"Do ‘Retention of Title’ clauses protect the seller in Finnish bankruptcy proceedings?"

by Elina PESONEN and Pauliina TENHUNEN Finnish bankruptcy proceedings in general and Retention of Title clauses Finnish bankruptcy proceedings are governed by the Finnish Bankruptcy Act (20.2.2004/120). The Bankruptcy Act was totally renewed and modernised in 2004, undergoing major changes compared to the previous Bankruptcy Code. The new Bankruptcy Act also slightly changed the legal state governing the handling of Retention of Title clauses in bankruptcy proceedings. The purpose of bankruptcy proceedings is to liquidate the assets of the debtor for the benefit of the creditors and, ultimately, to share the surplus equally amongst the creditors whose claims rank equally. One of the leading principles in Finnish bankruptcy proceedings is the principle of ‘pari passu’, i.e. principle of creditors’ equality when distributing the assets from the bankruptcy estate. Retention of Title clauses are clauses by which the title to property to be sold is retained by the seller until the purchase price has been paid in full. This kind of a provision is an exception to the general rule provided in Finnish legislation in the Finnish Sale of Goods Act, according to which the title to property is transferred to the buyer at the same time as possession.