Estonia has adopted a new Business Register Law

Estonia is a Baltic country that strives to have an impeccable and transparent reputation. Therefore, the jurisdiction strictly complies with all international standards and regularly improves its legislation. Interestingly, introducing changes to corporate legislation, the country is still trying to preserve its economic attractiveness for business and investment as much as possible.

Not an exception is the recently adopted Law on the Commercial Register, which makes adjustments to the conditions for the creation and operation of companies. This Law enters into force on February 1, 2023 and contains both tightening and relaxation for companies. Conventionally, innovations can be divided into several blocks.

Introduction of the deadline for appointing a company contact person in Estonia

Now all appointed contact persons of companies must have a fixed term of office, which will be displayed in the Commercial Register. After the expiration of the term of office, it will be possible to extend it, which will also need to be notified to the Register. In case of non-renewal, the contact person’s data will be deleted automatically.

The legislator has set a deadline from February 1 to April 30, 2023 for assigning a term of office to all current contact persons in Estonia.

There are 2 options to assign a contact person’s term of office:

• Through the Commercial Register using the e-resident card.
• Through a power of attorney, if there is no e-resident card.

Introduction of new penalties for failure to file a financial report

The Registrar will impose penalties for failure to submit the annual business report without warning. The amount of the fine can be up to 3200 EUR.

When assigning the amount of the fine, it will be taken into account: how many times the report is not submitted on time and how much time has passed since the last day of the report submission. The penalty can be applied more than once, until the company fulfills the obligation to file an annual report.

The fine will be assigned to the board of the company, and in its absence – to the shareholders.

Forced liquidation for non-compliance with reporting requirements and contact person

The Keeper of the Register may, in a judicial proceeding, forcibly terminate the activity or liquidate the company, if the identified shortcomings are not eliminated within the prescribed period:

• No required contact person assigned. At least 1-month notice.
• The annual economic report has not been submitted. At least 3 months’ notice.

Opening the Register of beneficiaries of the company

The current register of beneficiaries of companies will now be open. In this regard, each company will have to double-check the data of its beneficiaries, the correct spelling of the name and surname, the size of the share/shares.

The legislator has set a deadline for reconciliation of current data – until 08/31/2024.

You can check the data on the beneficiaries:

• On the Commercial Register portal using the e-resident card. This check can be carried out by a member of the board of the company.
• In an extract from the B-Card register, if there is no e-resident card.

Changes for new companies

Despite some tightening of requirements, the Law contains some relaxations. Thus, for new companies, the legislator cancels the requirement for a minimum share capital of 2500 EUR, and the minimum nominal value of a share is now 1 cent. Thus, it becomes possible to create a company in Estonia with a capital of 1 EUR.

But, from 01.02.2023, when registering a new company in Estonia, it should be taken into account that the founders must pay the full amount for their share before submitting an application for entering the partnership into the register. Thus, the establishment of a company without the contribution of capital will no longer be available. Money from the deposit/starter account should be transferred to the company’s regular account within 1 year of activity.

For already existing companies, all the previous conditions continue to apply, changes in capital come into force only for new companies.

The main purpose of these innovations is to ensure the proper functioning of the Commercial Register with reliable and up-to-date data on companies, as well as the reliability of the business environment in the country.

For advice on the corporate and tax system in Estonia, leave a request to our specialists or contact the contacts listed on the website.