Amendments to Estonian Commercial Code: Simplified procedure for dissolution of a company
From January 2015 Estonian Commercial Code was amended. The most significant change was new simplified procedure for dissolution of a company. It was considered to be welcomed change as the earlier process was complicated for companies with no assets or creditors.
A new simplified procedure for dissolution of company
Dissolution is a legal act that leads to cease of the company. It shall not be mixed with bankruptcy. Dissolution can take place in several different situations, for example when company mergers with another company and is after the merger part of that company. Therefore the merging company is dissolved. Another option is also that companies can merge and form a new company. In this case both merging companies shall be dissolved.
It is also possible that private or public limited liability company is merging with the assets of a natural person who is the sole shareholder of the company. The merger is also permitted if the shares of the company are in the joint ownership of the spouses. The merger can be denied if the natural person who is acquiring the share is insolvent. All the rights and obligations that the company have are transferred to sole shareholder of the company. Provisions of acquiring private limited liability company applies to natural persons if the Commercial Code does not provide otherwise. In this procedure it is also possible to handle the merger without liquidation proceedings. The new process is following:
- Petition for merger in the commercial register shall set out the personal identification code of an acquiring natural person
- Members of the management board of the company being acquired shall confirm that the creditors of the company have been given a security
- Written confirmation of acquiring natural person that he or she is not insolvent
- If shares are owned in joint ownership of the spouses and only one of the spouses enters into a merger agreement, notarised consent of the other spouse for merger shall be submitted to commercial register
- If shares of acquired company are pledged the notarised consent of pledgee for merger shall be submitted to commercial register
Increase of share capital of acquiring company
In case of acquiring private limited liability company wishes to increase share capital, the merger shall not be marked to registry card of the acquiring company before the increase of the share capital has taken place and marked to commercial register.
Tony Koivula, attorney at law of the Gencs Valters Law Firm in Tallinn.
Practising in fields of Mergers and Acquisitions in Latvia, Lithuania, Estonia.
T: +372 61 91 000
F: +372 61 91 007