If you would like to close your private limited company, otherwise known as an OÜ, there are several exit strategies.
To learn more watch the recording of the webinar "How to exit: selling or closing your company in Estonia" or keep reading this article.
You can voluntarily dissolve a company by a resolution of shareholders. This resolution must be approved by at least 2/3 of the shareholders. After that, the management board must submit a formal request to the Commercial Register. This is followed by liquidation proceedings which take on average 6-9 months.
As an exception, if your company has not started any activities, and all management board members and shareholders agree, you can apply for a simpler process of dissolution based on petition (see §63 of the Commercial Code).
According to the Estonian Commercial Code, a company must appoint at least one liquidator. The intention behind this requirement is to make sure that companies could be held accountable should there be any unfinished business and that the interests of creditors would be protected. Liquidation services are also offered by many business service providers, including those listed on our Marketplace.
During the liquidation proceedings, a company is not allowed to continue with regular business operations except for selling assets, settling debts, and satisfying claims. Your company will be marked in the Business register as being in the process of liquidation.
Detailed information about the full process can be found in the State Portal. We recommend you seek the assistance of a business service provider to guide you through the whole process.
Selling your company
A second option is to sell your company. As a first step in this process, you need to prepare your company for sale by making sure that:
- Accounting/bookkeeping is in order
- Annual reports have been submitted
- Corporate taxes have been declared and paid
- Confirmation of balances has been obtained from debtors
- Liabilities have been cleared
- Due diligence by an auditor or a lawyer has been conducted
When you find a buyer for your OÜ, you will need to book an appointment at the notary office either in person or via video call if both parties (seller and buyer) have the possibility to identify themselves online and give digital signatures. It is also possible to sell a company by granting Power of Attorney to a lawyer or any other person you can trust who lives in Estonia and/or has an e-Residency card, Estonian ID card, or digital ID. From August 2020, companies with a share capital of EUR 10,000 euros and more may transfer shares without a notary, if this option is included in the Articles of Association.
Your service provider can help you to find a buyer for your company and sell it.
Merging your company with another company
If you can find another company registered in Estonia or another EEC country that would be interested in taking over your business, you can merge your company with an existing company or establish a new company together.
In order to merge several companies, the management boards or shareholders of both companies must sign a merger agreement, which must be notarized. All assets and liabilities of your company will be transferred to the acquiring company.
Upon merger, no liquidation proceedings take place. The partners or shareholders in both companies become the partners or shareholders in the acquiring company.
Merging your company with the assets of a natural person
Single-shareholder companies can also be dissolved by a merger procedure during which all the assets of a company are transferred to its owner who is a natural person.
This business exit option is also available for companies owned jointly by spouses. In this case, the shares must be first gathered in the hands of one natural person, after which it is possible to apply the aforementioned merger procedure.
This business exit option is the fastest (takes 1-2 months) as it allows the dissolution of a company without liquidation proceedings.
Please note that this type of merger entails an unlimited personal liability on the natural person for the obligations of the company being merged. For detailed instructions on merging a private limited company with the assets of a natural person, please see the Commercial Code.
Dissolution by judicial order
A compulsory dissolution may occur if your company has intentionally ignored its duty to submit an annual report or pay taxes in any jurisdiction, abused deferment of share capital contribution, or the management board has not been appointed and the registrar’s warnings have been ignored. Additionally, your company can face compulsory dissolution if its activity is not in conformity with any other requirements set forth in legislation or is in conflict with public order and good morals.
When a company is closed by judicial order, one needs to consider that the information about the compulsory dissolution will remain public. This will be taken into account when you apply to renew your e-Residency digital ID card and may also be considered a restriction when applying for different EU grants intended for businesses.
Important note: Deleting your company from the Commercial Register
As the last step of exiting your business, your company should be deleted from the Commercial Register (unless you sold or merged it).
Once the liquidation proceedings are over, a liquidator shall submit an application to delete a company, appended with the final balance sheet and asset distribution plan, to the Commercial Register.
If, after a private limited company has been deleted from the Register, it becomes evident that it has assets which were not distributed and that supplementary liquidation is necessary, a court may, at the request of an interested person, order a supplementary liquidation and restore the rights of the former liquidators or appoint new liquidators.
A company can only be deleted from the Commercial Register if it is not a party to any court proceedings currently conducted in Estonia.
A private limited company deleted from the Commercial Register must preserve its documents for ten years. The documents are generally deposited with a liquidator or with a person assigned by the liquidator. A notation is made to the Register indicating the depository of the documents.
Dissolution of your OÜ without an e-Residency digital ID card
If you wish to finish your business operations in Estonia but your e-Residency digital ID card is no longer valid, the only other alternative is to appoint a natural person to represent you by giving them a Power of Attorney.
The signatures on the document need to be confirmed by a notary office and depending on where the document is issued, it will need an additional confirmation:
- an apostille, if the country has acceded to the Apostille Convention. Apostilles are required for official documents (e.g. notarised authorisation document), which are to be used in another country that has acceded to the Apostille Convention. An apostille is a certificate that certifies the capacity in which the person signing the document has acted. An apostille shall be attached inseparably to the document.
- legalisation, if the country has not acceded to the Apostille Convention). Legalisation is a formality with which a competent authority certifies the signature on the document and the authenticity of the impression of a seal or stamp or the competence of the undersigned person. A document shall be legalised by comparing the signature of the undersigned person with the specimen signature and also by comparing the impression of a seal or a stamp with the specimen impression of the seal or stamp.
As the dissolution of a company does take a long time, we do recommend that you either start the processes while your e-Residency card is still valid for at least a year or that you apply for a new e-Residency digital ID card. This process is likely to be smoother and more cost-effective than the alternative described above.