Questions and answers about the act on the screening of foreign corporate acquisitions

The objective of the Act is to promote foreign investments and adopt a positive attitude to foreign ownership. Primarily, the Act is intended as a tool for screening and monitoring foreign corporate acquisitions.

In practice, the Act aims to secure key national interests, i.e. national defence, the security of supply and functions fundamental to society, in particular.

The Act enables to restrict the transfer of control to foreign owners in the companies subject to screening, should the key national interest so require. The Ministry of Economic Affairs and Employment can also set conditions for the confirmation of corporate acquisitions.

Regulation 2019/452 of the European Parliament and of the Council (EU FDI screening regulation) is directly applicable legislation at the national level. The Member States have the right to restrict the freedom of providing services and the right of placement by adopting measures that are justified on the grounds of “security or public order”.

The Ministry of Economic Affairs and Employment acts as the national contact point required in the EU FDI screening regulation. The role of the national contact point is to strengthen communication and cooperation between the EU Member States and the European Commission. Starting from 11 October 2020, information about cases subject to the confirmation procedure laid down in the Finnish Act on the Screening of Foreign Corporate Acquisitions and within the scope of the EU screening regulation must be disclosed to other Member States and the European Commission.

Foreign owners include foreign natural persons that have no place of residence in the EU or EFTA Member States, and foreign organisations and foundations that have no domicile in the EU or EFTA Member States.

Foreign owners also include organisations and foundations that have a domicile in an EU or EFTA Member State, but in which another foreign owner holds at least one tenth of the total votes of all shares in a limited liability company or holds corresponding actual control in the organisation.

With regard to corporate acquisitions in the defence sector (including dual-use goods), foreign owners include parties that have a domicile in an EU or EFTA member state.

Considering critical functions fundamental to society, criticality may vary depending on the prevailing security situation at the time in Finland. As a rule, safeguarding the security of supply is key whatever the situation.

The Act does not specify the private or public sectors or functions in which companies are not subject to the screening. This is because it is impossible to predict what sectors and functions will be critical for functions fundamental to the society in the future. Ultimately, the needs of national defence, public order and security, as well as other functions fundamental to society, are determined according to the conditions that prevail at each time.

However, the operations of a company in a field important to the security of supply or other fundamental functions does not necessarily mean that it would be subject to screening pursuant to the Act. For example, a number of companies that are not critical for the security of supply operate in the fields of food supply or logistics.

Guidance on the scope of application of the Act is available, for example, in the Government’s public guidance documents on the security of supply and national security.

Government Decision on the Objectives of Security of Supply (1048/2018) (in Finnish)

The Security Strategy for Society (Government Resolution 2 November 2017) (in Finnish)

A defence sector company refers to a company that produces or supplies defence material or other products or services vital to national defence within the meaning of the Act on the export of defence materiel (282/2012) to, for example, the Ministry of Defence, the Defence Forces or the Finnish Border Guard.

In practice, the importance of the products or services is assessed case by case based on existing contracts with the Defence Forces, for example. For example, the supply of essential software applications, cyber applications, cloud services or other similar products or services can be deemed a vital product or service.

The target company maintaining or supporting a critical infrastructure or, for example, providing the Defence Forces with key equipment can also be deemed as a vital function in terms on national security. Other examples of the aforementioned vital products or services include encryption products, civil protection material, products for protection against chemical or biological weapons, radiation and explosives (CBRNE products), and space technology products. In addition, products and services related to securing infrastructure vital to national military defence, such as providing support for construction related to military readiness or supplying fuel to the Defence Forces, can be deemed vital products or services.

A company producing dual-use goods within the meaning of the Act on the Control of Exports of Dual-Use Goods (562/1996) is also regarded as a defence sector company. Among others, a limited liability company operating in the civilian sector that imports dual-use goods requiring authorisation to third countries, transferring sensitive goods within the EU or that has otherwise been granted authorisation or a notification or decision from an authority for the export of dual-use goods, is considered a defence sector company. Similarly, a civilian sector company using, developing or otherwise handling dual-use technology, such as competence or other technical information, in its operations, such as production or product development, is considered a defence sector company.

A security sector company is a company that supplies or produces products or services critical for security in society to Finland’s key authorities in relation to their statutory duties. These security authorities include the Finnish Defence Forces, the Finnish Border Guard, the Police of Finland, Finnish Customs, the National Emergency Supply Agency, the National Security Authority (NSA) and the Finnish Transport and Communications Agency (Traficom).

Products or services whose provision to key Finnish security authorities can be considered as critical include software (e.g. encryption software), cyber security applications, certification services, cloud services, data centre services and other products and services related to maintaining these. In addition, for example, personal protective equipment and their provision to key security authorities can be considered critical products or services. However, software for regular office use that has not been tailored for the use of a security authority does not fall under the scope of critical products or services within the meaning of the Act.

