Directors’ Liability in Finnish Capital Investment Business

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Title: Directors’ Liability in Finnish Capital Investment Business
Author: Hiidenhovi, Miika
Contributor: University of Helsinki, Faculty of Law
Publisher: Helsingin yliopisto
Date: 2019
Thesis level: master's thesis
Abstract: The thesis concerns issues in relation to director’s liability in Finnish capital investment business and how the Finnish legislation framework governs issues in relation to it. The research shall be carried out especially from the director’s practical point of view and how they should address the business while they are at the office. The thesis also researches the question of why the rules and regulations in relation to directors’ liability are important and what has been the legislator intention behind them. The main research method during the essay shall be jurisprudence. Although the majority of the research shall be done in relation to Finnish legislation, there shall also be references to made EU legislation and therefore the thesis also has a comparative element in it. The thesis shall concern two main types of legal capital investment companies: venture capital and private equity. Thesis shall make necessary references to venture capital and private equity businesses when necessary, but otherwise they are seen as equals. Private equity and venture capital companies were selected to be part of the thesis, because they have adapted a similar structure in their investments and company structures; meaning that the investments are usually carried through a limited partnership, in which the investment are managed by capital investment company which serves as a general partner and the investors the limited partnership as limited partners. The limited liability company aspect of the thesis shall be inspected especially in the light of Companies Act and how the provisions of the Act are affecting the business of capital investing and how the directors of the capital investment companies and investment funds must take account the legislation aspect in their business. Thesis shall also focus on issues in relation management of limited liability companies and limited partnerships from the general legislative point of view. The general examination of the both legal entities is important, as of the detailed structure of the capital investment business which combines two separate legal entities; limited liability company and limited partnership respectively. Hence, it is also important to also establish who shall be considered to be the director, of the capital investment organization and thus bare the liability for potential mismanagements of the capital investing. The directors’ liability in case of limited liability companies shall be examined in the light of duty of care, duty of loyalty and duty to act as defined in Companies Act. In case of limited partnerships, the examination of the directors’ liability shall focus mainly on the duties of general partners as set out in Partnership Act. The issues in relation capital investment also involves specific legislation such Act on Alternative Investment Fund Managers. The specific legislation is mainly based on EU legislation and therefore the research shall compare issues in relation EU national legislation. That been said, the specific legislation has also affected a lot in to the national legislation and how for example the issues in relation investor protection has been taken account. The research shall also take account the penal provision that the national legislation has imposed for mismanagement of the company and investment fund. The conclusion of thesis then was that one underlying principle in all legislation in relation to capital investment business is the fundamental principle of the investor protection that aims to protect the party who has an information disadvantage and have no real power to exercise control over invested capital during the lifespan of capital investment cycle. During the thesis it was established that the legal entity of limited liability company, which separates its owners from the legal entity itself, was created out of necessity to collect outside capital while protecting the investors who would provide such investment but who did not have resources to participate in to day-to-day operations of a company. The same thing can then be argued to be with the rules and regulations in relation to capital investing. Capital investment companies and the investment funds they are operating require outside capital. However, the investors then logically want to protect their investment. Although there can also be contractual obligations in place, it can be still argued that the best form of investor protection is achieved with the legislative frameworks that set out the standards for directors’ liability that they must follow.
Discipline: Kauppaoikeus
Commercial law

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