Estonia Has Amended Its Commercial CodeMar 04, 2018
The Commercial Code was established in late 1995 to provide umbrella legislation for the myriad international treaties Estonia has with several countries. More specifically, the Code defines the role of both the Commercial Register and an Estonian Company. Last year, Riigikogu, Estonia’s Parliament, gave the green light for the amendment to the Commercial Code, and the changes came to full force on 15 January 2018.
For the first time, thanks to the amendment, the management board of an Estonian company can reside outside of Estonia. Even so, those Estonian companies whose seat of the management board is officially outside the country are still required per the Code to have a point person (within Estonia) for the Commercial Register. More than that, these companies have to inform the Commercial Register of the same.
However, there is an exception to this rule. While the decision to determine the management board’s official seat rests with the company itself, there are instances where management decisions of the company are actually undertaken in Estonia. In such a case, the management board is thought to be in the country and, therefore, the company is not obliged to appoint a contact person.
Before opting to notify the Commercial Register that the official seat of the management board resides abroad, the company should first assess the potential tax ramifications. If making such a move forces the company to become a tax resident of another state, for instance, it could lose its legal status as an Estonian Company. The bottom line is that the company should conduct thorough research and consultation before taking advantage of this amendment.