Formation of companies
It is possible to register the following legal persons in Estonia:
- Public limited company
- Private limited company
- Limited partnership
- General partnership
- Branch of foreign company
- Foundation
- Non-profit association
Private limited company and public limited company are the two more widely used forms of enterprise in Estonia.
A private limited company is a company with share capital of at least 40 000 kroons. The minimum nominal value of a share shall be 100 kroons. Shares may have the same or different nominal values. Each shareholder may have one share. If a shareholder acquires an additional share, the nominal value of the initial share shall increase accordingly.
A private limited company may be founded by one or several persons. A founder may be a natural person with active legal capacity or a legal person. In order to found a private limited company, the founders shall conclude a memorandum of association A contribution may be monetary or non-monetary and the founders shall pay for the shares in full before submission of a petition for entry of the private limited company in the commercial register.
A shareholder shall not be personally liable for the obligations of the private limited company. A private limited company shall be liable for performance of its obligations with all of its assets. A certificate shall not be issued for a share. The management board is a directing body of the private limited company which represents and directs the private limited company. The management board may have one member or several members. A member of the management board need not be a shareholder. A member of the management board must be a natural person with active legal capacity. The residence of at least one-half of the members of the management board must be in Estonia or any other EEA member country or Switzerland .
A private limited company shall have a supervisory board if the share capital is greater than 400 000 kroons and the management board of the private limited company has less than three members. A private limited company shall have an auditor if the share capital of the private limited company is greater than 400 000 kroons.
Necessary information for the foundation of a Private Limited Company
- Founders (name, address, registry code/personal identification code)
- In case of legal persons data regarding a representative (name, address, registry code/personal identification code)
- Members of the management board of the company to be founded (name, address registry code/personal identification code) and the restrictions on the right of representation (if they exist)
- Desired business name of the company
- Amount of share capital and its division among the shareholders
- Address
- Telecommunications numbers (e.g. telephone, facsimile, e-mail)
- Main activities
- The beginning and end of the financial year
If a founder is a foreign legal person then copies of the registration documents certified by an apostil need to be submitted to the notary.
Essential procedures in founding a Private Limited Company
The founding documents shall be signed at the notary’s office and all the founders (their representatives) and members of the management board shall be present. If the representatives of the founder have a joint right of representation then both representatives of the founder shall sign the memorandum of association.
The founders shall open a starting account in a bank onto which they shall pay the amount of share capital listed in the memorandum of association. Then the founders shall obtain from the bank ‘a bank notice concerning the payment of share capital to be submitted to the commercial register’ on which the total amount paid is shown.
If all the necessary documents are in order we shall pay the state fees due and submit the documents to the commercial register. The registration procedure usually takes about 2-3 weeks. If the business name is not deemed acceptable it takes at least another 2 weeks to eliminate the shortcoming and register it, whereas the necessary entry petition for making the changes needs to be signed once again at the notary’s office.
After the entry of the company in the commercial register, the starting account can be transferred into a current account, the company can apply for the value added tax identification number and take up business.
A public limited company is a limited company which has share capital divided into public limited company shares. Share capital shall be at least 400 000 kroons. The minimum nominal value of a share shall be ten kroons. If the nominal value of a share is greater than ten kroons, the nominal value shall be a multiple of ten kroons.
A public limited company shall be liable for performance of its obligations with all of its assets. A shareholder shall not be personally liable for the obligations of the public limited company.
A public limited company may be founded by one or several natural persons with active legal capacity or legal persons. In order to found a public limited company, the founders shall conclude a memorandum of association. If the public limited company has one founder, the memorandum of association shall be substituted by a foundation resolution. The shareholders shall pay for shares in full before the submission of a petition for entry of the public limited company in the commercial register. A contribution may be monetary or non-monetary. Monetary contributions shall be paid onto a starting account opened in the name of the public limited company being founded.
Non-monetary contributions shall be transferred to the public limited company according to an agreement.
Shares shall be entered in the Estonian Central Register of securities and upon foundation a notice from the Estonian Central Register of Securities concerning registration of the shares shall be submitted to the commercial register.
The directing bodies of the public limited company shall be the general meeting of shareholders, the management board and the supervisory board. The general meeting of shareholders is the highest directing body of a public limited company where shareholders shall exercise their rights. An annul general meeting shall be held once a year.
The supervisory board shall plan the activities of the public limited board, organize the management of the public limited board and supervise the activities of the management board. The supervisory board shall notify the general meeting of the results of a review. The members of the supervisory board shall be elected by the general meeting. The supervisory board shall have at least three members. A member of the supervisory board need not be a shareholder. A member of the supervisory board must be a natural person with active legal capacity. A member of the management board shall not be a member of the supervisory board.
The management board is a directing body of the public limited company which represents and directs the public limited company. The members of the management board shall be elected by the supervisory board. The management board may have one member (director) or several members. A member of the management board need not be a shareholder. A member of the management board must be a natural person with active legal capacity. The residence of at least one-half of the members of the management board must be in Estonia or any other EEA member country or Switzerland .
Necessary information for the foundation of a Public Limited Company
- Shareholders
- Business name
- Seat and address
- The amount of share capital (min. 400 000 kroons)
- The names, personal identification codes and residencies of the members of the management board
- The names, personal identification codes and residencies of the members of the supervisory board
- The name, personal identification number, residence and license number of the auditor
- Telecommunications numbers (telephone, facsimile, e-mail)
- Areas of activity
Registration of a branch of foreign company
A foreign company can offer goods or services in its own name permanently in Estonia only if it has entered a branch in the commercial register. A branch is not a legal person, but rather it operates in the name of its founder.
As opposed to the Estonian subsidiary of a non-resident company, a branch is liable to pay income tax only on the income generated from the Estonian sources.
Essential procedures in registering a branch of foreign company
The director of the branch shall submit a petition to the commercial register. The following shall be appended to the petition: documents of the foreign company (extract from a commercial register or a copy of a registration certificate, in cases provided by law – the articles of association) and an authorization document certifying the authority of the director of the branch or a copy of a resolution appointing the director. The above-listed documents must be certified by an apostil and accompanied by notarized Estonian translations.
The petition for entry of a branch in the commercial register and other petitions submitted to the commercial register shall be signed by the director of the branch. If a branch has several directors, several directors shall sign the petition if they only have the right to represent the branch jointly. The signing of the petition shall be conducted at the notary’s office.
It takes up to a month to register a branch, including the time allocated for making the translations and the appropriate entry in the commercial register.
