Entrepreneur’s business ID unexpectedly cancelled

Limousine business owner Lauri Kovanen is amazed that the Patents and Registration Office did not verify that its letters had reached the addressee.

Lauri Kovanen, a from Helsinki, was on holiday in Spain in March when he received an email from the Patent and Registration Office (PRH).

The email said that Kovanen’s company had lost its business ID, meaning it was no longer able to operate. The PRH had removed the company from the trade register.

“I immediately rang the PRH customer service, who told me that they had sent two letters about unfiled financial statements,” Kovanen tells Yrittajat.fi.

This information came too late, as the company had already been entered into a “removal procedure”, which we have previously reported on.

By law, a company must submit a financial statement to the trade register within eight months of the end of the financial year. If the company files more than a year late, it can risk going into the removal procedure. In the last removal procedure round, the PRH sent companies 7,065 requests to file financial statements.

Accountants’ negligence at fault

The information was a total surprise for Kovanen. He soon learnt that the reason was his company’s accounting firm’s negligence.

“We switched accountants a few years ago, which in retrospect turned out to be a bad choice. The situation escalated during Covid, when they didn’t do our books or filings to the PRH. As a result, we went over things with the accounting firm, and in the autumn of last year everything was supposed to be in order,” he says.

Everything was not in order: when Kovanen contacted his accountant’s supervisor after the email from the PRH, he learnt that the accountant had forgotten to make the necessary filing to the PRH.

“After that, it took the accounting firm half an hour to make the filing, but by then my business ID had already been struck off, and the PRH couldn’t acknowledge the filing.”

Kovanen wonders whether the accountant’s omission might have been affected by the fact that he had told the firm he would be changing accountants at the end of the financial year. However, that makes no difference to the PRH’s decision.

Concern about the future

The entrepreneur’s only recourse was to lodge a complaint with the Administrative Court. The PRH did not make any concessions; it said it was bound by the Limited Liability Companies Act. The legal fees of Kovanen’s Administrative Court case have so far run to €15,000.

“We’ve submitted a complaint and a few requests for investigation to the Administrative Court, and now we’re waiting for a decision. We haven’t heard anything since July,” he says.

Fortunately for Kovanen, the deregistered business ID belongs to a group, which manages two companies which still operate. Of these, two employ around a hundred employees and own around forty cars.

“The situation is very tricky and painful, because the service group running the business is very well-known in the Helsinki region. Fortunately, this group’s business is not affected at all.”

Kovanen still owns the shares in the deregistered holding company, where he is the sole owner. Because trading has ceased, he is in effect unemployed. It has stopped paying salaries and dividends, nor can it enter into contracts or sell its property. For the time being, the company has been struck off the VAT register, making trading impossible.

“The biggest headache here is the wait for something to happen. If they don’t give me back my business ID, nobody seems to know what happens then. That raises the question of how I was supposed to know. In spite of everything, I’d just like to keep running my business. I don’t think that’s too much to ask and would only need a few minutes of civil servants’ time.”

SY expert: unreasonable punishment

Before the last reform of the trade register, the PRH would restore companies to the trade register if they filed their financial statements afterwards.

Tiina Toivonen, Legal Affairs Manager at Suomen Yrittäjät, the Finnish SME association, hopes the practice will change.

“This year, the register authority’s practice has changed, so they generally don’t restore companies to the register, even if the issue was human error or a delay in the post. This cannot be considered a reasonable punishment, as when a company is struck off the trade register, it cannot do business any longer without establishing a new company.

“We’d like to see the PRH consider changing its procedures to avoid unreasonable situations. This country can’t afford to lose a single going concern or job because of human, and therefore minor, errors,” Toivonen says. She says that the Limited Liability Company Act and Trade Register Act may need to be amended to resolve the situation.

“If a need for change is observed, it should be done quickly.”

Where did the letters go?

Lauri Kovanen is amazed by the provision in the Limited Liability Company Act that prevents the PRH from restoring a business ID.

“It would place nobody at a disadvantage. Instead, it would only be positive, once the errors had been remedied. Now, it feels like I, as a business owner, have been sacrificed to the inherent faults of the Limited Liability Company Act. And I’m clearly not the only one. I’m amazed by the inequality between companies and business owners, because some companies with years of unfiled financial statements have not been removed from the register, even though their finances are in a bad state, unlike ours.”

The reason for the PRH’s letters not reaching Kovanen are still a mystery to him.

“If I had got them, you wouldn’t be interviewing me. They say they’d posted them to our office. We’ve been getting post there as usual, but we haven’t seen those letters. I’m stunned that the law doesn’t require the PRH to verify that the information has reached the recipient. They say they didn’t use any of the many tools they have to verify whether the information has got through because they lack resources. So they can flush a company down the toilet without the owner knowing anything about it.”

In spite of everything, Kovanen admits that he as the business owner bears the ultimate responsibility for the deregistration of his business ID. Nevertheless, he would like to see society wanting to retain a functional, taxpaying company.

“Here, they wanted to forcibly close down a company that regularly pays taxes and shift responsibility to the bureaucracy of the legal system by claiming there weren’t enough resources. It’s concerning to see the flimsy grounds they use to make such radical decisions about people’s livelihood, life work and property just because of missing filings. It feels like the bureaucrats have elevated themselves above the citizens’ interest.”

PRH removal procedure under way

In its latest bulletin, the PRH urges businesses to file their financial statements by 11 September 2024 to avoid removal from the trade register.

The PRH says that every limited company and cooperative must file its financial statements with the trade register for every financial year, including when trading is suspended or has ceased. Approximately 4,700 limited companies and cooperatives are now in the third removal procedure of 2024. These companies have failed to file financial statements with the trade register in over a year since the end of the financial year. The PRH has made a note on these companies’ entries in the trade register reflecting the request to submit financial statements to the trade register by 11 September 2024. The non-compliant companies will be removed from the register in October.

“It’s worth being aware that the removal procedure lasts for several months. “A company is obliged to arrange its affairs so it responds to official letters in time,” Marko Peltonen, unit chief at the PRH, previously commented to Yrittajat.fi.

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