Anyone considering incorporating a new company in Estonia will be interested in a new bill amending the Commercial Code. The draft legislation sent to parliament on October 9, 2006 aims at rationalizing proceedings for registering new companies and partnerships. The most significant part of the new legislation is a provision enabling the expedited registration of new companies.
The core principle of the expedited procedure is that both the application and all the accompanying documents will be submitted electronically and digitally signed. Also, the need to have the document approved by a public notary will not apply.
In the proposed expedited procedure there is no need to draft specific articles and memorandum of association. The incorporators will just need to sign a standard form of articles. The new form will provide a fixed set of data with a limited amount of variations.
In the proposed expedited procedure, the requirement of a preliminary bank account for the payment of share capital will be abolished and share capital will be deposited in the court's deposit account. After the registration of the company, the share capital will be transferred to the bank account of the company.
Even though the idea behind the expedited procedure is the automatic processing of applications, certain changes in the commercial register will be still processed using the old methods. These are, in particular:
- Incorporation of public limited companies.
- Incorporation of companies, where contributions for shares are paid for by a contribution in kind.
- Mergers, annulation of mergers and reorganizations.
Under Estonian law, digital signatures can only be used by those holding Estonian identity cards, foreign investors not possessing them will still need to undergo the full process of attesting memorandum and declaring the articles of association at the notary.
After an application for the expedited procedure is submitted, it will be automatically reviewed. An error notice will be sent by the court system to the email address of the applicant, if any errors occur during the application process. If the application is correct, the company must be registered the next business day at the latest, though in practice it should not take more than a couple of hours.
Another positive development, which comes along with the expedited procedure, is the modification of the obligation to declare the business that a company or a partnership conducts. Each type of business will be now allocated a code based on the EU NACE classification, which brings greater precision and cohesion into the information contained in the commercial register.
In conclusion, the main benefit of the new changes is that the requirement of attestation will be excluded, thus making the expedited procedure save both time and money.
The bill is already warmly supported by Estonian business circles and is due to come into force on January, 1 2007.
Teder Glikman & Partners, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms which includes Kronbergs & Cukste in Latvia Jurevicius, Balciunas & Bartkus in Lithuania, dedicated to providing a quality 'one-stop shop' approach to clients' needs in the Baltics.