Changes in the Estonian Commercial Code and new Commercial Register Act

Estonian Commercial Code has been amended and first amendments will enter into force on 1st February 2023.

CONTACT PERSON (becoming effective 01.02.2023)

• When appointing a contact person, the company must also set a term for contact person’s powers.

• The contact person's address is considered the company's address, if not stated otherwise

• Branches do not need to designate a contact person

• Existing companies have the obligation to specify the term of the contact person in the register until 30.04.2023 (based on the decision of the body + application to the registry). There is no information yet whether the state fee will apply or not in case of this change (if the company already has a contact person and wants to set the deadline for its term).

SHARE CAPITAL (becoming effective 01.02.2023)

• Disappearance of the minimum capital requirement (can be established even with 1 EUR or even 1 cent share capital).

• In case of bankruptcy, the liability of the owners is still up to EUR 2,500 for bankruptcy proceeding related costs (even if the company is established with a smaller share capital).

• It is no longer possible to establish a company without a capital contribution. Existing companies do not have new obligations in this regard (there is no obligation to pay in their capital by a certain deadline, in case their company was establishment before 01.02.2023 without the capital contribution).

• Existing companies whose capital size is determined according to the old requirements (e.g. EUR 2,500) and want to reduce the share capital, although the share capital is unpaid, they must first pay in the capital in order to be able to reduce the capital.

• The bank's notification must be submitted for a deposit of at least EUR 50,000. For smaller share capital payments, it is sufficient to submit the board’s confirmation that the share capital has been paid into the company's bank account.

Can the board then write that the capital has been paid into the cash register? As there are no specifications in the law regarding this, then payments to a bank account or cash register both should be suitable.

It is not yet known whether anyone will check whether the company has an account overall or not (since a bank notification is not required for capital payments less than EUR 50,000).

• The net assets (netovara) must be at least half of the share capital (for example, if the share capital is EUR 1, then the net assets are at least EUR 0,50).

If the company has a share capital of 2,500 EUR, then from 01.02.2023 the net assets no longer have to be 2,500 EUR, but instead 1,250 EUR.

• If the share capital is more than 25,000 EUR and the value of the non-monetary contribution is more than 25,000 EUR, an audit by an auditor is required the non-monetary contribution of the share capital.

KEEPING THE LIST OF SHAREHOLDERS (becoming effective 01.09.2023)

• The obligation to keep the list of shareholders is transferred from the company board to the commercial register.

• If the company has waived the formal requirements for the transfer of a share (share capital over EUR 10,000 and a notary is not required for the transfer of a share), the list of shareholders is kept by the board.

• The names and personal identification codes/registry codes of the shareholders, par value of the share, and information on pledging of the share are entered into the list of shareholders.

STATEMENT FOR MAKING AN ENTRY WITH A FUTURE DATE (becoming effective 01.03.2024)

• For a valid reason, an application may be requested to be processed on a specific date (merger, division, and other actions related to changes in the company's structure).

For example, you submit an application in January 2023 and request to make an entry as of June 2023.

The date of the requested entry can be up to 6 months from the submission of the entry application.

COMPANY NAME RESERVATION (becoming effective 01.03.2024)

• Reservation of the company name for up to 6 months (when booking, the activity field EMTAK code and company form, e.g. OÜ, AS, etc. must also be indicated)

• One person can reserve only 1 company name

• The reservation is automatically deleted if the company is not established under the booked name within 6 months

• If someone else wants to use the reserved name, it is allowed to do so based on the consent of the name booker

MISCELLANEOUS

• In case of liquidation, two final balance sheet documents “final balance sheet” and “asset distribution plan” will be replaced with one document named “final liquidation report”.

• If the company wants to restructure (merger, division, etc.), the commercial register will refuse to make an entry in case any annual reports have not been submitted.

• In case the commercial register has difficulties in contacting the company (for example, an error reply to an e-mail or a letter sent by registered mail does not reach the recipient), then a public note about this is made in the registry card of the company.

• If the annual report is not submitted, the registry can issue a fine without a warning order (currently they issue a warning ruling and then they issue a fine).

Fines can also be imposed on board members and shareholders.

The registry has a lot of discretion (size of the fine, etc.) in this matter and can issue as many fines as they find appropriate.

• The registry has the right to delete the company if the annual report has not been submitted and 3 months have passed from the deadline of the submission.

• The board of a company can submit annual reports without the approval of shareholders.

• If a company does not fulfil the obligation to appoint a contact person, the registry can impose a fine and eventually delete the company.

• If the company's board and shareholders confirm that they have not started any operations since the day of establishing the company, then the company can request to be deleted from the register.

The company should state in the application the reason for the deletion (e.g. the company turned out to be not useful and the activity has not started and never will).

• Groups: the parent undertaking has the right to submit instructions to its subsidiary in written form, which the board of the subsidiary company must follow.

The group's interest must be recognizable and the subsidiary must not become insolvent as a result of the transaction (otherwise the parent undertaking is liable for the liabilities incurred).

• In case of a compulsory dissolution of a company, there will be a possibility of restoring the liquidation proceeding.

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