Estonian Company Share Capital Gets a Makeover: Launching Your Startup with More Freedom

Attention e-Residency entrepreneurs: The Estonian Commercial Code underwent a major makeover on February 1st, 2023, and your company's share capital just got a serious flexibility upgrade. But with new freedoms come new considerations. In this article, GroüHub, your trusted Estonian services provider, is here to break down the changes and guide you through this new share capital landscape that every founder needs to know.

Companies registered before February 1st, 2023, were required to have a minimum share capital of €2,500; representing an investment in the business's development for its operations take-off, but also a liability for the shareholders before registering the share capital contribution (deposit) in the business register.

However, the minimum required share capital of 2500 euros has been deleted along with the clause that allowed you to postpone your share capital contribution at the moment of registration. 

You can now register your limited liability company in Estonia starting from €0,01 (one euro cent) per shareholder. Gone are the days of a one-size-fits-all capital mandate, now you have the chance to decide the fuel-share capital - your business needs to set sail.

At GroüHub, we advise you to register your company with at least €100 per shareholder. Consider that this is the amount that will be shown in your company’s registration documents and it gives more seriousness to your business than having one cent a share capital. Remember, you can always adjust your share capital up - or down -, just like adding sails or reefs during your entrepreneurial voyage.

After the option to delay share capital payments was removed, there's a tricky clause in the Commercial Code (§ 141) about how to pay it. Ideally, you should transfer the share capital to your business bank account before registering; but here's the catch: most e-resident companies struggle to get a business bank account before registration. Banks usually won't open an account until everything's official (company registered). So, founders often have to confirm the payment or use a court deposit account instead. Just a heads-up: giving false info is a big no-no, as the e-Business Register kindly reminds us. But don't worry, you won't see these reminders when registering your business with GroüHub.

Contribution of the Share Capital:

Freedom doesn't mean free-for-all. The amount established as share capital must be deposited - contributed - to the company bank account from the shareholder(s) personal bank account(s) according to the distribution of the shares (%) and then declared to the Tax Authorities (EMTA). Remember, the share capital can be used for your daily business operations and expenses. 

Note: At the moment of transferring the share capital contribution, make sure you detail the payment as “Share Capital Contribution”. This will make it easier for our accountants to identify the deposit(s) made and keep the right bookkeeping records.

A Word on Personal Liability:

Let's talk about responsibility. If your company’s net assets dip below one-half of the share capital, the shareholder(s) can either reduce or increase share capital so the net assets worth would make up to at least 51% of the share capital; or submit a bankruptcy petition. 

Estonian Bankruptcy Act makes shareholders of a company with a share capital below €2,500 personally liable and covers some of the bankruptcy fees. Think of it as a safety net to protect creditors.

GroüHub is your trusty map and compass – just point us in the direction of your accountant, and we'll make sure your paperwork sails smoothly through the registration process.

The Bottom Line:

The Estonian Commercial Code's new share capital rules are a game-changer for entrepreneurs. Embrace the flexibility, navigate the nuances, and build your dream company with confidence. GroüHub is your trusty first mate, ready to answer all your questions and guide you through every financial storm. So, hoist the sails, set your course, and let's conquer the Estonian business seas together!

Have questions about the new share capital rules? GroüHub is just a call away! We're happy to help you navigate through your entrepreneurial journey.

Remember, knowledge is your compass – stay informed, stay on track, and expand your business with GroüHub!

This blog post uses nautical metaphors to appeal to the entrepreneurial spirit. It also highlights GroüHub's role as a helpful guide and advisor throughout the process. We hope it was helpful and clear enough for you. Thank you for reading!

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