Important changes to the Commercial Register of the Republic of Estonia

On February 1, 2023, changes regarding the legal regulation of the activities of the companies, which were registered under the legislation of the Republic of Estonia entered into force.

Changes were made to the Law "On the Commercial Register" and the Commercial Code.

The main points regarding the contact person are:

• at the moment of a contact person appointing, the company is obliged to indicate the duration of an executing the obligations of the contact person;
• the contact person will be appointed only in the case if the legal address of the company is abroad;
• the address of the contact person is considered as the legal address of the company unless otherwise specified.

Therefore, it is necessary to appoint a contact person if the legal address of the company is located abroad. Due to such a fact, the company must either have a virtual office address in the Republic of Estonia or must appoint a contact person if the company uses a foreign legal address in the Register.

Above mentioned changes have the purpose of strengthening control, and therefore, in case of non-renewal the duration of the contact person's obligations the contact person's data will be automatically deleted from the Register.

However, you need to pay attention to the fact that although the changes no longer include provisions regarding the need to appointment a contact person in the case the members of the board are not residents of the Republic of Estonia, to fulfill the requirements of the Commercial Register of the Republic of Estonia, but such requirements exist concerning the economic presence rules.

Because, in the opposite case, according to the legislation of some countries, the company may be recognized as a tax resident of another country based on criteria of the place of the effective management.

For example, the provisions of  article 133 of the Tax Code of Ukraine provide that legal entities that are established in accordance with the legislation of other countries (foreign companies) and have a place of effective management on the territory of Ukraine, are determined as tax residents of Ukraine on the criteria of the place of effective management.

Therefore, it is necessary to appoint a contact person in the case if the location of the company’s Board is not in the Republic of Estonia according to the economic presence rules.

The main points regarding the share capital are:

• removing the requirements regarding the size of the minimum share capital (the minimum amount of the authorized capital may be established for 1 euro or 1 cent);
  the impossibility of establishing a company without depositing a contribution to the authorized capital;
• the needing to provide evidence of the contribution to the authorized capital, if an amount of the authorized capital is equal to or exceeding 50,000 euros;
• the size of the company's net assets determines the possibility of distributing dividends (for a certain type of the companies).
  The specified requirements form a more responsible approach to the process of forming an authorized capital and conducting a business.

Other requirements:

• if the annual report is not submitted within the period established by law, the Register may impose a fine without warning and can remove the company;
• in the case of ignoring the receipt of correspondence and the impossibility of establishing contact with the company, the Register makes a note about difficulties in interacting with the company.
   

The mentioned changes are very important because additional responsibility is established regarding the conditions of doing business, and therefore, it is recommended 1) not to save on the services of a registration agent, who can ignore the legislation requirements due to a huge workload; 2) to make a balanced approach regarding the decision of the size of the authorized capital; 3) do not consider any requirements regarding the procedure of conducting business as insignificant.

The real price of an error and unjustified savings is equal to a fine and removal from the Register.