Amendments to Estonian commercial law

Estonia: Leading a limited liability company now more flexible.

As of 1 July 2015 amendments to the Estonian Commercial Code will make leading companies with limited liability more flexible. Many possibilities that were until now only accessible to public limited companies will now also be extended to companies with limited liability. Especially for start-up companies, the new rules will make investing easier and safer.

Under current regulation, only shareholders can increase the share capital, but in future the right to increase the share capital can also be delegated to the management or supervisory board. This will allow the management board to react more quickly and effectively to the need to increase share capital. It is no longer necessary to name shareholders in a decision to increase the share capital. According to the amendment, it will be enough to determine a group of persons who may take part in an increase of share capital and who may acquire an additional holding. The new regulation also enables the issue of convertible debentures and options, which so far was only allowed for public limited companies.

Until now it was not possible to give shareholders different special rights (e.g. as to taking certain decisions, veto or priority rights) or allow the issue of different kinds of share (e.g., with different voting or other special rights). However, the amendments coming into force as of 1 July 2015 will modernize the rules accordingly so that shareholders will have more freedom to fully meet the real needs of a company. The shareholders will be allowed to create shares with special rights and it will be possible to give special rights to investors (e.g. preferential rights on liquidation or when taking decisions). This means that shareholders who need capital from investors will have wider possibilities to regulate mutual rights and obligations on the level of the law and statutes. These rights will no longer have to be regulated by complex shareholder agreements, enforcement of which often seemed quite uncertain to foreign investors.

Updating the law also includes an amendment by which shareholder and supervisory board members no longer have to meet in person to hold a meeting. From now on Skype or other means of communication may also be used.



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