If a corporate acquisition concerns a defence or security sector company, the application is mandatory, and it must always be submitted to the Ministry of Economic Affairs and Employment in advance. The Act does not specify any time limits on when the Ministry of Economic Affairs and Employment can intervene in an acquisition of a defence or security sector company if no application has been submitted to the ministry.

If the acquisition concerns a company other than a defence or security sector company, the notification is voluntary, and it may also be submitted in advance. However, an advance notification can only be submitted during the phase directly preceding the final conclusion of the business arrangement (e.g. a letter of intent, binding on the parties, has already been signed for the planned acquisition).

The Ministry of Economic Affairs and Employment, together with its network of authorities, monitors implemented corporate acquisitions regarding companies subject to screening. Based on the monitoring, the ministry may also independently request information about corporate acquisitions that may be subject to screening pursuant to the Act.

If an applicant deems that the target company may potentially be critical considering functions fundamental to society, it is recommended that a notification be submitted to the Ministry of Economic Affairs and Employment.

If a foreign owner acquires at least one tenth, at least one third or at least half of the total votes of all shares or corresponding actual control in a company within the scope of screening, an application/notification must be submitted.

For specific reasons, the buyer can be obligated to also submit an application/notification for measures that increase control implemented after processing and that would not result in these limits to be exceeded.

There is no fixed format for the application/notification, but it must include key information about the entity subject to screening, foreign owner and corporate acquisition necessary for confirming the corporate acquisition.

The Ministry of Economic Affairs and Employment may request any additional information required for the processing of the case, until the information provided in the application/notification can be considered to be sufficient for a decision.
For an indicative check list of the information to be included in an application/notification, visit the website of the MEAE.

Other Member States and the Commission must be notified of cases in the process of confirmation under the Act starting from 11 October 2020. A separate filled-in form must be attached to applications and notifications submitted to the Ministry of Economic Affairs and Employment.

Form to be attached to application/notification

The conditions are set only in certain situations. They are necessary mitigation measures that are aimed at restricting the critical security effects of a foreign corporate acquisition instead of the authorisation for the acquisition being entirely denied in a Government plenary session.

The Ministry of Economic Affairs and Employment can include conditions in their decision to secure a key national interest. Authorisation can only be denied in a Government plenary session. Conditions may only be imposed if the parties to the corporate acquisition undertake to comply with them. The conditions are defined in negotiations between the acquisition parties and the competent authorities.

The content of the conditions varies depending on the case. For example, they can require the exclusion of a certain business function or share from the acquisition or an obligation to ensure the continuation of services under related production and supply agreements.

Applications/notifications will always be processed urgently in the ministry.

The processing time varies on a case-by-case basis, depending on the extent of the case. When preparing a corporate acquisition case, the ministry will also acquire comments from other authorities as necessary, in which case the process will also take more time. A round of comments usually takes three to four weeks, including a round of comments in the network of authorities and an analysis by the ministry.

In acquisitions not concerning defence or security sector companies, the Ministry of Economic Affairs and Employment must initiate further investigations within six weeks, and the decision to refer the case forward must be made within three months. All above mentioned time periods begin to run only after the Ministry deems that it has received all information relevant for processing the case from the applicant.

For example, in 2022, the average processing time was approximately two months.

No. From 1 April 2023 onwards, the fee for processing an authorisation application related to a foreign corporate acquisition is EUR 8,000/decision and decisions for non-investigation (inadmissibily of a matter) are EUR 1500/decision. This decision is in force until 31 March 2025 (The Ministry of Economic Affairs and Employment’s decree on services subject to a fee).

As a rule, the Ministry processes applications/notifications and their annexes as confidential material. The Ministry will not provide any information on the corporate acquisition to any third parties during the confirmation process or prior to the acquisition being completed.

The Ministry of Economic Affairs and Employment’s decision will become public only after the transaction has taken place and after the legal representative has notified of the matter. The Ministry of Economic Affairs and Employment will make a final decision on the publicity based on the Act on the Openness of Government Activities (621/1999).

The application/notification and its annexes must be submitted on paper to the Government’s mail distribution centre (address: Ritarikatu 2B, Helsinki) in Finnish or Swedish. However, annexes to the application/notification may be submitted in English if necessary. The form for notification to the EU must be completed in English.

Please write ‘YKA kiireellinen’ on the envelope and address it to:

Ministry of Economic Affairs and Employment
Marjaana Aarnikka/Lasse Puroma/Linda Rönnqvist/Matias Keinänen
FI-00023 GOVERNMENT

In matters concerning applications and notifications, please use the mailbox:
[email protected]

Further information:
Marjaana Aarnikka, Commercial Counsellor (Legal Affairs), +358 50 338 4350, [email protected]
Matias Keinänen, Senior Specialist, +358 50 439 2483, [email protected]
Lasse Puroma, Senior Specialist, +358 50 352 9585, [email protected]
Linda Rönnqvist, Specialist, +358 50 534 4721, [email protected]

Statistics:
Ministry of Economic Affairs and Employment’s annual report 2022 (in Finnish)
EU Commission’s annual report 2021