This contribution was originally published as part of the Legal 500 Venture Capital Comparative Guide and is republished here with permission. The full Q&A is available on The Legal 500 website.
Are there specific legal requirements or preferences regarding the choice of entity and/or equity structure for early-stage businesses that are seeking venture capital funding in the jurisdiction?
In Finland, early-stage businesses seeking venture capital funding typically choose to establish themselves as limited liability companies. This structure is preferred for its flexibility in equity arrangements in terms of governance and capital structure, as well as the limited liability it offers shareholders. However, other entity forms are also possible, as there are no regulatory requirements mandating a specific business structure.
What are the principal legal documents for a venture capital equity investment in the jurisdiction and are any of them publicly filed or otherwise available to the public?
The principal legal documents for a Finnish venture capital equity investment typically include:
(i) term sheet (non-binding), outlining the key commercial and legal terms of the investment.
(ii) investment agreement (binding), that sets out the terms of the investment, including funding tranches, conditions precedent, representations and warranties, and certain investor rights.
(iii) shareholders’ agreement, governing the relationship between the investors, founders, and other shareholders related to e.g. governance, voting rights, exit mechanisms and restrictions on share transfers.
(iv) articles of association, typically including specific provisions affecting shareholders’ rights, such as share classes and transfer restrictions.
(v) board and shareholder resolutions, for the purposes of formal approvals for the investment and related corporate actions.
(vi) employment and IPR assignment agreements, which are particularly relevant in early-stage companies to ensure founders and key personnel have properly assigned intellectual property rights to the company.
Only the articles of association and certain corporate resolutions related to e.g. share issues and board changes are publicly filed and available through the Finnish Trade Register.
Where the equity investment is provided via a convertible loan, the transaction documentation typically includes board resolution approving the loan(s). Investor(s) may also require the company – either through shareholders’ resolution or board authorisation – to issue special rights that entitle them to subscribe for shares by setting off the share subscription price against the loan receivables (i.e. converting the loan).
Is there a venture capital industry body in the jurisdiction and, if so, does it provide template investment documents? If so, how common is it to deviate from such templates and does this evolve as companies move from seed to larger rounds?
Finland has a venture capital industry body and public policy advocate called the Finnish Venture Capital Association (FVCA). FVCA represents the interests of venture capital and private equity investors in Finland and promotes best practices in the industry. FVCA is a member of Invest Europe, which is an association representing Europe’s private equity and venture capital industry and investors.
FVCA does not provide template investment documents for the industry. However, the SeriesSeed standardised template documents, maintained by the Startup Foundation, are commonly used in Finland to facilitate early-stage startup financing rounds. They are modelled after similar frameworks in other jurisdictions. SeriesSeed templates are commonly used at the seed stage but become less dominant as funding rounds progress. By the time a company reaches Series A and beyond, negotiations typically involve more tailored agreements reflecting investor preferences and company-specific factors.
Are there any general merger control, anti-trust/competition and/or foreign direct investment regimes applicable to venture capital investments in the jurisdiction?
Finland has merger control, competition law, and foreign direct investment regimes that can apply to venture capital investments, depending on the specifics of the transaction. Merger control rules may be triggered if the investment leads to control and the turnover thresholds are met, which is rarely the case given that VC-backed companies in Finland are typically small.
Finnish and EU competition laws apply generally and may become relevant if the investment raises concerns about coordination or market dominance. Particular attention should be paid to provisions such as non-compete clauses in shareholders’ agreements, especially where investors or founders are active in the same sector.
Foreign investors are, in certain instances, required to apply for prior approval from the Ministry of Economic Affairs and Employment in relation to acquisitions of e.g., Finnish defence or security companies, or companies or businesses holding a key position with respect to maintaining vital functions of the Finnish society (including safeguarding critical infrastructure and security of supply).
What is the process, and internal approvals needed, for a company issuing shares to investors in the jurisdiction and are there any related taxes or notary (or other fees) payable?
The process of issuing shares to investors in Finland generally includes the following steps:
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- The shareholders resolve on the directed issue of shares or authorise the board of directors to do so. A resolution on a directed issue of shares generally requires at least a 2/3 qualified majority of votes and shares. The issuance (or related authorisation) may specify a fixed number of shares or a maximum limit.
