2023 Regulatory Changes for Companies in Estonia

Most of the changes will significantly simplify company formation, but some rules regarding fines and penalties will be stricter than before. Let's review the main changes.

Estonian Company Formation for as Little as 1 Cent

Previously, the minimum share capital for a private limited company (OÜ) was set at €2,500. This requirement had been in place since 1995. According to the official e-Residency website, this minimum requirement created a situation where owners did not consider how much capital they actually needed. Instead, they automatically set it to the minimum. Therefore, the minimum capital requirement often had no relation to the company's actual capital needs.

As of February 1, 2023, the shareholders of each company will decide on the capital themselves. Since the minimum nominal value of a share is 1 Euro cent, the capital of an OÜ can be 1 Euro cent if it has a single founder and shareholder. Each additional shareholder would then mean at least another 1 Euro cent. At the same time, a company does not need to prove its capital contribution with a certificate from a banking institution if the contribution is below €50,000.

In the event of bankruptcy, the liability of the owners for the costs of bankruptcy proceedings is still up to €2,500. This rule applies even if a company's capital is less than €2,500.

If the capital of the private limited company is less than €2,500 and the trustee cannot satisfy the claim at the expense of the debtor's other assets, the trustee has the right to demand compensation for fees and expenses from the shareholder of the limited company to the extent that remains between the limited company's capital and €2,500.

Failure to Submit the Annual Report Will Lead to Deletion from the Register

You probably know that every company in Estonia must submit an annual report. Under the new rules, a fine can now be issued without warning. The amount of the fine will be decided in each case, with a minimum of €300.

But now there is also a much heavier penalty. A company that fails to submit a report within 3 months of the deadline can be deleted from the register. The decision regarding each legal entity will be made by the registrar. Since deletion from the commercial register is the most extreme measure that can be taken against a legal entity, the possibility of re-registration within 3 years will be created to balance the deletion.

Get Information on Becoming an e-Resident and Starting a Company in Estonia

Changes to Legal Address and Contact Person Rules

Previously, the legal address of a company with foreign founders was tied to the contact person, meaning the legal address was automatically the address of a contact person. The new regulation separates the contact person's address from a company's legal address. What does this mean?

Basically, the address entered on a company's registration card can now be an Estonian or a foreign address. If a company already has only a management board address registered in the commercial register, this is considered the company's address for the purposes of the new law.
Therefore, when registering a company now, shareholders must define the address where the business is physically located. So, what changes for existing companies? If a company has already defined a management board member's address, the register will use this as a company address in the future. However, if the company has not added contact person information, it must be added to the register by April 30, 2023, at the latest.

This new change does not mean you will need to change a company's legal address in the future. This measure will make it easier for a company's founders to receive any procedural documents or letters of intent addressed to a business delivered on paper. With the delivery of a procedural document or a declaration of intent to a legal address, the document is considered to have been delivered to your business.

A company will remain a tax resident in Estonia, but it can now easily distinguish its legal address from that of a contact person. The clarification of terminology in Estonian legislation has no effect on national or international tax law, nor will this change have an impact on how a company is taxed.

And there is another change regarding a contact person. Now, when a company appoints one, it also needs to specify the end date of the contact person's appointment. The appointment term can be extended, but if a company fails to do so, the contact person will be removed from the register.

Business Name Reservation

In 2024, founders will be able to reserve a business name before registering a company. While the main rules for a business name remain the same, a future shareholder will be able to reserve the business name for up to 6 months and extend this reservation once for three months. A person will be able to reserve only 1 company name. The state fee for this will be a total of €150.

Deletion from the Register if the Company Fails to Appoint a Contact Person

Therefore, there is now a new and heavier penalty for not appointing a contact person. The main rule is the same as before: a contact person must be appointed if the legal entity does not have an Estonian address.

If the legal entity does not provide the information within 3 months, a fine can first be issued. However, this can later lead to deletion from the register.

List of Estonian Shareholders to be Kept in the Commercial Register

Currently, the information of shareholders is public in the commercial register, but it must be kept by a company's management board, and the data is not considered a commercial register entry.

With the new regulation, the data on shareholders becomes a part of the effective commercial register data. The list of shareholders will be kept in the commercial register. Therefore, the data on shareholders will have the quality of a commercial register entry.
That's all for the main changes.