6 ways to change the ownership of an Estonian company

Home » Consulting » 6 ways to change the ownership of an Estonian company
6 ways to change the ownership of an Estonian company

Estonia is home to several Blockchain and FinTech businesses. The country offers fair regulations, a favourable business environment and a unique tax regime. Further, almost every aspect of establishing and managing an Estonian company can be done entirely online, from anywhere in the world, thanks to the e-residency programme. This is not always the case, however, as we are going to explain now ho to change the ownership of an Estonian company.

Recently, Statistics Estonia has revealed that Estonia’s e-residents around the world have now generated more than €1 billion of economic activity through their Estonian companies. That means Estonia’s e-resident community has a larger GDP, as it were than 14 actual countries.

When the owners of an Estonian company want to add a new member to their corporate structure or sell their business, the digital nation (99% of Estonian government services are online) seems to be a bit less digital than usual. To put it simply, this is because these decisions result in the need for the State to be sure the shareholders are doing them of their own free will and in a well-considered manner. 

But the landscape is changing, and six different ways can be taken into consideration when it comes to adding a new shareholder on an Estonian company.

1. With an Estonian notary

The old-school solution is to arrange a meeting with an Estonian notary. All shareholders must be present, and the meeting must be done in Estonia.

The notary is responsible for preparing all necessary paperwork and notifying the Register of commercial activities.

While it is possible to book the meeting with the notary online, this solution comes with both nuisance and costs. 

2. Granting Power of Attorney (POA)

This solution still requires a meeting with an Estonian notary but, in this case, a proxy entitled to act on behalf of the shareholders attend the meeting. In other words, shareholders can avoid travelling to Estonia

Some hassles and expenses still occur. In fact, a power of attorney will need to be apostilled or certified by the designated authority, and a business services provider in Estonia must be involved in the procedure.

3. Via e-notary services in Estonian embassies

This is the first way to transfer shares of an Estonian company in which the country’s high level of technological development shows up. 

Starting from last February, Estonian notaries have launched a very interesting e-service: company owners can visit an Estonian embassy abroad. The process is identical to the old-school one described above, but shareholders don’t have to fly to Estonia.

To date, this service is offered only in Brussels, Helsinki, London, Riga and Stockholm. Why isn’t this option available in all Estonian embassies? It’s a matter of technology: Estonia’s diplomatic missions in Belgium, Finland, Latvia, Sweden and the United Kingdom have been equipped with a biometric facial recognition set up in a dedicated room. The Estonian based Veriff offers the tool.

For the sake of completeness, this option is now in its testing phase and is supposed to be extended to other embassies in the future. Further, Estonian notaries are looking to have videoconferencing transactions with “previously identified individuals” even without the requirement of visiting an embassy.

4. Do it yourself

To facilitate investments in Estonian start-ups, last March the Parliament passed a bill to amend the Commercial Code and associated acts. Thanks to this, from the 1st of August 2020, it is possible to change the ownership of an Estonian company or transfer shares to a new shareholder at the responsibility of the parties involved, in a free form capable of producing a written record.

To benefit from this regime, the company must have a fully-paid share capital of at least 10,000 euros, and its articles of association approve this.

5. Using Nasdaq CSD

It’s quite unlikely that all the shareholders have a securities account opened with an Estonian bank. But, if this is the case, their company can register its shares with Nasdaq CSD. Nasdaq CSD is the regional Central Securities Depository and manages the listed stock companies’ lists of shareholders. Other companies wishing to use its services are welcome and can use it as an alternative to the Estonian Register of companies. 

6. Don’t transfer, but add

The last option is surprisingly simple. In this case, there’s not a transfer of pre-existing shares, but the company issues new shares online, without notaries, attorneys and other intermediaries.

Under the national Commercial Code, the company must produce a digitally signed resolution of the Shareholders’ Meeting that outlines the planned new share allocation, with the details of all the shareholders. The Tartu country court will check the formal consistency of the petition and update the data in the Register of companies. Only the existing shareholders must sign the resolution; therefore, each new shareholder can be added even if they do not have an Estonian digital ID.

An example will be of help. Let’s say that Acme OÜ has a share capital of 2,500 euro, fully paid by its sole shareholder, Mr John Doe. Mr Doe wants to transfer 20% of the company’s ownership to Mr Joe Bloggs. To get this result, Mr Doe agrees on Acme issues 625 new shares, each of them worth 1 euro, which Mr Bloggs subscribes and pays. Acme OÜ has now a share capital equal to 3,125 euro. Mr Doe owns 80% of it (3,125 * 80% = 2,500 euro).

Conclusion

Six ways are many ways, but as you can see, they are not always straightforward. However, Estonia is a digital country, so it is likely that the government will implement new, simpler ways to change the ownership of an Estonian company, with new scenarios and possibilities.

Related posts

Leave a Reply

Your email address will not be published. Required fields are marked *