Estonia company formation and registration

According to the Estonian Commercial Code there are six forms of business entities in the Republic of Estonia. Foreign investors have equal rights and obligations with local entrepreneurs. All foreign investors may establish a company in the Republic of Estonia in the same way as local investors; no special restrictions are made.

Prior to establishing an enterprise it is essential to assess and choose the type of an undertaking which is the most appropriate for you in legal and economic terms. This choice will affect not only the amount of necessary equity capital, but also the legal status of the enterprise and other business related issues.

The most popular types of legal entity being set up by foreigners in Estonia are the so called private limited liability company (OÜ) and the public limited liability company (AS).

• private limited liability company (OÜ)
• public limited liability company (AS) or joint stock company
• general partnership (TÜ) and limited partnership (UÜ)
• sole proprietorship (FIE)
• branch of foreign company

It is mandatory to register the company with the Commercial Register of Estonia in order to commence business and operate in Estonia.

Representation

Legal Baltic is capable to draft all the necessary incorporation documents and represent your interests before the Commercial Register.

Private limited liability company (OÜ)

Equity capital

– when establishing a private limited liability company, the minimum share capital is EUR 2500. The share capital contribution may be done by three different ways:

• monetary contribution (100% in cash). Disadvantage is your “money frozen” for 1 week.
• 100% non-monetary contribution. A non-monetary contribution may be a whatsoever property or pecuniary right appraisable in money and transferable to the public limited company to which a claim may be subjected. Appraisal by an auditor is required.
• more than one-half (EUR 1251) in cash and the remaining (EUR 1249) by a non-monetary contribution. In such a case no auditor’s appraisal is required.

The private limited liability company in Estonia may not sell its shares to public.

Founder – one or more persons can be the founder/s or shareholder/s of a private limited liability company and they can be both natural persons and legal entities. The founder may be a resident or non-resident of the Republic of Estonia.

Incorporation documents shall be signed before a notary. All founders and Board members are required to be present.

Status – a private limited liability company is considered a legal entity.

Liability – the founder/s or shareholder/s of a private limited liability company is not personally liable for the obligations of the company. The shareholder/s of company is liable for the company's debts and obligations to the extent of each one's contribution. A private limited liability company is liable for the performance of its obligations with all of its assets.

Management body – a company must have a management board which is a directing body of the private limited company that represents and directs the private limited company.
The board consists of one or more directors; directors can be only natural persons. A member of the management board need not be a shareholder. At least 50% of board members of the management board must be residents of the European Union, Switzerland, Norway, Iceland or Liechtenstein.
A private limited company must have a supervisory board, if the share capital is greater than EUR 25,000 the management board has less than three members, or if prescribed by the articles of association of the private limited company.

Accounting - monthly accounting is necessary in case the company has a VAT ID or regular salary payments. Otherwise it is sufficient to submit annual reports once a year, within 6 months after the end of the fiscal year at the latest.

Audit - always be required if the registered share capital exceeds EUR 25 000, otherwise it is required if any two of the below conditions are met:

• annual turnover exceeds about EUR 650 000;
• balance sheet total exceeds EUR 330 000;
• number of employees is 10 or more.

Public limited liability company (AS) or joint stock company

Equity capital – the minimum share capital is EUR 25 000. The equity capital contribution can take the form of both cash and property contribution. The capital is divided into shares, which may be traded or offered for sale publicly. Shares must be registered and entered in the Estonian Central Register of Securities. The rights attached to registered shares belong to the person who is entered as the shareholder in the share register.

Founder – one or more persons can be the founder/s or shareholder/s of a public limited liability company, and they can be both natural persons and legal entities. The founder may be a resident or non-resident of the Republic of Estonia.

Status – a public limited liability company is considered a legal entity. Liability – the founder/s or shareholder/s of a public limited liability company is not personally liable for the obligations of the company. A public limited liability company is liable for the performance of its obligations with all of its assets.

Management body – a company must have a management board and a supervisory board. The management board is a directing body of the public limited company that represents and directs the public limited company. A member of the management board need not be a shareholder. The board consists of one or more directors; director can be only natural person. A member of the supervisory board must not be a member of the management board. At least 50% of board members of the management board must be residents of the European Union, Switzerland, Norway, Iceland or Liechtenstein.

The supervisory board must plan the activities of the public limited company, organise the management of the public limited company and supervise the activities of the management board. The supervisory board must notify the general meeting of the results of a review. The supervisory board must give orders to the management board for organisation of the management of the public limited company. The supervisory board must have three members unless the Articles of Association prescribe a greater number of members.

Audit - a company must appoint an auditor.

General partnership (TU) or limited partnership (UU)

There are two type of partnership in the Republic of Estonia. The main difference is range of liability.

Equity capital – there are no a minimum capital requirement. As in a general partnership, the members of a limited partnership divide the profit in correspondence with each one's contribution.

Founder –two or more persons or legal entities that join for business purpose.

Status – both partnerships are considered a legal entity.

Liability – in case of General partnership the partners are jointly and severally liable for the partnerships' debts and obligations, and as general partners they manage the company entirely.
At limited partnership one member is a general partner being in charge with the partnership's management, instead bearing unlimited liability for the company's losses and at least one limited partner who is liable to the extent of his contribution, but does not play any role in the company's management.

For both general partnerships and limited partnerships, there needs to be an agreement between the partners.

Sole proprietorship (FIE)

A sole proprietor is a form of business that is best suited to those who are going into business alone or with their family.

Equity capital – there are no a minimum capital requirement.

Founder – one or more persons can be the founder/-s of a sole proprietorship and they may be a resident or non-resident of the Republic of Estonia.

Liability – sole proprietorship have unlimited liability for debts incurred in business.

Branch of a foreign company

A branch is an independent unit or part of a foreign undertaking conducting business in the territory of the Republic of Estonia on behalf of the foreign undertaking. A branch is not a separate legal person and the foreign company will be responsible for the branch’s activities and liable for its obligations

Management body – a company has to appoint a director or directors for the branch. The place of residence of at least one of the directors must be residents of the European Union, Switzerland, Norway, Iceland or Liechtenstein.

If more than one director has been appointed for the branch, the branch may generally be represented by any one of them.