All limited companies (OÜ) registered through the Unicount online company formation service in Estonia follow standard articles of association. These articles of association are the English version provided by the Estonian Business Register for expedited limited company formation, effective from 1 June 2023. If your company is registered via the e-Business Register online service, you would have similar articles, unless you made manual amendments. For further information on the e-Business Register formation process and articles of association, we have written a detailed support article.
To ensure you have a complete understanding of the articles of association, we will take a closer look at each article in both the new version and the old version, which was used until 31 May 2023.
Standard articles of association from 1 June 2023
1. The business name of the osaühing (private limited company, hereinafter the company) is … OÜ.
Unicount: This is where your company name appears. Changing the company name would require changing the article.
2. The registered office of the company is in Tallinn, Harju maakond.
Unicount: No street address in articles, but changing town or county within Estonia would require changing the article. Please note that companies registered outside of Estonia would still have registered office of the company shown to be in Estonia in this article.
3. The amount of the share capital of the company is 1 euros.
Unicount: Changing the amount of the share capital always requires changing the articles. Allowed share capital when using the Unicount company formation service is 0.01 – 50 000 euros. The default amount is set to 1 euro in the Unicount service and 1 cent in the e-Business Register. As the least possible nominal value of a share is 1 cent you can have 100 shareholders with 1 euro share capital if each of the shareholders has 1% of the company.
4. The company has no legal reserve.
Unicount: Since 2011 it is no longer necessary to keep part of the profits as a reserve. You may still use a voluntary reserve.
5. Upon foundation a shareholder of the private limited company “Your Name here” holds a share with the nominal value of 1 EUR.
Unicount: Whatever the shareholder composition it will be reflected in the first articles adopted during the foundation. It can be removed later.
6. Upon foundation of the private limited company, the share is paid for by monetary contributions according to the nominal value.
Unicount: This would only matter when trying to increase the share capital with a non-monetary contribution.
7. The projected costs of foundation of the private limited company are 300 euros, where costs of foundation are borne by the shareholders according to the nominal value of their shares.
Unicount: Commercial Code requires anticipated expense estimates. When using the Unicount company formation service, the anticipated costs are always stated as 300 euros no matter what it really is. In the e-Business Register you need to have a share capital that exceeds the foundation costs. The reasons are explained in our blog post about share capital requirements.
In a nutshell, the standard articles are really minimalistic now. This may cause some issues with service providers who want to see more information about your company. This may lead to a situation where founders need to amend company articles of association based on the external requests of third parties doing due diligence on your business.
Standard Articles of Association until 31 May 2023
Below we also keep the commented version of the standard articles that were in use until 31 May 2023.
Chapter 1. General information
1.1 The business name of the osaühing (private limited company, hereinafter the company) is …………….. OÜ.
Unicount: This is where your company name appears. Changing company name would require changing the articles.
1.2 The registered office of the company is in Tallinn, Harju maakond.
Unicount: No street address in articles, but changing town or county would require changing the articles.
1.3 The amount of the share capital of the company is … EUR.
Unicount: Changing the amount of the share capital always requires changing the articles. Allowed share capital when using the Unicount company formation service is 0.01 – 50 000 euros.
1.4 The financial year of the company is from 01.01 to 31.12.
Unicount: All companies registered via the Unicount company formation service have the same financial year.
1.5 Upon increasing the share capital the shares of the private limited company shall be paid for in monetary contribution only.
Unicount: This would only matter when trying to increase the share capital with a non-monetary contribution.
Chapter 2. Share, shareholder and legal reserve
2.1 Any shareholder of the company is paid their share of profit (dividend) in proportion to the nominal value of their share.
Unicount: Non-proportional dividend payments are normally only used when raising money and new equity investors demand privileges for dividend payouts.
2.2 Upon transfer of a share of the company:
the other shareholders have the right of pre-emption if the share is transferred to any third person.
Unicount: This only matters if there are multiple shareholders. Be careful when designing shareholder agreements that are not in line with articles.
2.3 A share of the company may be pledged.
Unicount: This provision allows you to use your shares as collateral for credit, such as a business loan.
2.4 Upon partial transfer of any share of the company:
the other shareholders have the right of pre-emption if the share is transferred to any third person.
Unicount: This only matters if there are multiple shareholders. Be careful when designing shareholder agreements that are not in line with articles.
2.5 Formation and amount of the company’s legal reserve. The company has no legal reserve.
Unicount: Since 2011 it is no longer necessary to keep part of the profits as a reserve. You may still use a voluntary reserve.
2.6 Upon liquidation of the company, the remaining assets are distributed between its shareholders by means of only monetary payments.
Unicount: This means that all the assets of the company must be sold as part of the liquidation process.
2.7 Special rights have not been assigned to a private limited company’s share or shareholder.
Unicount: This only matters if there are multiple shareholders. Be careful when designing shareholder agreements that are not in line with articles.
Chapter 3. Management of the company
3.1 One cent of each share of the private limited company shall give one vote at the shareholders’ general meeting of the private limited company as well as in decision-making without convening the meeting.
Unicount: Without special rights, each euro cent gives one vote, so if you have 1 euro share capital, the votes you have will be 100 as a single founder.
3.2 The shareholders’ meeting is qualified to pass resolutions if at least 51% of the votes determined by shares are represented at it.
Unicount: This explains the regular qualification quota for shareholder meetings. This only matters if there are multiple shareholders.