- The board of directors resolves to issue the shares based on the authorisation granted by the shareholders.
Investors subscribe for the shares and pay the required subscription price. The subscription of shares must be made in a verifiable manner and must indicate the subscriber, the share issue decision on which the subscription is based, and the shares being subscribed. - The issued shares are recorded in the company’s shareholder register once officially registered with the Trade Register.
- If the issuance involves new shares, no tax is payable. However, if the shares were previously owned by shareholders, returned to the company, and then reissued, this is considered a transfer of securities and is subject to transfer tax. The shareholder is registered as the owner only after proving that the transfer tax has been paid.
There are no notary fees associated with issuing shares in Finland. The Trade Register charges nominal registration fees.
How prevalent is participation from investors that are not venture capital funds, including angel investors, family offices, high net worth individuals, and corporate venture capital?
Participation from angel investors, family offices, HNWIs and corporate venture capital is very common in Finland. While angel investors are particularly active, family offices and HNWIs are increasingly influential in the Finnish venture capital landscape.
What is the typical investment period for a venture capital fund in the jurisdiction?
Venture capital funds in the Finnish market are typically structured as closed-ended funds, with an investment period of around 3 to 5 years from the fund’s first closing, in line with common European market practice. Follow-on investments are generally permitted after the initial investment period. The typical duration of a Finnish venture capital fund is ten years, with an option to extend by one to two years. As a result, exits are usually made towards the later stages of the fund’s lifecycle, often beginning around year 5 and becoming more frequent between years 6 and 10.
What are the key investment terms which a venture investor looks for in the jurisdiction including representations and warranties, class of share, board representation (and observers), voting and other control rights, redemption rights, anti-dilution protection and information rights?
Venture capital investors in Finland often receive preferred shares, which come with additional rights compared to common shares, such as liquidation preferences and anti-dilution protection especially in later stage rounds.
Investors frequently require a seat on the board of directors, particularly in early and growth-stage investments, or the right to appoint a board observer who, while not holding voting rights, can attend meetings, receive information and participate in discussions. Investors also tend to request veto rights over key company decisions, including issuance of new shares, making significant expenditures, securing debt financing, and engaging in significant transactions. Some reserved matters require qualified majority or investor consent.
Other common key terms in shareholders’ agreements are redemption obligations/rights and other transfer restrictions (which allow investors to sell their shares back to the company under specific conditions, such as the failure to achieve a trade sale within a set period, or pre-emption rights, giving them control over who can become a shareholder in the company). Drag-along rights are often included to enable majority shareholders (often the investors) to compel minority shareholders to sell their shares during an exit. Conversely, tag-along rights ensure that minority shareholders have the option to sell their shares alongside the majority shareholder if the latter decides to exit. Investors also seek extensive information rights, which may include access to quarterly financial statements or the right to inspect the company’s books and records. Finally, they typically require representations and warranties from the company and its founders to confirm the company’s good standing and ensure there are no undisclosed risks.
Early-stage bridge financing rounds executed through convertible loans typically do not include the shareholder rights mentioned above. However, such rights may be discussed in advance as part of the terms to be applied if the loan is later converted into equity.
What are the key features of the liability regime (e.g. monetary damages vs. compensatory capital increase) that apply to venture capital investments in the jurisdiction?
In Finland, the liability regime for venture capital investments generally includes monetary damages as compensation for actual damage incurred by the investor as a result of a breach by the company or the founders of the investment agreement (e.g. in case of warranty breaches). Limitations of liability are often subject to discussions between the parties. Alternatively, any damage may instead be compensated by way of a compensation share issue.
In addition, shareholders’ agreements often include provisions on liquidated damages. Additionally, the company and/or other shareholders may have the right to buy back the shares held by the breaching shareholder at a reduced (bad leaver) price.
How common are arrangement/ monitoring fees for investors in the jurisdiction?
In Finland, it is relatively common for VC investors to require the company to cover their transaction-related costs, such as legal and financial due diligence costs.
However, specific arrangement fees (which are paid based on the size of the investment amount) and monitoring fees are not as commonly included in Finnish venture capital transactions.
Are founders and senior management typically subject to restrictive covenants following ceasing to be an employee and/or shareholder and, if so, what is their general scope and duration?
