Starting a business in Estonia is not complicated, as the procedure has been simplified a lot and can also be completed remotely. However, there are cases in which a company does not perform as required and must undergo liquidation. In order to ease the liquidation procedure of an Estonian company, the government has simplified this process a few years ago.
Below, our company formation specialists in Estonia explain the main steps related to liquidating a company. We can help foreign investors who need to liquidate or open companies in Estonia, in accordance with their needs. All our services are tailored to the client’s requests in order for them to have a good experience with us.
Legislation on company liquidation in Estonia
The main law which provides for the liquidation of a company in Estonia is the Company Act. It provides for the reasons under which a company can be terminated and the ways to do that. The procedure of company liquidation must comply with a few requirements which can be explained by our Estonian company formation consultants.
The reasons for liquidating a company in Estonia may be very different, from bankruptcy, forced termination on the basis of a court decision, to the owners’ voluntary decision to close the business. In any case, in order to be liquidated and deleted from the Commercial Register, the company must pass through different stages and procedures.
With respect to the reasons for winding up an Estonian company, one must understand the following:
- – the company can be terminated if it was registered for a limited period of time;
- – if the company can no longer pay its creditors and will become bankrupt, the shareholders can request the liquidation;
- – in case the company cannot pay its debts, the creditors can also request the liquidation with an Estonian court;
- – the company can also be terminated if the company no longer meets the shareholding requirements.
It should be noted that Estohttps://www.companyincorporationestonia.com/why-is-estonia-an-attractive-country-for-foreign-investorsnia also provides for company liquidation by merger and acquisition, or by the division of the company. These procedures, however, do not imply erasing the company from the Trade Register but only the distribution of the assets held by the shareholders.
The main steps in company liquidation in Estonia
No matter the way the Estonian company will be terminated, there are several steps which need to be completed in case of voluntary and compulsory liquidation. These steps are:
- the company’s representatives must file a petition in this sense with the Trade Register or the court, depending on the type of liquidation procedure;
- once the liquidator is appointed, his or her name must be lodged with the Estonian Commercial Registrar;
- the financial documents of the company must be prepared and submitted with the Companies Register;
- the notice of liquidation must be published in the Official Gazette and the creditors must be announced about it;
- the balance sheet which provides for the distribution of assets must also be prepared;
- the bank account which belonged to the company to be liquidated must also be closed;
- the remaining assets after the company are terminated will be distributed among the shareholders.
Once the Estonian company is liquidated, it is deleted from the records of the Trade Registrar.
It should be noted that the simplified company liquidation procedure is available for Estonian companies with one shareholder. This procedure has been implemented because of the large number of private limited liability companies owned by single foreign shareholders.
Voluntary company liquidation in Estonia
A company must begin the liquidation procedure by adopting a decision signed by the sole member or by at least 2/3 of the shareholders. In order to liquidate a company in Estonia, the shareholders must submit an application with the Commercial Register, along with the minutes of the general meeting. The shareholders must also present a financial report for the previous year and a current year economic insight.
The general meeting shall also appoint the liquidators, with the main tasks of: termination of the company, preparing an opening balance sheet and explanatory report, preparation of financial statements for the year ended, informing the creditors about the company’s situation, recovering the debts and satisfy the creditor’s claims, drawing up a final balance sheet and the liquidation of the remaining assets by an distribution plan in order to divide the remaining assets between the company’s owners. When there are not enough assets to satisfy all claims, there must be submitted a bankruptcy petition.
The liquidation of a company in Estonia by voluntary decision implies ending the daily activities of the company, ending the company’s financial activity and starting liquidation proceedings, including termination statements that shall be submitted to the Commercial Register.
The procedure of liquidation of a company in Estonia also includes a liquidation report which shall contain the following elements: the income statement, statement of cash flows, statements of changes in equity, report on profits and losses.
Once the liquidation of a company in Estonia is started, the company shall also terminate the working relations with the employees.
Compulsory liquidation in Estonia
The compulsory liquidation of a company in Estonia requires the intervention of the court, in order to dissolve a company that doesn’t comply with certain requirements. The forced grounds for termination are: results in non-compliance with laws on compulsory liquidation, the purpose or activity is contrary to the law (for example when the company violates foreign labor recruitment or when the company fails to comply with the obligation to submit an annual report), foundation of a serious violation of the law, the company’s situation does not meet the statutory requirements, the powers of the board expired more than two years ago and a new management board has not been elected.
When the forced termination relies on an underlying defect or other circumstances that are likely to be eliminated, the court will usually establish a deadline for elimination of those circumstances.
The petition for forced dissolution may be submitted to the court by the company’s management board, shareholder or other persons specified by law. The court may also decide on its own initiative on forced termination.
In order to liquidate a company in Estonia, the Court will also appoint a liquidator that will be in charge of all further actions, as in the case of voluntary liquidation.
A notification about the company’s liquidation must be published in the Official Gazette and the direct creditors will receive official notice about the company’s situation. In this sense, the creditors can raise claims within 4 months since the announcement was published in the Official Gazette and all the claims must be sustained by appropriate documentation. This procedure is also available for voluntary liquidation.
The liquidator must then draw up the balance sheet and take care of the distribution of the remaining assets within 6 months from the publication in the Official Gazette and no later than 2 months from the elaboration of the balance sheet.
The liquidator must provide, no later than 6 months from the liquidation announcement, the petition of deletion from the Commercial Register. This can be made only when all the assets have been fully redistributed between the shareholders.
Assistance in company liquidation in Estonia
Given the fact that company liquidation in Estonia is a rather long and complicated procedure, especially in the case of large companies, it is best to solicit the help of professionals. With a vast experience in company winding up matters and corporate law, our local advisors can help foreign company owners in Estonia with this procedure.
In the case of voluntary liquidation, once the shareholders have voted for the termination of the company, our agents can complete the procedure with the Trade Register.
In case of a compulsory liquidation, we can help with the preparation of the documents which need to be filed with the Commercial Register in Estonia.
FAQ on company liquidation in Estonia
Terminating a company in Estonia implies various procedures and steps, which is why often it raises many questions among company owners. Our company registration agents in Estonia have answered some of these questions:
Yes, the procedure of terminating a company is the same, no matter the business form.
No, they are two different procedures. A company must first declare bankrupt and then be liquidated.
Yes, there is no difference between foreign and local owners liquidating companies in Estonia.
The company liquidation procedure in Estonia can take between 6 and 8 months to complete.
If you have any other questions about company liquidation in Estonia, do not hesitate to contact us. We can also help you open a company in Estonia.