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Big regulatory changes to related party transactions

27.05.2019

New rules on related party transactions will no longer prevent participation in the general meetings and management of companies. The definition of a related party will also be changed.

New rules on related party transactions will replace the current disqualification provisions in the Finnish Limited Liability Companies Act on 10 June 2019. The rules on related party transactions affect the decision-making of all limited liability companies.

Under the new rules, there will no longer be disqualified persons to participate in the board of directors’ or the general meeting’s decision-making concerning a related party transaction. Instead, such decision will require a majority or a qualified majority in respect of those members or votes that are not related to the transaction in question.

Although the change mostly affects the disqualification rules applied to the general meetings and management of listed companies, the new provisions apply to the decision-making of the board of directors, managing director, the supervisory board, and the general meeting in all limited liability companies.

A broader definition for listed companies

So far, a general definition of a related party has been applied to all limited liability companies. This will now be clarified in the sense that listed companies will from June onwards have a broader definition of their own. A narrower definition will normally be applied to other limited liability companies, but they are also allowed to apply the broader definition.

Related party register not required

The upcoming change does not involve a requirement to create a related party register, and companies are not always expected to know about the family relationships or ownerships of the persons in the company’s management. However, the general obligations of loyalty and duty of care may require companies to find out whether a party to a transaction qualifies as a related party.


For further information, please contact:
Ismo Hentula
  • Ismo Hentula
  • M: +358 40 8338 002
  • E: ismo.hentula@procope.fi
Petri Kyllönen

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