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Articles of association for Estonian OÜ

Adam Rang
Adam Rang, Communications Director at Unicount

All Estonian limited companies (OÜ) registered via the Unicount online company formation service have the same standard articles of association.

This is the official translation of the articles provided by the Estonian Business Register.

Unicount explains each article briefly so you are aware of possible limitations and required procedures.

ARTICLES OF ASSOCIATION

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 2500 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 2500 – 25 000 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 euro 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 gives one vote, so you would have 2500 votes out of 2500 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 the members of the management board is 1-5.

Unicount: It is always good to have management board without a fixed term. Otherwise, you might be surprised to find that you are a board member without 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 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) average number of employees 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) average number of employees 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 1,600,000 euros;
2) total assets as of the balance sheet date 800,000 euros;
3) average number of employees 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) average number of employees 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 Your Name holds a share with the nominal value of 2500 EUR, for which the shareholder pays upon establishment or by the term specified in Article 2.2. of the Appendix to the Articles of Association according to the nominal value.

2. Payment for a share of the private limited company.

2.1 A share of the private limited company shall not be paid for in full before the submission of the application for entering the private limited company into the Business Register.

Unicount: Due to the API limitations the Unicount company formation service only allows to establish companies without making immediate share capital contributions.

2.2 Upon foundation of the private limited company without making the contribution a shareholder shall pay for the share in full upon the submission of a claim referred to in subsection 140¹ (2) or (3) of the Commercial Code.

Unicount: The Estonian Commercial Code allows you to postpone share capital payment until you would like to distribute dividends, or the company enters bankruptcy proceedings which require shareholders to pay for company debts. Limited liability means that the amount is then capped with the amount of the share capital which the shareholders committed to pay.

3. Upon foundation the shares of the private limited company shall only be paid for by monetary contributions.

Unicount: This has no direct implications as the companies registered via the Unicount company formation service are registered without immediate share capital contribution. Article 1.5. regulates future situations.

4. 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.

4.1 All the foundation expenses shall be borne by the private limited company.

Unicount: This here means that you can reclaim your company formation expenses as a founder. Unicount will issue an invoice after your company is registered.

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