Finland: Covid-19 and the insolvency regulation in Finland
The latest Temporary Insolvency Act came into force on the 1st of February 2021. Non-compliance with a demand for payment with bankruptcy threat gives rise to a presumption of insolvency. Under the provision of the latest Temporary Insolvency Act, the debtor has to pay the debt within 30 days after receiving the creditor’s demand to avoid the presumption of insolvency. According to the ordinary Insolvency Act, the payment period is one week after receiving the demand for payment with bankruptcy threat. The provision, which extends the payment period to 30 days, is in force until the 30th of September2021.
The Parliament of Finland enacted temporary legislation to facilitate the difficult situation caused by the Covid-19 pandemic. The first Temporary Insolvency Act came into force on the 1st of May 2020.The temporal validity of the Act was extended until the 31st of January 2021. The first Temporary Insolvency Act removed the presumption of insolvency, which exacerbated creditor’s possibilities to apply the debtor for bankruptcy. The temporary legislation significantly decreased the creditor’s possibilities to file the debtor for bankruptcy.
The first Temporary Insolvency Act that came into force on the 1st of May 2020 postponed a great number of insolvency processes into the future. The aim of the temporary regulation was to prevent bankruptcy proceedings when a company’s financial problems were temporary and related to the Covid-19 pandemic. According to statistics, the number of insolvency processes decreased in comparison to the time before the enactment of the amendment. In fact, the legislation could not differentiate whether the company’s financial difficulties were temporary or permanent.
The presumption of insolvency has been applied as it used to be since the 1st of February 2021. The new Temporary Insolvency Act gives the debtors extra time to organize their financial affairs after receiving the petition for bankruptcy. However, the new temporary regulation cannot prevent bankruptcy when insolvency is permanent.
Covid-19 and the insolvency regulation in Finland -Lindblad & Co
Written by Marika Korsimaa
The 3th of February 2021
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