3.3 A resolution of the shareholders shall be adopted if 51% per cent of the votes of the participants in the shareholders’ meeting or of all the votes in the case of deciding without convening the meeting is given in favor unless otherwise provided for by law or the Articles of Association.
Unicount: This explains the regular qualification quota for shareholder meetings. This only matters if there are multiple shareholders.
3.4 The resolution on amendment of the Articles of Association of the private limited company, the resolution specified in the subsection 192 (1) of the Commercial Code, the resolution specified in the subsection 197 (1) of the Commercial Code, the resolution on dissolution of the private limited company, the resolution on continuation of activities of the dissolved private limited company, the resolution on merger or division of companies or the resolution on reorganization shall be adopted at shareholders’ meeting, if at least 2/3 of the votes are given in favor of the resolution.
Unicount: This only matters if there are multiple shareholders. Keep this in mind when designing shareholder agreements or selling shares in your company.
3.5 The shareholders’ pre-emptive right of subscription for shares may be precluded by a resolution, which shall be adopted: at shareholders’ meeting, if at least 3/4 of the votes are given in favor of the resolution.
Unicount: This only matters if there are multiple shareholders. Normally this situation only applies to startups issuing new shares.
3.6 The management board of the company is elected without a term. The number of members of the management board is 1-5.
Unicount: It is always good to have a management board without a fixed term. Otherwise, you might be surprised to find that you are a board member without the right of representation due to your term expiring!
3.7 Management board of the private limited company has no right to increase the share capital.
Unicount: Normally this situation only applies to startups where the board may have a limited right to increase the share capital without a shareholders’ resolution.
3.8 Each member of the management board has the right to represent the company in all legal acts unless a different entry is made in the commercial register. A corresponding resolution of the shareholders shall be adopted under the procedure prescribed for amending the articles of association.
Unicount: For a solo founder and board member company, the only option is to have a management board member with unlimited rights. You may consider limiting the rights of additional board members, such as a minority shareholder etc.
3.9 Upon liquidation of the company, the liquidators shall be the members of the management board unless otherwise prescribed by a resolution of the shareholders or a court decision.
Unicount: This is a normal procedure when liquidating your company. Keep in mind that at least one liquidator needs to reside in Estonia. For a solo founder and board member company owned by a non-resident, this would mean using a liquidation service.
3.10 The company shall have no supervisory board.
Unicount: Micro- and small-size companies normally do not need a supervisory board.
3.11 The company shall have no auditor, except in case the requirement of having an auditor arises from law.
Unicount: The current Auditors Activities Act is the law that prescribes the requirements for audit. A review is a simplified version of a full audit.
An audit of the annual accounts is compulsory for companies in whose annual accounts at least two of the indicators of the financial year exceed the following conditions:
1) sales revenue or income 4 000 000 euros;
2) total assets as of the balance sheet date 2 000 000 euros;
3) the average number of employees is 50 people.
OR
at least one of the indicators of the financial year exceeds the following conditions:
1) sales revenue or income 12 000 000 euros;
2) total assets as of the balance sheet date 6 000 000 euros;
3) the average number of employees is 180 people.
A review of the annual accounts is compulsory for companies in whose annual accounts at least two of the indicators of the financial year exceed the following conditions:
1) sales revenue or income of 1 600 000 euros;
2) total assets as of the balance sheet date 800 000 euros;
3) the average number of employees is 24 people.
OR
at least one of the indicators of the financial year exceeds the following conditions:
1) sales revenue or income 4 800 000 euros;
2) total assets as of the balance sheet date 2 400 000 euros;
3) the average number of employees is 72 people.
3.12 Company may not issue, for a conditional increase of the share capital, bonds by a resolution of the shareholders, the holders of which have the right to convert their bonds to shares (convertible bond).
Unicount: Normally this situation only applies to startups where investors may ask for convertible bonds for their investment.
APPENDIX TO ARTICLES OF ASSOCIATION
1. Upon foundation a shareholder of the private limited company … holds a share with the nominal value of … EUR, for which the shareholder pays upon establishment according to the nominal value.
2. Upon foundation the shares of the private limited company shall only be paid for by monetary contributions.
Unicount: The Estonian Commercial Code does not require a share capital deposit of up to 50 000 EUR to be proven with a share capital deposit certificate.
3. Foundation expenses. The anticipated foundation expenses of the private limited company are 300 euros.
Unicount: Commercial Code requires anticipated expense estimates. When using the Unicount company formation service, the anticipated costs are always stated as 300 euros no matter what it really is.
3.1 All the foundation expenses shall be borne by the shareholders according to the nominal value of their shares.
Unicount: This here means that formally you cannot reclaim your company formation expenses as a founder of the company. Unicount will issue an invoice after your company is registered.
Need custom articles?
Our legal partner is Hedman Law Firm. A top law firm in Estonia that has been working with many Estonian startups. Whenever you do make custom articles be sure to submit bilingual parallel texts to Estonian Business Register as notaries and other third parties need to understand your articles. The official language in Estonia is Estonian and all Business Register documents anyway need to be in proper Estonian. Our translation partner is the Eiffel translation agency.
Thanks for reading
We hope this article was useful for you. If you’d like to start your own Estonian company then Unicount is the simplest way to do it. We have a user-friendly online company formation service that’s been developed for citizens, residents and e-residents of Estonia. It takes a few minutes to get a company set up. Check it out at https://unicount.eu/en/.
