Waselius & Wist

The Supreme Administrative Court has recently rendered a decision (KHO:2010:12), according to which a holding company set up mainly by private equity investors may still be deemed as a company engaged in private equity activities. In an earlier decision from 2009 (KHO:2009:64), the Supreme Administrative Court took the opposite view, thus removing the private equity status of a holding company and rendering the losses arising from the liquidation of its subsidiary non-deductible for tax purposes.

Contrary to the earlier case – where the holding company had no employees and carried no active business activities and where the intention was to liquidate the target (subsidiary) company immediately after the transaction – the holding company employed in this particular case four employees providing group internal and private equity services, but apparently most importantly, had also held its underlying subsidiaries for a longer period of time. In these circumstances, the Supreme Administrative Court considered the holding company eligible for the private equity status, which accordingly made the goodwill included in the purchase price of its Finnish subsidiaries deductible for tax purposes upon the liquidation of the subsidiaries in question.

The ruling of the Supreme Administrative Court clarifies to some extent the private equity concept. Private equity structures should now be carefully scrutinized to determine their tax efficiency.

For further information, please contact Mr. Niklas Thibblin.

The Supreme Administrative Court has recently in its decision (KHO:2010:9) upheld the ruling of the Finnish Central Board of Taxation, according to which shares in a subsidiary may qualify as an independent business unit in connection with a partial demerger of the parent entity. Accordingly, the decision facilitates a tax-neutral transfer of shares in a subsidiary to another entity by way of a partial demerger. In the decision, importance was especially given to the fact the business purpose of the subsidiary was different from that of the parent entity and that the subsidiary also otherwise was able to operate on its own both from an organizational and from a financial perspective.

A partial demerger may therefore prove to be a very useful tool to restructure, for example, group holdings without any immediate tax consequences.

For further information, please contact Mr. Niklas Thibblin.

The provisions of the Finnish Securities Market Act of 1989 relating to the cross-border and branch operations of foreign clearing, settlement and depositary houses (CSDs) will be amended with effect from 1 January 2010.

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The Finnish Supreme Administrative Court has recently issued its awaited decision in the largest cartel case tried to date in Finland, dismissing the asphalt companies’ appeals of the Market Court’s decision of 2007 and approving to a significant extent the appeal by the Finnish Competition Authority.

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The Supreme Administrative Court has recently rendered a decision, according to which a pure holding company set up mainly by private equity investors will not itself be deemed as a company engaged in private equity activities. Therefore, any possible capital or liquidation losses suffered by such holding company from its underlying investments will generally not be deductible for tax purposes.

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The Helsinki Court of Appeal has rendered its verdict in one of the largest insider dealing cases in Finland. The former key management of the Finnish telecommunications operator Jippii Group plc was found guilty of gross misuse of inside information, communications fraud and false accounting and was sentenced to up to two years unconditional imprisonment. Read more

The FFSA has published new guidance relating to disclosure of derivative contracts. According to the guidance, also cash-settled derivative contracts may trigger shareholder’s disclosure obligation insofar as, based on the derivative contract, the holder of the derivative may, directly or indirectly, exercise actual voting power/control in respect of the underlying shares. Read more

The Financial Supervisory Authority (FFSA) has announced that it has found shortcomings of varying degree in the marketing materials of nearly every distributor of structured notes. FFSA urges the issuers and distributors of structured notes to critically review their marketing processes to ensure that the marketing materials are up to standard. Read more

In April 2009 the EU Acquisition Directive (44/2007/EC), on the procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector, was implemented in Finland through amendments to the Act on the Finnish Financial Supervisory Authority, the Act on Credit Institutions, the Act on Insurance Companies and several other acts regarding entities supervised by the Finnish Financial Supervisory Authority. Read more

A Working Group appointed by the Ministry of Employment and the Economy has recently published its proposal regarding a major overhaul of the Finnish Act on Competition Restrictions (the “Competition Act”). The Working Group proposes amendments, i.a., to the provisions concerning merger control, sanctions and leniency, actions for damages and certain procedural rules.

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