Abolition of share capital requirement for companies in Estonia in 2023
On April 13, 2022, the Estonian Parliament adopted a new Business Register Act that removes the minimum share capital requirement for Estonian limited liability companies (OÜ).
Since the first Estonian Commercial Code was issued in 1995, the required share capital was 40,000 Estonian crowns, which was converted to 2,556 euros when Estonia adopted the euro in 2011. It was later rounded up to €2,500.
How much is the share capital of a company in Estonia now?
According to the current Commercial Code, the share capital of a limited liability company in Estonia must be, at a minimum, 2,500 euros. The amount of minimum capital has been the same for 24 years, but given the purchasing power of the crown in 1995, this was a huge hurdle for any aspiring entrepreneur who did not have spare cash. This created a market for scammers who sold ready-made companies in Estonia (riiulifirma in Estonian) that already had a registered share capital of 40,000 Estonian crowns. In reality, it was paid only for the purpose of registering the company in Estonia, and then withdrawn from the company’s bank account to show that it existed in cash. The buyer would then buy the Estonian company with a balance of 40,000 crowns in cash and confirm it at the notary’s office.
Amendments to the Commercial Code in 2011 allowed individuals to establish an Estonian limited liability company without having to contribute to the share capital during its formation. Thus, as of January 1, 2011, it was possible to set up a company in Estonia even if you did not have €2500 to contribute.
This option is often used by Estonian e-residents.
Registration of the share capital of a company in Estonia
Company share capital registration in Estonia has been problematic in the past for some e-residents who were unable to open a company account with an EEA-licensed credit or payment institution to obtain the share capital deposit certificate required by the Estonian Business Register. Before January 1, 2019, this had to be a credit institution in Estonia – which meant that if no credit institution (bank) was willing to accept a person as a client, they could not even register the company’s share capital to legally pay dividends.
Fortunately, the Estonian Parliament passed an amendment supporting e-Residence, amending the Estonian Commercial Code to allow Estonian companies to use the company accounts of any credit or payment institution in any EEA country to deposit share capital. This opened the way for fintech companies to become the first financial institutions outside Estonia to start accepting e-residents established by Estonian companies.
How much will the required share capital be for a company in Estonia?
Starting from February 1, 2023, founders, and subsequently shareholders, must estimate the amount of share capital that is required to establish and operate a given limited liability company. Since according to § 148 para. 1 of the Commercial Code, the minimum nominal value of a share is 1 eurocent, the share capital of an Estonian limited liability company may be 1 eurocent if it has one founder and shareholder. Each additional shareholder would therefore mean at least 1 eurocent more.
Special provision added to the Bankruptcy Law Act
The Bankruptcy Law Act added a new provision, § 29 para. 91, under which a shareholder of an Estonian limited liability company with a share capital of less than €2,500 is liable for the fees and expenses of the provisional trustee in bankruptcy proceedings. For example, if the share capital of a limited liability company is €1 and the company does not have sufficient assets to cover the receiver’s fees and expenses, the shareholder’s potential liability is €2499.
The new Business Registration Act will come into force on February 1, 2023.
If you are interested in establishing a company in Estonia, please contact us and our specialists will help you with all the formalities.
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