall be included or attached to the MOA. The AOA shall always contain the business name of the LLC, the municipality in Finland where the LLC has its registered office and the field of operation of the LLC. In addition, the LLC may in the AOA agree on more detailed rules of the LLC in accordance with the Finnish Limited Liability Companies Act (OYL).
The Start-Up Notification provided by the registration authority has to be filled out either in Finnish or Swedish. However, the registration authority has bilingual forms in Finnish and English to help out the non-native applicant. Furthermore, the website of the registration authority has extensive information in English on how to establish an LLC in Finland.
What about the Shareholders Agreement (SHA)?
The SHA is not required by law and hence it is not a mandatory document when one wishes to establish an LLC in Finland. However, it is highly advisable for the shareholders to draft an SHA as with a well-functioning SHA, the shareholders of an LLC are able to solve, even possibly severe, problems beforehand and at its best an SHA minimizes the pressure of the shareholders enabling the shareholders to focus only on developing the business operations knowing that the core rules of the LLC are clear, comprehensive and predictable. In other words, the yellow brick road to success is most often paved with a well-written SHA.
Do I have to set up a Finnish bank account?
No. Generally, the subscription price (i.e. share capital) shall be paid in cash into an account of the LLC in a Finnish deposit bank or in a branch of a foreign credit institution licensed to accept deposits in Finland, or into a comparable foreign account. The foreign credit institutions that are subject to the law of an OECD state are usually considered reliable.
In addition, the subscription price can be paid in full or in part with other assets (contribution in kind). It should be pointed out that it is advisable to direct the payment of shares to the share capital in order to cover the minimum share capital.
Could you elaborate on the registration procedure?
The registration of the LLC can be notified to the registration authority either online or in printed form. The handling fee regarding online registration is 330 EUR and regarding printed form registration the handling fee is 380 EUR. The LLC shall be registered within three months of the signing of the MOA; failing this, the incorporation of the LLC shall lapse. It should be noted that only the shares which have been fully paid can be notified for registration.
The LLC may be registered once the registration authority has been provided with a declaration by the Members of the Board of Directors and the Managing Director to the effect that the provisions of the OYL have been complied with in the incorporation of the LLC and, where need be, a similar certificate by the auditors of the LLC.
If, under the law or the AOA, no Auditor need be appointed for the LLC, other evidence on the payment for shares shall be attached to the notification. As a general rule, an auditor is required in the bigger businesses – for example, if a foreign entity wishes to establish a Finnish LLC as a subsidiary, it is highly likely that the Finnish LLC must appoint an auditor already in the foundational stages.
The LLC shall receive a legal personality and a legal capacity once it has been established by registration. The obligations arising from measures taken after the signing of the MOA and from measures specified in the MOA and taken no earlier than one year before the signing shall be transferred to the LLC upon registration.
Interested in doing business in Finland? If yes, do not hesitate to contact us at Nordic Law – we offer all-encompassing corporate legal services with a strong emphasis on professional competence.