Founders and senior management are often bound by restrictive covenants, such as non-compete and non-solicitation clauses, after leaving a company. These covenants are typically limited in scope and duration to strike a balance between protecting the company’s interests and safeguarding the individual’s right to work.
Non-compete clauses in Finnish employment contracts are subject to specific legal limitations and compensation requirements. While a shareholders’ agreement may offer broader protection for the company and other shareholders, as the non-competition clause is tied to share ownership, Finnish employment law restrictions cannot be bypassed simply by placing non-compete provisions outside of employment agreements. As a result, these legal limitations may under certain circumstances apply also to non-compete clauses in shareholders’ agreements. The maximum duration of a non-competition restriction under the Finnish Employment Contracts Act is 12 months, but such limitation does not apply to a person who is considered to be performing management work or an autonomous part thereof, or to be in an independent position directly comparable to such management work. Furthermore, employees may be entitled to claim monthly compensation during the entire duration of the non-competition obligation. However, if the shareholder’s shareholding is substantial enough so that the shareholder can be considered an entrepreneur instead of an employee, the non-competition provisions of the Finnish Employment Contracts Act do not necessarily apply.
How are employees typically incentivised in venture capital backed companies (e.g. share options or other equity-based incentives)?
In Finnish VC-backed companies, the most prevalent incentive programme structures for key employees are employee stock option programmes as well as direct employee share issue programmes. Finland offers favourable tax treatment for employee stock options, with taxation generally deferred until the options are exercised rather than when they are granted. This enables employees to cover the tax liability using proceeds from an exit event, provided the options are exercised in connection with the exit.
Following a relatively recent amendment to Finnish tax legislation, employee share issues in unlisted companies have become a more attractive form of incentive. Under such programmes, employees may subscribe to company shares either at a discount or free of charge. Taxable income arises only to the extent that the subscription price is lower than the adjusted mathematical value of the share, as determined from the most recently approved financial statements before the subscription period. This adjusted value may be lower than the fair market value, which in turn reduces the taxable benefit for the employee.
Founders typically only have common shares subject to negative vesting and other lock-in mechanisms.
What are the most commonly used vesting/good and bad leaver provisions that apply to founders/ senior management in venture capital backed companies?
Vesting provisions in Finland often include “reversed vesting” for founders and key employees, where the shares are issued up front but equity ownership is contingent on continued employment. Good and bad leaver provisions define the conditions under which equity is retained or forfeited to the company (or its other shareholders).
Typical bad leaver situations usually include the key person resigning from their role, or the company terminating the relationship for reasons that would legally justify dismissal (i.e., reasons attributable to the key person), as well as material breach of the shareholders’ agreement. Typically all other situations are treated as good leaver events.
The most common vesting schedule is a four-year linear vesting with a one-year cliff, though alternative models may be applied on a case-by-case basis.
What have been the main areas of negotiation between investors, founders, and the company in the investment documentation, over the last 24 months?
Finnish venture capital investment activity has picked up significantly in 2024, with a 56% increase from the previous year, and is estimated to have been even higher in 2025. Despite this growth, foreign capital has remained essential for larger rounds. The challenging exit environment and selective funding landscape have brought valuation, investor protections, exit terms and control provisions into sharper focus between founders, investors and companies in investment negotiations.
How prevalent is the use of convertible debt (e.g. convertible loan notes) and advance subscription agreement/ SAFEs in the jurisdiction?
Convertible loan agreements are relatively common form of venture capital financing in Finland, particularly in early-stage financing rounds and also thereafter as part of bridge financing. These instruments provide flexibility for both investors and founders, allowing startups to raise capital without immediately determining valuation.
SAFEs and KISS documents are sometimes used, but less common instruments in Finland due to the Finnish legal framework presenting challenges that complicate the direct use of such instruments. Convertible capital loans have become a more typical form of equity-like financing. This is largely because, under the Finnish Companies Act, such loans can be treated as equity in the company’s balance sheet if they meet specific statutory requirements. This can be important when seeking debt financing, as banks may require the company to maintain a minimum equity level.
What are the customary terms of convertible debt (e.g. convertible loan notes) and advance subscription agreement/ SAFEs in the jurisdiction and are there standard from documents?
