Borenius’ Tech Blog – Share Swap Reform: Opening the Door to International Funding

Reformed Finnish share swap rules came into effect at the start of 2026. For growth companies eyeing international capital, the changes were long overdue. The purpose of the reform was to facilitate more flexible reorganisation of business operations and enable access to larger capital markets, especially in the US and the UK. Consequently, a share swap can now be carried out with parties located outside of the European Economic Area (EEA), enabling so-called US flips to be executed more efficiently. This is a meaningful development for Finnish growth companies seeking capital outside the EEA. What does this mean in practice?

A US flip is a transaction in which the shareholders of a Finnish company swap their shares for shares in a newly incorporated US company, effectively relocating the parent company to the US. When executed correctly, the US flip enables Finnish investors to “roll” their ownership in the Finnish entity into the new US company, deferring capital gains taxation to a later exit event. The resulting corporate structure with a US parent company is important, as US venture capital and private equity funds often prefer to invest through US corporate structures given their familiarity with the US corporate law framework, in particular Delaware’s, whose corporate law is developed, comprehensive, and well-regarded, offering companies predictability and legal certainty. A US flip can also lay the groundwork for a future listing on a US stock exchange. Establishing a US-parented structure early, therefore, not only facilitates the raising of private capital but also positions the company for the US capital markets further down the line. It should be noted that although the US is commercially the most typical “flip destination”, the new share swap rules enable swaps equally to most other commercially relevant non-EEA countries, such as the UK.

Prior to the reform, Finnish share swap rules did not apply when the acquiring company was located outside the EEA. The rules therefore only permitted tax-neutral swaps with companies resident within the EEA, and a US flip could not be executed via share swap. In practice, a tax-neutral US flip could previously be achieved through more burdensome and time-consuming steps, typically involving a merger process. As many EU and EEA countries already permit tax-neutral share swaps with non-EEA companies, Finnish companies were put in a disadvantageous position compared to their European peers when it came to accessing foreign funding, constraining their growth prospects.

After the share swap reform, the flip can be executed without triggering immediate tax consequences for shareholders, provided that the technical requirements are met. For example, a US company can acquire a Finnish company’s shares by way of a share swap, issuing its own shares as consideration, with capital gains taxation of the Finnish company’s shareholders deferred until the newly issued US shares are ultimately sold, e.g. in connection with a later exit or an IPO.

Share swaps with non-EEA companies are permitted when:
(1) the acquiring company or the target company is a resident in a state with which Finland has a tax treaty in force;
(2) both companies are subject to tax on their income at a rate of at least ten per cent without the possibility of election or exemption; and
(3) both companies correspond in legal form to a Finnish limited liability company.

Both US- and UK-based buyers generally meet all three conditions: Finland has tax treaties with both countries, US and UK corporations pay sufficient corporate income tax, and local limited liability companies are equivalent in form to a Finnish limited liability company.

For a Finnish growth company considering a US flip, the path is now considerably cleaner. The transaction can be structured directly, without intermediate steps or burdensome merger proceedings, without triggering immediate capital gains tax consequences for the shareholders, and on a timeline that reflects the expectations of international investors. The reform places Finnish companies on a level playing field with their counterparts in jurisdictions that have long permitted tax-neutral share swaps with non-EEA companies and removes a structural disadvantage that has constrained Finnish companies for years.

Also key limitations still remain, as the Finnish tax deferral is clawed back in cases such as the selling shareholder relocating outside the EEA within five years of the swap, e.g. to work in the new local organisation of the parent company. Diligent planning is hence required also concerning the time following the swap itself.

We routinely plan and execute share swap and US flip arrangements for our clients and would be happy to discuss what the new rules mean for your company and how to optimise the legal structure in light of your specific circumstances.