Company Formation in Finland- An Overview
Finland is also known as the Republic of Finland. It is present in the northern part of Europe and is considered as a Nordic and Scandinavian country. Large part of land mass in Finland is covered by forests. Hence export of forestry and allied types of products are the main businesses in Finland. Company Formation in Finland is quite straightforward; however investors have to respect local laws and culture for successive business registration in Finland.
The services sector in Finland is booming with significant amount of revenue deriving from it. About more than 60% of the government revenue comes from the services sector. After this sector, manufacturing and production activities contribute to the development of the GDP of Finland. Information technology and electronic production are one of the main areas in Finland. Export of paper, software products and forestry products are also major sources of domestic revenue in Finland.
The mobile phone company Nokia was the largest producer of phones and has Finnish roots. As per the Index of Competition, Finland is considered as one of the most competitive economies in the world. Incorporating a company in Finland is quite straightforward.
Hence the above reasons should be considered by an investor for company formation in Finland.
Benefits of Company Formation in Finland
The following are the benefits of company formation in Finland:
- Competitive Economy
As per the Index of Competition, Finland is considered as one of the most competitive economies in the world. This would be in the areas of the services, manufacturing and exports.
- Services Sector
The services sector in Finland is booming. This contributes to more than 60% of the revenue of the government. These services sector would include financial services, insurance services and other forms of services.
- Manufacturing Hub
Finland is a large manufacturing and production hub in the world. This would predominantly include sectors such as telecommunications, paper and other industries. Electronic equipment are manufactured in Finland and exported to other countries. Forestry goods and products are also produced and exported to other countries. This is due to the amount of landscape in Finland.
Finland is known for exports of different types of resources. Such resources would include forestry products, manufacturing equipment and other types of products.
Eligible Business Structures for Company Registration in Finland
The following are eligible business structures for company registration in Finland:
- Tax Resident LLC
This form of entity has the principle of limited liability. Such company is known as a domestic tax resident. Corporate tax at the rate of 20% would be levied on this type of organisation.
- Free Zone LLC
This type of entity would be formed in a Finnish free zone. Usually companies which are into manufacturing and services would be considered under this form of entity.
- Private Limited Company
This type of company is also known as Osakeyhtiö (Oy). Such entity is not allowed to list shares in the stock exchange. The liability of this form of entity is limited to a particular amount of capital which is subscribed. Private Limited and Public Limited Companies in Finland are regulated by the law of Finland. This would be considered as the Companies Act (2006/624).
- Representative Office
A representative office is a mere extension of a foreign parent company in Finland. The representative office can carry out different forms of activities related to promoting the activities of the parent company. This would usually include market research and other types of activities.
- Branch Office
A branch office is a mere extension of the foreign parent company. In the branch office usually operations can be carried out under the scope of the foreign parent company.
- Co-operative society (Osuuskunta)
Cooperative Societies in Finland is regulated by the Co-operatives Act (2013/421). The legal liability of the members is separate and they are independent to carry out different forms of activities. The members of a co-operative society are not liable for the debts of the company.
Minimum Eligibility Criteria for Company Registration in Finland
The following eligibility criterion is required for company registration in Finland:
- Minimum Capital Requirements
For a private limited company there is no capital requirements. However, for a Finnish public limited company the minimum capital requirements are EUR 80,000. An applicant for company formation in Finland has to satisfy the minimum capital requirements of the company.
- Minimum Directors
There has to be one director and one deputy director for forming the company in Finland. If there are two directors, then the board must appoint a deputy director to carry out the requirements of the company. A director must be a natural person, above the age of 18 years and should not be liable for any criminal offences. The director must also not be declared bankrupt or adjudged as an insolvent. At least one member or director must be a resident of the European Economic Area (EEA). This would usually be the case, unless they are granted an exemption from the Finnish Trade Registry.
- Minimum Shareholders
A minimum of one shareholder is required for the process of company formation in Finland.