There is no standard form for convertible loan agreements in Finland, but they generally follow similar structures. Typical terms include a discount and/or valuation cap, a qualified financing round that triggers conversion, conversion valuation where the qualified financing round does not take place, maturity date and interest rate. Conversion may either occur automatically upon certain events or at the investor’s discretion, depending on the agreed terms.
How prevalent is the use of venture or growth debt as an alternative or supplement to equity fundraisings or other debt financing in the last 24 months?
In Finland, venture and growth debt is still a relatively niche segment compared to equity financing. It is estimated that in Europe, venture debt represents about 5-10% of the annual venture capital transactions in terms of amounts.
Venture debt is provided by a number of Finnish financial institutions. For example Business Finland’s (Finland’s official government agency for e.g. trade and investment promotion and innovation funding) Young Innovative Company funding program is available for early-stage scalable companies, and European Investment Bank provides venture debt loans to companies that have already gone through one or two financing rounds (A/B) with venture capital funds.
What are the customary terms of venture or growth debt in the jurisdiction and are there standard form documents?
Although there are no publicly available standard form documents for venture debt in Finland, certain terms and structures are commonly followed in practice. Interest rates are generally higher than those of traditional bank loans, reflecting the increased risk profile. Venture debt can be either unsecured or secured against specific assets, such as intellectual property. Typical covenants may include financial requirements (such as maintaining a minimum cash balance), restrictions on taking on additional debt, and provisions triggered by a change of control. The financing is usually intended to support working capital, fuel growth initiatives, or serve as bridge funding ahead of a future equity round.
What are the current market trends for venture capital in the jurisdiction (including the exits of venture backed companies) and do you see this changing in the next year?
The venture financing environment has come under strain over the past few years due to the war in Ukraine and broader market turbulence, with the venture debt segment contracting alongside equity markets. Nevertheless, data from the Finnish Venture Capital Association (FVCA) indicates a notable turnaround: startup investments in Finland rose by 56% in 2024 compared to the previous year, with 2025 numbers estimated to land even higher, suggesting a possible recovery and renewed investor confidence. This growth was largely fueled by several large funding rounds. A significant share of the capital came from foreign investors, underlining Finland’s reliance on international funding due to the relatively small size of domestic investment funds.
Despite the increase in investments, the exit landscape for venture-backed companies has remained difficult. A muted M&A market and a closed IPO window have resulted in historically low levels of successful exits.
Looking ahead, there is cautious optimism in the Finnish venture capital sector. A gradual recovery is expected to continue into 2026, along with the potential reopening of the IPO market. That being said, the ongoing global economic volatility may influence the trajectory of the Finnish venture capital market in the coming year.
Are any developments anticipated in the next 12 months, including any proposed legislative reforms that are relevant for venture capital investor in the jurisdiction?
Over the next 12 months, Finland is expecting to implement several significant policy and legislative developments that are highly relevant for venture capital investors.
Finnish Industry Investment Ltd (“Tesi”, a state-owned investment company with an industrial policy mission focused on driving economic growth, renewal, and investments) has formally implemented its investment strategy for 2025-2029, with a focus on industrial-scale investments. Tesi emphasizes that it does not compete with private investors but collaborates with them as a minority investor. While direct investments will see a significant increase, Tesi will continue to invest in funds, maintaining a balance of approximately 50% direct and 50% fund investments.
Since the financial crisis of 2007–2009, Finland has experienced slow economic growth, which has been a major contributor to the challenges facing government finances. To address this, the Finnish Prime Minister launched the Room for Growth project in September 2024. An expert working group gathered proposals from various stakeholders and compiled them into a final report which was submitted to the Prime Minister and discussed by the Government during its mid-term policy review in April 2025. Several proposals have since progressed into concrete legislative initiatives. The proposals specifically aim to tackle bottlenecks that hinder capital formation and growth funding.
A central element of this initiative is to enhance the attractiveness of Finnish fund structures for international investors. This includes reforming the current limited partnership model to make it more flexible and competitive by international standards. Another key focus is on eliminating double taxation for foreign investors in Finnish funds, which has previously deterred cross-border capital flows. Additionally, tax neutrality and clearer treatment of fund distributions are central concerns.
Fore more information, please contact: Jaakko Huhtala and Niko Markkanen