Clarifying bondholder representatives’ rights
The Government is proposing light regulation of the activities of bondholder representatives. The new Act would improve and accelerate various processes, particularly in restructuring proceedings and other transactions of listed companies, where the consent of bondholders is required.
The aims of the government proposal are to create a better functioning bond market, improve companies’ access to financing, diversify the financial markets and increase investor protection.
Representatives may institute proceedings and file for bankruptcy
A bondholder representative is a company that represents investors in dealings with issuers, i.e. businesses that are seeking finance. The company can be, for instance, an investment service provider or a company set up for this particular purpose.
By agreement, a representative can be given the right to
- institute proceedings on behalf of bondholders against an issuer or third parties
- exercise in legal proceedings the bondholders’ right to be heard without separately obtaining authorisation
- apply for an issuer to be declared bankrupt
- represent bondholders and exercise the right to be heard on their behalf in issuer bankruptcy
- manage collateral given for bonds for the benefit of bondholders.
Financial Supervisory Authority responsible for registration and supervision
Under the government proposal, if a prospectus is published for the bond then only companies entered in a specified public register may act as bondholder representatives. The same applies to cases where bond units are traded in a regulated market or in a multilateral trading system. In other cases, unregistered companies can also act as representatives.
The Financial Supervisory Authority is the authority responsible for registration and supervision. The prerequisites for registration would include the need for the company to be reliable and to have a sufficient knowledge of the bond market. This would ensure a sufficient threshold for entry to the market and therefore enhance investor confidence in the activities of representatives.
The proposal is part of the Government’s action plan for implementing the key projects and reforms of its strategic Government Programme (strengthening competitiveness by improving conditions for business and entrepreneurship; strengthening the funding and equity capital position of businesses).
The intention is that the new Act will enter into force in the autumn. In addition, eight other acts would require technical and other amendments.
The government proposal is published under proposals and decisions.
Experts: Development of bond markets would support growth and employment (press release 27 January)
Ilkka Harju, Legislative Counsellor, tel. +358 2955 30215, ilkka.harju(at)vm.fi
Urpo Hautala, Financial Counsellor, tel. +358 2955 30276, urpo.hautala(at)vm.fi