Procedure for Company Formation in Finland
An applicant for company formation in Finland can use the Finnish LLC (Limited Liability Company), as this is one of the most utilised types of business structure for company formation process. Apart from this, a shelf company can be utilised for the process of company formation in Finland. The following steps have to be considered for the process of company registration in Finland:
- Choose the Type of Business Structure
First and foremost, the applicant for company formation in Finland has to choose the required business structure. Usually an LLC is considered as a suitable business structure. On choosing the business structure, the company would have the principle of separate legal entity. Such registration and incorporation of the entity must also be informed to the Finnish Tax Authority (FTA).
- Submit Documents to the Trade Registry
When a company is formed in Finland, the documents must be submitted to the trade registry to carry out the incorporation process. The following documents have to be submitted to the trade registry:
• Board Minutes of the Company taking the decision for incorporating a company in Finland.
• Board Resolution for opening the corporate bank account in Finland.
• Memorandum of Association- Which provides details of the original shares which are subscribed by the members to the company.
• Articles of Association of the Company.
• Notification from the Finnish Trade Registry.
• Fee Receipt for Finnish Trade Registry- EUR 380 for the physical process and EUR 270 for the online process.
• Confirmation from the auditor regarding the payment of share capital. If there is no auditor in the company, then a receipt for confirmation of the payment of share capital must be provided.
- Approval of Articles of Association
The Finnish Trade Registry has to make an approval of the articles of association of the company. Once the articles of association are approved by the Trade Registry, then such documentation can be filed online. This process can be carried out through the Finnish Trade Registry. Apart from this, one of the Board Members in Finland must also have an internet bank account to carry out the above process.
- Name of the Company
The Company has to satisfy the requirements with the name. A private limited company has to have Oy ("Ltd") or osakeyhtiö (meaning "limited company") in the name. A public limited company formed in Finland has to have Oyj or "julkinen osakeyhtiö" in the name. The name of the company must not breach the requirements related to intellectual property rights.
- Registration Time
The documents of the company can be sent in physical form to the trade registry or submitted online. The online system can be utilised if the articles of association has been verified by the Finnish Trade Registry. Usually the process for company formation in Finland would take about three weeks. When the company is registered, then limited liability status would be present.
Compliances for Company Registration in Finland
The following compliances have to be carried out for company formation in Finland:
- Shareholders Meeting
A private limited company (“Oy”) is required to hold annual general meetings in order to carry out compliances related to changes in the company and voting matters.
- Board Meeting Requirements
There are no statutory requirements for board meetings. Minimum of one board meeting must be conducted in a year.
- Finnish Corporate Tax
Corporate tax at the rate of 20% is levied on the world wide income of Finnish Companies. This compliance has to be carried out as per the profit and loss statements of the Finnish Company.
- Business Registrations and Filing Requirements
All business registrations have to be carried out in accordance with the requirements of the company. All filings must be carried out with the Finnish Trade Registry.
- Financial Statements
Financial Reporting and statements have to be prepared in accordance with the requirements of the GAAP (Generally Accepted Accounting Practices). Any company which is listed in the Stock Exchange would comply with the requirements of the International Financial Reporting Standards (IFRS). All financial statements have to be submitted to the Finnish Tax Authority (FTA). This must be carried out four months at the end of the Financial Year.
All Disclosures related to the Company must have the VAT registered ID. This would include all the letters, company forms and documents.
The following documents are required for company formation in Finland:
- Board Minutes of the Company taking the decision for incorporating a company in Finland
- Board Resolution for opening the corporate bank account in Finland
- Memorandum of Association- Which provides details of the original shares which are subscribed by the members to the company
- Articles of Association of the Company
- Notification from the Finnish Trade Registry
- Fee Receipt for Finnish Trade Registry- EUR 380 for the physical process and EUR 270 for the online process.
- Confirmation from the auditor regarding the payment of share capital. If there is no auditor in the company, then a receipt for confirmation of the payment of share capital must be provided.