Branch offices are a common model used by many international companies to expand into Finnish markets due to their relative simplicity and cost efficiency. It follows that questions relating to the role of branch offices in potential insolvency situations – whether local or global – are significant issues for the creditors of such companies.
As confirmed by a recent ruling by the Helsinki Court of Appeal, however, a branch office is not a legal person, but rather a part of another foreign legal person. This could be problematic for the creditor, especially if a debtor’s assets in Finland would make local bankruptcy a practical and attractive solution. In these instances, a creditor may find potentially available territorial proceedings (such as secondary insolvency proceeding under EU Insolvency Regulation) directly against the debtor more convenient than the main proceedings in debtor’s country of domicile due to, among other things, the limited scope of the proceedings and relative ease of lodgement in brankruptcy claims.
The update written by partner, attorney-at-law Juho Lenni-Taattola and associate Lasse Luoma at Hammarström Puhakka Partners, Attorneys Ltd has been published in the International Law Office’s newsletter on February 2013.
