Browsing by Author "Fallström, Ben"

A bond arrangement or a bond issuance can be described as an arrangement where mainly professional investors offer financing to an issuer in exchange for transferable debt securities. Due to the good liquidity of the bonds on the secondary market there are great administrational risks related to them. As a solution, a bondholders’ agent is used to minimise the judicial risks relating to the administration of the bonds and to lower the transaction costs, as well as to increase the legal protection of the investors. From an investors’ point-of-view, the use of a bondholders’ agent is aimed especially at facilitating the monitoring of the compliance of the terms and conditions, as well as unifying acceleration and enforcement actions, in addition to increasing equal treatment and negotiation between the issuer and the bondholders. Then again, the use of a bondholders’ agent prevents opportunistic behaviour of individual bondholders and therefore enables smoother amendment of the terms and conditions. The bondholders’ agent has been completely unregulated on both domestic and EU level. Additionally, there is no domestic case law regarding the bondholders’ agent. Hence, the capacity of the bondholders’ agent has rested mainly on established contract practises and related general doctrine. The absence of regulation and the unclear legal status weakens the legal safety of the players on the securities market when using a bondholders’ agent. It is possible to increase the market players’ confidence in the functionality of the bond market by clarifying the current legal status. The purpose of this thesis is to study and systematise judicial questions relating to the irrevocability of the agency according to the current legislation in Finland. The principal research questions are finding out whether a single bondholder is permitted to terminate the agency relationship and whether bondholders are eligible to use their bondholders’ rights despite the prevailing agency relationship. The current legal status is systematised in this thesis by fitting the bondholders’ agent into existing forms of representation. The applicability of current doctrines regarding the termination of an agency relationship to the bondholders’ agent faces some system internal problems. Contractual restriction of someone’s competence is related to restricting someone’s legal capacity and seen as inappropriate use of one’s freedom of contract. It is regarded as incompatible with the principles of Finnish civil law because it constitutes an avoidance of legal institutions covered by imperative legislation. Some aspects affecting the scope of the parties’ freedom of contract is displayed in this thesis e.g. restrictions imposed by imperative legislation, the weight of different objects of legal protection and internal conflicts regarding the general doctrines. As a result of the assessment the collective interests of the bondholders and the market players’ confidence in the functionality of the bond market were found to be supporting a deviation of the general principles regarding the termination of an agency relationship. In addition, the representation is seen as such a material part of the complete arrangement that permitting a single bondholder to terminate the agency would undermine the purpose of the whole arrangement. During the writing of this thesis, a legislative proposal regarding bondholders’ agents has been prepared by the Finnish Ministry of Finance. The effects of the special enactment to the current legal status have been taken into consideration as applicable in the thesis. However, the new legislation is non-mandatory, which will put emphasis on the present conditions.