Estonia has one of the world’s most transparent business environments. This helps ensure Estonian companies can be trusted worldwide, even though they can be run entirely online from anywhere by Estonians and e-residents.
A key part of this transparency is ensuring it’s clear who controls each and every company. As an Estonian company director, you are legally obliged to declare the persons benefiting from your company’s activities, the so-called ‘beneficial owners’. This must be done by everyone after starting a company through Unicount, as well as updated within 30 days whenever there is a change to your company’s beneficial owners.
So we put together this guide for you to understand who they are and how to register them.
By the way, it’s not easy picking stock photos at the moment, but that one above is our best attempt at depicting a board meeting in 2020.
Who is a ‘beneficial owner’?
Not all shareholders are beneficial owners and not all beneficial owners are shareholders. Confused? Don’t worry. It’s a little simpler than it sounds.
Firstly, Estonia only counts beneficial owners as people who own more than a quarter of a company, whether directly or indirectly. That’s why not all shareholders have to be recorded as beneficial owners.
In addition though, a beneficial owner can be someone who benefits from the company activities and profits even though they may not be formally registered as owners. They may not even consider themselves to be owners, but if they are exerting influence over the company in some form and/or expecting returns from the company, even if they do not have a formal stake, then they may well be classed as beneficial owners.
In some cases, for example, there may be a third party involved that formally owns the shares for reasons of security or convenience. More commonly though, the beneficial owner is someone who owns a company that controls the company, sometimes referred to as parent or mother companies.
Estonian companies always had to be transparent about their beneficial owners when dealing with financial institutions, notaries and other regulated service providers. In 2018 though, Estonia updated its Money Laundering and Terrorist Financing Prevention Act to make it mandatory for Estonian companies to know who their beneficial owners are and publish the data publicly on the Estonian Business Register. If you want to look at the law yourself, then the section about beneficial owners is outlined in Section 9 on the link above.
So who are your company’s beneficial owners?
Well, in many cases, this is actually a very easy answer. It’s probably just you. A lot of Estonian companies are single shareholder companies with no complex co-ownership agreements or corporate ownership structures. This is especially true for e-residents and those who use Unicount, many of whom are freelancers or start out as solo entrepreneurs. If that’s the case for you then you are the only owner, only director and the only beneficial owner. You still have to go through the process to declare yourself as your company’s beneficial owner though.
If anyone’s unsure if they have other beneficial owners, let’s take a look at how Estonia defines a beneficial owner.
“In the case of companies,” according to the Estonian Ministry of Finance, “a beneficial owner is the natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in that person, including through bearer shareholdings, or through control via other means. Pursuant to subsection 9 (3) of the [Money Laundering and Terrorist Financing Prevention Act], direct ownership is a manner of exercising control whereby a natural person holds a shareholding of 25 percent plus one share or an ownership interest of more than 25 percent in a company; indirect ownership is a manner of exercising control whereby a company that is under the control of a natural person holds or multiple companies that are under the control of the same natural person hold a shareholding of 25 percent plus one share or an ownership interest of more than 25 percent in a company.”
So there’s the complicated bit.
If, for example, someone owns more than 50% of a company that owns 50% of your company then that person indirectly owns more than 25% of your company. Therefore, they are an indirect beneficial owner of your company. Of course, percentage ownership isn’t always as neat as that so you may have to do some calculations to be sure who owns more than 25% of your company indirectly.
For more help and additional examples, a full guide for identifying beneficial owners is available for Estonian company owners from the Ministry of Finance.
How to declare beneficial owners after starting an Estonian company
Every Estonian company has to complete this process.
When you register an Estonian company through Unicount, you are expected to complete this process within a reasonable period. You’ll also find you can’t submit anything else, such as your company’s annual report, without doing it.
It’s super simple though and takes a minute or two.
First, log into the Estonian Business Register. You’ll then see your company with a warning box saying ‘Beneficial owners not appointed’. Click on that warning box.
On the next page, you’ll see an empty list of beneficial owners. Helpfully though, you’ll also see a list of people related to the company, including direct owners, that you can add straight away. For most of you without complex ownership structures, all you need to do is add anyone who owns at least 25% straight from there. For everyone else, click ‘add new person’.
In either case, you will see a form for each person like this below, which you can complete before clicking ‘add’. If you selected the person from the suggested list then most of the details will be pre-filled.
That’s it. Your company’s beneficial owners are now recorded in the Estonian Business Register.
How to change the beneficial owners for your Estonian company
As your company grows, your company may have changes to its ownership.
At Unicount, we recently published a full guide on how to add a shareholder for your Estonian company online. Regardless of whether they are a new direct or indirect owner though, if they own more than 25% (or an existing beneficial owner no longer does) then you can log into the Estonian Business Register and update that just as easily. The data is not updated automatically when you transfer or issue new shares.
This time though, you’ll need to click on your company name.
Then scroll down to the section on beneficial owners and you will see a box underneath that says ‘Start amending beneficial owners’.
You will then see the option again to add a new beneficial owner or remove an existing one. If you are removing someone then you will need to provide a reason too. Note that you cannot remove all your beneficial owners so you’ll need to add someone new before deleting the last person.
Thanks for reading
Unicount is the simplest way to start a paperless EU company.
By the way, you can only choose one shareholder when starting a company through Unicount due to API limits from the Estonian Business Register. However, if you wanted to register multiple shareholders from the start then you can follow our guidelines. You’ll need to use the Estonian Business Register directly, which takes a bit longer and is more complicated. However, you can still subscribe to Unicount’s virtual office service first here because there is a requirement for all Estonian companies to have a registered address and contact person in Estonia. You can read more about our virtual office subscription.
In addition, here is our guide for how to add a new shareholder for an Estonian company online.
