Estonian Business Register recently deleted more than 26 000 companies for not submitting their annual accounts on time. In 2023, 121 654 companies missed the annual accounts deadline. Of those 26 681 were deleted from the register in 2024, and another 13 100 were fined.
Knowing that non-submission can result in company deletion, it has been widely used to evade debts and tax liabilities. Currently, having debts does not prevent deletion unless legal actions are already in progress. The Estonian Ministry of Justice stresses that deletion does not absolve directors’ legal responsibilities for unlawful acts or inactivity.
Understanding the Deletion Process
The Business Registry allows companies a three-month grace period to submit their reports before deletion. Even after deletion, creditors, including the tax office, can demand the company’s administrative restoration for debt recovery. If your company was deleted accidentally and you did not intend to have it deleted, you can restore it only after you submit your annual accounts and pay a state fee of 200 euros.
This mass deletion is part of a broader initiative to maintain the accuracy and reliability of the Business Register. It ensures that only active and compliant businesses are listed, enhancing the register’s credibility. However, the process has raised concerns that mass deletions may inadvertently encourage some business owners to deliberately avoid submission of annual accounts, knowing that the company will be deleted automatically.
Liabilities are not deleted
Deleting a company from the Business Register does not eliminate its financial obligations. Directors can remain personally liable for the company’s debts, and creditors can seek legal action to recover outstanding amounts.
Additionally, the Estonian Tax and Customs Board has the authority to block the deletion of a company if there are outstanding tax liabilities. This measure ensures that companies cannot simply disappear to avoid paying declared but unpaid taxes.
Why to submit Annual Accounts on time
Submitting annual accounts on time is crucial for several reasons. Timely submission helps maintain a company’s good standing with the register, avoiding penalties and potential deletion. It also ensures transparency and trustworthiness in the business environment. This is vital for trust-based business relationships where you do not need to prove your good standing, as everyone can see it from the public records.
Late submission of annual accounts can lead to fines, administrative costs, and, finally, deletion, affecting your ability to conduct business and fulfil contracts until your company is restored. As a founder, you can avoid these risks by staying compliant.
Impact on Business Environment
The removal of such a large number of companies from the registry is unique and will have significant implications for the business environment in Estonia. On one hand, it helps to clean up the register, making it a more reliable resource for valid information about business partners. On the other hand, it may cause disruptions for creditors, employees, and other stakeholders associated with the deleted companies. However, we assume that most deleted companies were micro-companies with no employees.
Some stakeholders believe the government should consider alternative measures to enforce compliance without committing to mass deletions. Suggestions include more robust penalties for non-compliance, improved support for businesses struggling to meet their obligations, and increased transparency in the enforcement process.
For businesses operating in Estonia, this deletion serves as a crucial reminder to maintain compliance with annual accounts disclosing requirements. Founders should prioritize the timely submission of their annual accounts to avoid penalties and the risk of deletion.
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