Commercial undertakings in Estonia

PRIVATE LIMITED COMPANY (osaühing = OÜ)

 

A private limited company is a commercial undertaking, which has its share capital divided into shares. A shareholder shall not be personally liable for the obligations of the private limited company; a private limited company shall be liable for fulfillment of its obligations with all its assets.

 

A private limited company may have one or several shareholders that may be either natural or legal persons. Share capital shall be at least 2 500 €. The minimum nominal value of a share shall be 1 €.

 

A contribution may be monetary or non-monetary. In case the contribution is made in cash, the money can be used again after the register has made its entry, it means – 1- week. A non-monetary contribution may be any thing which is monetarily appraisable and transferable to the private limited company like a fax machine, mobile telephone, TV set, computer, etc. A non-monetary contribution shall be evaluated by the management board of the private limited company.

 

A private limited company shall have a management board. The management board is a governing body of the private limited company, which represents and governs the private limited company. The management board may have one 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 legal competence.

 

A private limited company shall have an auditor in case the share capital of the private limited company is higher than 25 000 €.

A private limited company is the best form of an undertaking for a small entrepreneur, who would like to benefit from the clause of limited responsibility and who does not want to list his company.

 

PUBLIC LIMITED COMPANY (aktsiaselts = AS)

 

A public limited company is a commercial undertaking which has stock capital divided into stocks. A stockholder shall not be personally liable for the obligations of the public limited company. A public limited company shall be liable for fulfillment of its obligations with all of its assets.

A public limited company may be founded by one or several natural or legal persons. Stock capital of a public limited company shall be at least 25 000 €. The minimum nominal value of a stock shall be 0,1 €. The stock has to be registered in the Estonian Central Securities Depository.

 

The governing bodies of a public limited company are the general meetings of stockholders, the supervisory board and the management board. The general meeting of stockholders is the highest governing body of a public limited company.

 

Supervisory board is a body superior to the management board. Supervisory board shall plan the activities of the public limited company, organize the management of the public limited company and supervise the activities of the management board. The supervisory board shall consist of at least three members.

A member of the supervisory board need not be a stockholder. A member of the supervisory board must be a natural person with legal competence. A member of the management board, a procurator, auditor, bankrupt or a person from whom the right to be a trader has been taken away pursuant to law shall not be a member of the supervisory board.

 

Management board is a governing body of the public limited company, which represents and governs the public limited company.

 

The management board may consist of one or several members. A member of the management board must be a natural person with legal competence. A member of the management board need not be a stockholder.

 

Main disadvantages of a public limited company lie in the following:

– high requirement of the capital;

– a three-tier management structure;

– requirement to have an auditor;

– high administrative costs.

 

As a rule, people opt for a public limited company in case they want to list the company or they have a major project or activity.

 

BRANCH OF A FOREIGN COMMERCIAL UNDERTAKING

 

In case a foreign commercial undertaking wants to permanently offer goods or services in its own name in Estonia, it shall enter a branch in the Commercial Register. A branch is not a legal person. The foreign commercial undertaking shall be liable for the obligations arising from the activities of the branch.  A branch may register itself as a VAT- liable person, conclude labor, social and health security contracts, buy and own real estate.

 

A branch shall have a director or directors, who must be natural persons with legal competence and who shall manage and represent the branch as well as organize the accounting of the branch. Minimum one of the directors shall reside in Estonia.  The branch shall be entered in the Commercial Register on the notarized application of the director (directors).

The application shall be appended by a certificate concerning the existence of the commercial undertaking in its home country, a certified copy of the Articles of Association in case submission of the Articles of Association to a register is also required in the home country of the undertaking, the permission to found a branch and appoint a director (directors).

 

Documents shall be executed in due form, apostilled or legalized and translated into Estonian. A notary or a certified translator shall verify the translation. Legalization is a verification that the document is applicable in Estonia. First the document issued in a foreign country shall be verified by a notary of a foreign country, whose signature shall be verified by the representation of the Republic of Estonia in that particular country. In case there is no representation of the Republic of Estonia in that country, the verification is executed by the Ministry of Foreign Affairs of that country.

 

Hereafter the documents shall be sent to the Ministry of Foreign Affairs of Estonia or the representation of the Republic of Estonia in the foreign country, where they shall be verified to be applicable in Estonia.

 

In case the particular country is in the list » of the document shall be verified with an apostille. The apostille shall be received either from the Ministry of Foreign Affairs of the foreign country or it shall be issued by a notary of the foreign country. A document with an apostille issued in a foreign country is equal to a document verified by an Estonian notary. The apostille simplifies considerably the application of foreign documents in the countries, which have joined the Hague Convention.

 

NON-PROFIT ASSOCIATION (mittetulundusühing = MTÜ)

A non-profit association is a volunteer association of persons; the aim or main activity of which shall not be profit making through economic activities. The income of a non-profit undertaking shall be used exclusively for achieving its chartered goals. A non-profit undertaking shall not divide its profit between its members.

 

A non-profit association is a legal person under private law. The legal capacity of a non-profit undertaking starts upon its entering in the Register of Non-Profit Associations and Foundations and ends upon its deletion from the register.

 

A non-profit association may be founded by at least two natural or legal persons. The founders shall conclude a foundation agreement stating the name, purpose and the address of the non-profit association as well as the data on the founders.   A non-profit association shall not be transformed into any other type of a legal person.