In February 2023, Estonia made significant changes to its companies law, particularly related to the minimum share capital requirement for private limited companies. The country abolished the minimum share capital requirement of 2,500 euros, allowing company founders to decide on the amount of share capital themselves. While the minimum nominal value of a share remains at one cent, a natural person cannot establish a private limited company without contributing to the share capital. A bank account must also be opened for payment of the capital. This move is expected to lead to higher diligence in civil transactions and may increase bankruptcies of “1-euro” private limited companies. The changes will come into effect on February 1, 2023, and will allow shareholders of each company to determine the share capital themselves. The introduction of a low share capital requirement is expected to spur entrepreneurship and investment in the country. However, private limited companies must still have assets to meet their obligations, and the share capital requirement for public limited companies remains at least 25,000 euros, with net assets of at least half the company’s share capital.
Additionally, Estonia has also introduced new regulations separating the legal address of a company from that of the contact person. This means that a company’s address can now be Estonian or foreign, and shareholders must identify the physical address of the business when registering. The change is expected to make it easier for companies to receive procedural documents and letters. The clarification of terminology will not affect national or international tax laws.
Furthermore, companies must now indicate the expiry date when appointing a contact person, and failure to extend the appointment will result in removal from the register.
In conclusion, Estonia’s recent changes to its companies law have abolished the minimum share capital requirement for private limited companies, allowing founders to decide on the amount of share capital themselves. The changes are expected to promote entrepreneurship and investment in the country, leading to higher diligence in civil transactions. Additionally, the separation of a company’s legal address from that of the contact person is expected to make it easier for companies to receive procedural documents and letters.
