A merger is one of the ways you can restructure a company in Estonia. In simple terms, a merger combines two or more companies into one. The assets, contracts, rights and obligations of one company transfer to another, while the company being acquired is dissolved without going through liquidation.
As an e-resident, you can complete most of the merger process without travelling to Estonia. The process can often be handled digitally, much like setting up and managing an Estonian company.
This article explains the merger options available under Estonian law, what the process looks like in practice, which platforms you can use, and answers some common questions about mergers.
Key principles to keep in mind
- A merger takes place without a liquidation procedure
- The assets and obligations of the company being acquired transfer to the acquiring company
- The merging companies can be Estonian commercial undertakings entered in the Estonian Commercial Register, of the same or different legal form;
- The shareholders of the company being acquired become shareholders of the acquiring company as a result of the merger
Mergers in Estonia
Estonian law recognises three main types of mergers:
-
Merger by acquisition
One or more companies merge into an existing company. The acquiring company continues to exist, while the acquired company or companies are dissolved. -
Merger by formation of a new company
Two or more companies merge to form a new company. The original companies are dissolved and cease to exist as separate legal entities. -
Cross-border merger
An Estonian company merges with a limited liability company established under the law of another European Economic Area (EEA) country. The companies combine into one legal entity as part of the merger.
A merger can involve more than two companies. The overall process remains the same, but you may need to prepare additional documents.
As an e-resident, you are most likely to encounter one of these scenarios:
- Two Estonian companies merge. For example, two private limited companies (OÜ) may merge to bring their business activities under one company or simplify a group structure.
- A cross-border merger takes place. For example, a company may merge with an Estonian company as part of moving its business activities to Estonia.
Cross-border mergers
A cross-border merger is a merger between companies from different countries. In Estonia, this is only possible with a limited liability company established under the law of another European Economic Area (EEA) contracting state. The company must also have its registered office, management board or principal place of business in an EEA contracting state. Thus, a commercial association (tulundusühistu) cannot participate in a cross-border merger.
A cross-border merger is not permitted if:
- the company is in liquidation and the distribution of its assets to shareholders has already started; or
- reorganisation, bankruptcy or criminal proceedings have been initiated against the company.
If the Estonian company participates in the merger as the company being acquired, the Estonian registrar issues a cross-border merger certificate to the competent authority in the other country. The registrar can refuse to issue the certificate in certain cases. For example, this may happen if the merger appears to be planned for fraudulent or criminal purposes, or if it could pose a threat to Estonia's national security. To assess this, the registrar sends an inquiry to the Estonian Tax and Customs Board. The registrar may also contact other state or local government authorities or other public-law legal persons.
The merger process
| No | Domestic merger | Cross-border merger |
|---|---|---|
| 1 | Conclusion of the merger agreement — the merger agreement is concluded by the management boards or by the shareholders authorised to represent the companies, and it must be notarially authenticated. | Preparation and conclusion of the cross-border merger agreement — a merger agreement is concluded which, in addition to the general information, must include the specific terms of the cross-border merger (for example benefits granted to members of the company's governing bodies, principles for creditor protection and similar matters). |
| 2 | Preparation of the merger report — the management boards or shareholders with representation rights prepare a written merger report that explains and justifies the merger agreement. In certain cases, the merger report is not mandatory (for example where all shareholders agree to waive it). | Informing and consulting employees, preparing reports — employees must be informed and consulted with. |
| 3 | Audit of the merger agreement — for a public limited company (aktsiaselts; AS) an audit is mandatory; for a private limited company (Osaühing; OÜ) it must be carried out at a shareholder's request. The auditor reviews the merger agreement and prepares a written report. | Audit of the merger agreement — the auditor must examine the merger agreement and prepare a report. |
| 4 | Preparing the decision and informing shareholders — at least 2 weeks before the resolution is adopted (and, in the case of a public limited company (AS), at least 1 month before the general meeting), shareholders must be given the opportunity to review the merger agreement, the annual reports, the merger report and the auditor's report. | Publication of documents before the merger resolutions — the draft agreement and the auditor's report are filed with the Commercial Register and disclosed at least 1 month before the resolutions approving the merger are adopted; a corresponding notice must also be published in the Official Notices (Ametlikud Teadaanded). |
| 5 | Adopting the merger resolutions — the shareholders of the merging companies adopt a written merger resolution with at least a 2/3 majority, unless the articles of association require a larger majority. | Adopting the merger resolutions and safeguarding shareholder rights — the merger resolution is adopted at the meeting. Any shareholder who did not agree with the decision has the right, within 1 month, to demand that their share be acquired in exchange for monetary compensation. |
| 6 | Filing the application with the Commercial Register — 1 month after the merger resolutions have been adopted, an application is filed with the Commercial Register together with all the mandatory supporting documents. | Applying creditors’ protection measures — where the acquiring company is subject to the law of another EEA contracting state, creditors have the right to demand a security within 3 months from the publication of the notice. |
| 7 | Making the merger entry and informing creditors — the registrar makes the entry once the requirements have been met and the annual reports have been filed. On making the entry, the assets and obligations transfer, and the company being acquired is deemed to have ceased to exist. To inform creditors, the acquiring company promptly publishes a notice of the merger in the Official Notices. | Commercial Register proceedings, merger certificate and registration — The management board submits the required application and confirmations to the registrar. The registrar checks that there are no obstacles, including by contacting the Tax and Customs Board, and issues the cross-border merger certificate to the destination state through the EU Business Registers Interconnection System (BRIS). Once the merger is completed, the relevant entries are made and the information is exchanged between the registers through BRIS. |
Platforms for mergers
You will use several platforms and portals during the merger process. As an e-resident, you can access the relevant services using your e-Residency digital ID, which allows you to identify yourself online and sign documents digitally.
| No | Portal/Service | What it's used for? |
|---|---|---|
| 1 | e-Business Registry/Äriregister | The registration application for the merger is signed and filed here. The Commercial Register portal is also used for filing other Commercial Register applications and supporting documents. Management board members can upload documents, sign applications and follow the progress of the proceedings. |
| 2 | Notary – either in person at the notary's office or online via video link | The merger agreement must be authenticated by a notary. Notarial services can be used either by video call or in person at the notary's office. Whether remote authentication (i.e. by video call) is used is a matter for each notary to decide, so we strongly recommend checking with the notary's office before the transaction. |
| 3 | Ametlikud Teadaanded (Official Journal) | Notices that are required to be published by law are published in the Official Journal. |
Further reading
If you would like to learn more about mergers, check out these official resources below: