Changes in the Commercial Code of Estonia - 01.02.2023
Starting from February, 2023 new redaction of Estonian Commercial Code is in force.
This article will summarise the most significant changes in the Commercial Code of Estonia and explain how these changes will affect new company registration in Estonia and how they will affect already registered companies in Estonia.
MINIMUM SHARE CAPITAL IN ESTONIA EUR 0.01
This makes company registration in Estonia even easier than before. Until now, when registering a company in Estonia, the minimum share capital for limited liability companies was EUR 2500.00. It is useful to outline here that the share capital is not a state fee - these are assets of the company that owners of the company can use for their business after registering the company.
From 01.02.2023 the owners of the company will have the ability to choose the minimal share capital of the company according to their own business projections. For example, some businesses may need EUR 25.000 to start their operations, while other businesses may start with EUR 100.00.
2. SIMPLIFIED PROOF OF SHARE CAPITAL CONTRIBUTION.
Companies with share capital up to EUR 50.000 will no longer have to present a digitally signed bank statement showing that the share capital is contributed. It will be sufficient if the owner of the company will state that the share capital has been contributed.
This change will decrease the bureaucratic burden and will speed up the company registration process. The biggest benefactors from this particular change will be companies that wish to create a subsidiaries in Estonia. Until now, when creating a subsidiary, it was required to contribute the share capital in full which caused delays in company registration, because it took some time to open an initial account, then contribute the share capital, obtain a statement that the share capital has been contributed and then register the statement with the Business Registry.
3. LEGAL ADDRESS CHANGES.
The new changes in the Commercial Code will distinguish the legal address and the address of the contact person of the company. Until now, for the companies that have a legal contact person in Estonia, the address of the legal contact person was considered the address of thee company itself. With the new changes, the legal address of the company will be the address where the company can be reached for the official correspondence purposes.
WHAT DOES IT MEAN FOR EXISTING ESTONIAN COMPANIES?
The most significant changes that will affect the existing companies is the share capital decrease and the legal address change.
The companies that have the share capital of EUR 2500.00 and have fully contributed the share capital, can choose to decrease the share capital and withdraw EUR 2499.99 (or any other relevant amount, depending on the size of the share capital) to the account of the owner. To do that, the company needs to draft the Shareholders Resolution for share capital decrease and amend the Articles of Association. The new share capital has to be registered in the Business Registry accordingly. It is important to note that the company must inform the accountant about decrease of the share capital, as it will affect the total amount of assets.
If the company has registered share capital of EUR 2500.00, but haven’t contributed the share capital, then it has to follow the existing procedure to decrease it. According to the Commercial Code of Estonia, the company can increase / decrease the share capital only if it is contributed in full. Therefore, if it hasn’t been done, the owner of the company first needs to contribute it and only then decrease / increase it.
The change of the legal address is more “cosmetic” than practical and one off the goals of this change was to create more clarity with the exisintg definition of “place of the management board”. The companies that are already registered in Estonia, will have to choose which legal address to state in the Registry. The new address (if applicable) has to be entered until April, 2023.
CONCLUSION
It will be easier to create companies in Estonia. Considering the pace of business in 21st century, the meaning of the “minimum share capital” has changed quite a lot over the years. Just like we have mentioned it above, some companies can start their business with EUR 100.00 while others with EUR 50.000.
Until now, the private person shareholders could register the companies in Estonia with minimum share capital of EUR 2500.00, but choose not to contribute it. Therefore, this automatically defeats the argument that there should be some filter / limit that basically states that only someone with EUR 2500.00 on their account should create a company. The Status Quo in Estonia didn’t have this filter until now anyway. The most significant change is that finally the authorities have recognised this as well and by removing the minimum share capital requirement will speed up the company registration process.