Finland collection profile

 

Finland
       

Finland

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Complexity of collecting debt:

grading
notable High Very High Severe


Executive summary

  • The payment behaviour of domestic companies is excellent at 25 days DSO on average, and the EU framework provides reliable tools when it comes to late payment.​
  • However, legal action and enforcement proceedings may be time consuming, especially when the debtor's assets are difficult to locate, and recovering debt through pre-legal collection methods remains the most efficient solution.
  • Although insolvency law aims at rescuing companies facing financial difficulties in order to increase repayment possibilities, most reconstruction procedures spread over years (or fail) thus leaving the creditors with no or very little dividends, whilst liquidation procedures leave very little recovery chances to unsecured creditors.
 
General Information GENERAL INFORMATION arrow-transparent
 
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
 
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
 
General Information 

GENERAL INFORMATION

Days Sales Outstanding (DSO)

The payment culture in Finland is excellent and payments take place within 25 days on average.

 

Late payment interest

Late payment interest in Finland may be charged to the debtor. Indeed, the Recast Directive 2011/7/EU which stipulates that payments in the EU must be made within 60 days was transposed into Finish law in November 2012 (Act on the Payment Terms of Commercial Agreements - laki kaupallisten sopimusten maksuehdoista). The rules in Finland are stricter than the EU requirements: as a general rule, business-to-business transactions must be paid within 30 calendar days, although the terms may be extended to 60 days by contract as long as the agreement remains fair. Interest rates may be fixed contractually but the law otherwise provides a minimum interest calculated on the basis of the Finish National Bank's (Suomen Pankki) reference rate (fixed twice a year in January and July), increased by at least 7 percentage points. In practice, interests have long been applied systematically when bills remained unpaid.

In addition, an amendment to the Finnish Act on the Collection of Debts entitles creditors to receive a flat EUR 40 compensation covering for their collection costs, whilst reasonable collection costs may also be charged to the debtor. Those costs are usually paid for in practice.

 
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collection practice 

COLLECTIONS PRACTICES

Orchestrated negotiation first

Even though the Finnish judiciary system is trustworthy, it is advisable to first consider amicable settlement opportunities as an alternative to formal proceedings. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it indeed becomes impossible to enforce a debt (see below). Legal dunning ought to start with a Demand Letter (registration is not necessary in Finland) recalling the debtor its obligation to pay the principal together with late payment interests (as contractually agreed or taking a legal rate as a reference) within 7 days. If the debtor fails to respond, another letter threatening to register the debt into a public register is often extremely efficient since appearance in the register usually has an impact on the company's credit rating.

 
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Court Proceeding 

COURT PROCEEDINGS

Finland has a Civil Law system and its courts are fairly efficient. District Courts (käräjäoikeus) render decision in first instance, but they may be assisted by specialist courts such as the Insurance Court, the Labour Court or the Helsinki Markets Court (Markkinaoikeus) which has jurisdiction over fraudulent business behaviors, dominant position abuses, as well as intellectual property disputes and preliminary injunctions since September 2013. Finnish and Swedish are the country's official languages and are thus used in all legal proceedings. The courts do not set binding precedents but the decisions rendered by the Supreme Court tend to constitute guidelines followed by the lower courts.

If the debt is certain and undisputed, fast-track proceedings would first request a simplified Payment Order (suppea haastehakemus) on the basis of any invoice, contract or debt recognition title available. The debtor is contacted (electronically) and given two weeks to file a defence. The court then renders a judgment by default if the debtor remains silent. When the debtor company has assets in other EU Member States, a European Payment Order procedure facilitating the recovery of undisputed debts (under Regulation EC No 1896/2006) may furthermore be triggered. In this case, the demanding party may request the Helsinki District Court to issue an Order to Pay which will then be enforceable in all European Union countries (except Denmark) without exequatur proceedings. Ordinary legal action would usually commence when amicable collection has failed. A written application for summons must be left with the registry of the District Court, which then serves the debtor with a Writ of Summons. The debtor is then given approximately two weeks to file a defence, but failure to reply would tend to lead to a default judgment in favor of the claimant. Otherwise, the court will examine the parties’ evidence and arguments before rendering a decision. Courts normally award remedies in the form of injunctions, compensatory damages or declaratory judgments, but punitive damages are not allowed.

 
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insolvency Proceeding 

INSOLVENCY PROCEEDINGS

A debtor in Finland is regarded as insolvent if it is permanently unable to pay his or her debts when they fall due. There are two types of insolvency proceedings in Finland: reorganization of an undertaking (under the Restructuring of Enterprises Act of 1993) and bankruptcy (under the Bankruptcy Act 2004). Both can be initiated following a petition to the court of first instance by the debtor or by the creditors alike. In general the recovery rate in insolvency procedure is very low and, when a company is declared bankrupt it is most unlikely that a dividend exceeding 10% of the receivables is paid to the creditors. In Company reconstruction procedure, where the aim is to save the company as going concern, dividends may be paid in instalments, usually within a period of time which might reach up to ten years. In practice, however, most reconstruction procedures fail, leaving the creditors with no or very little dividends.

 
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