A special audit can be used to investigate misconduct that has occurred within a company, on the basis of which a shareholder may bring a claim for damages against the company’s management, majority shareholders, or the auditor.
A special audit is a procedure provided for in the Finnish Limited Liability Companies Act, intended as a protective measure for minority shareholders. A special audit cannot be used to resolve disputes between shareholders or disagreements related to a shareholders’ agreement; such matters must be resolved as private civil disputes. Similarly, a special audit cannot be used to determine whether resolutions passed at a general meeting are invalid—any such concerns must be brought before a court for an assessment.
The process of arranging a special audit must first be proposed at a general meeting. If the majority of shareholders oppose the proposal, a shareholder may then apply to the Regional State Administrative Agency to initiate the special audit. A special audit provides an independent and impartial assessment of the matters under review.
Organizing an audit requires compelling reasons
The Regional State Administrative Agency must approve an application for a special audit if there are compelling reasons for conducting such an audit. The existence of compelling reasons is generally assessed based on criteria related to appropriateness, the seriousness and financial significance of the alleged misconduct, and the availability of supporting evidence.
The expediency of a special audit requires that, in the given situation, a special audit is the most suitable means of determining whether suspected misconduct has occurred in the company. If the matter can be clarified by other means, such as through a shareholder’s right to request information, it typically does not constitute a compelling reason as defined by law.
With regard to the seriousness of the misconduct, it must be assessed how significantly the alleged actions affect the legal protection of minority shareholders. The legislator did not intend to provide legal remedies for minor violations. In addition, the suspected misconduct must have financial relevance.
Beyond expediency, seriousness, and financial significance, the applicant must also present at least some evidence of the alleged misconduct they wish to have investigated through the special audit.
A special audit may also serve as a means of exerting pressure on the company’s management, as the mere threat of a special audit can help a shareholder achieve desired outcomes—even if the audit is never actually conducted.
Opposing a special audit may be in the company’s interest, as the company is responsible for the costs associated with the audit. In addition to financial costs, a special audit consumes the time and mental resources of the company, its management, and potentially other personnel.
The staff at AASA-LAW have experience handling disputes between shareholders and companies. These types of assignments have been managed by Simo Ellilä and Mari Rouhiainen.