Changes to Estonian Commercial Code in 2023 & 2024
The Estonian business law changes you should know about!
You’ll be glad you’re reading this because we have some great news for you! Running a business in Estonia is about to get even easier with some major changes to Estonian commercial code coming into force from 1st February, 2023 and later on in 2024! The not so good news is that all the Estonian business law changes are described in a lengthy 46-page document in Estonian. But that’s what we are here for: we have done the hard work and reviewed it for you! You can thank us later, for now keep reading as we reveal the main legislative changes that will affect e-Residents with limited liability companies (OÜ) in Estonia. Here we go…!
The amendments to The Commerical Register Act will come into force in three stages:• The general compliance deadline for the Commerical Register Act will come into force on 1 February 2023.• From 1 September 2023, any amendments relating to a list of company shareholders and registry must be submitted to the Commercial Register.• From 1 March 2024, you will be able to register your business name as well as have the opportunity to apply for an entry in the register on a specific date.
1. Start a business with a minimum share capital of just 1 euro cent
Yes you read it right…say goodbye to the minimum share capital of 2500 euros! From the 1st of February, entrepreneurs will be able to start a business with a minimum share capital of just 1 euro cent! This welcomed change will bring entrepreneurs more flexibility to decide what amount they wish to start a business with. During the incorporation phase, the exact amount of share capital and contribution paid will need to be disclosed.
NOTE: e-Residents with a company prior to 1st February and who are yet to pay their share capital will need to follow the old Estonian business law which requires a minimum share capital of 2500 EUR.
Also, it’s worth stressing that if your share capital is under 2500 euros then the owner of the company will still be personally liable. In addition, if you are planning to get a loan from a bank or investor then companies who have paid in a small amount (between 10-100 euros for example) will be deemed to be less trustworthy as the credibility around their financial capabilities will be questioned, so just bear this in mind.
2. If your annual report is late…
Nobody likes a late submission! If your annual report is not submitted on time, then as part of the changes to Estonian business laws, Estonian OÜ’s will be issued with a fine without warning and can face being issued with multiple fines until the annual report is submitted.
It’s not all bad, because with Silva Hunt, we guarantee that you will be in safe hands as not only do we submit the annual reports on time, but we also make it our responsibility to remind you when accounting documents are due. So relax, we are all in it together as a team with these new Estonian Commercial Code guidelines!
3. Your legal address will no longer be restricted to Estonia in 2023
From 2023, you can choose a home address located outside of Estonia to be your legal address! Whilst this major change does help remove potential barriers for Estonian OÜ’s, it’s crucial to note that you will still be required to have a representative (contact person) in Estonia if you do decide to opt for a legal address outside of Estonia. Hopefully, you’ve got friends in Estonia because your chosen representative located in the country will need to be the first point of contact for the Estonian government and will be first in receipt of any procedural documents or letters of intent. Failure to respond to the Estonian government in a timely manner could result in missing important documents, or worse, closure of your business, so be careful! If you do not have a representative in Estonia, then you will be issued with a deadline to appoint a chosen representative. If you fail to meet the deadline, then an automatic warning of deletion from the register will be issued. Basically, you need a representative in Estonia or you risk losing your business!
Does it still make sense to have OÜ legal address in Estonia?
Yes absolutely! This is especially important if you wish to build a solid foundation in Estonia. By doing so, OÜ’s will have access to more opportunities including the option to open an Estonian bank account as it will help to demonstrate clear evidence of your connection to Estonia. You may also simply wish to choose a legal address in Estonia to simply avoid having a permanent establishment elsewhere.
4. Reserve your business name from 2024
Effective from 2024, you can reserve a business name for up to 6 months at a cost of only 150 euros.
5. The process of liquidation has been made easier
If you have an inactive company without any transactions and revenue you can easily liquidate the company by simply notifying the register. Even as a foreigner, you will have the right to liquidate the company, but as you will be required to submit the documents in Estonian, we highly recommend that you hire an expert who knows both the correct process and the Estonian language.
NOTE: If you have made any transactions and conducted business through the company and you wish to liquidate the company then the same rules will apply as before. Click here to refresh yourself of these rules.
Disclaimer: Since the changes to Estonian Commercial Code are new and there are still some internal disputes, in particular, on how to interpret the law regarding the legal address aspects. Do not consider this article as a legal advice or a substitute to a legal counselling. As these aspects are being clarified, changes to interpretation may occur. We will update you on any changes, if any.
Get in touch with us, if you have specific questions regarding the changes to Estonian Commercial Code and how it affects your business. Our legal council can help you clarify these aspects. If you are subscribed to our active company package, this service is free for you (2h/per month).