Changes to Estonian Company Share Capital Regulations as of 1 February 2023
Effective from 1 February 2023, a new Estonian Commercial Code has been implemented, bringing about revisions to the regulations governing share capital requirements for Estonian limited companies.
Under the new law, the previous minimum required share capital of 2500 euros has been eliminated, along with the provision that allowed the postponement of share capital deposits during company registration. In this article, we will delve into the specifics of these changes and offer some recommendations for founders who had registered Estonian companies prior to 1 February.
The amendments introduced by the new law offer increased flexibility for both resident and e-resident founders. However, experts in e-Residency have identified a controversial aspect of these changes. The elimination of the 2500 euros shares capital deposit requirement simplifies the process of starting a limited company for both residents and e-residents.
Share capital requirements for new companies The significance of 1 February 2023 lies in the radical transformation of the minimum required share capital for Estonian private limited companies (OÜ). Traditionally, Estonian entrepreneurs have been accustomed to the notion that a share capital of 2500 euros is necessary for establishing a limited company. Since the enactment of the initial Estonian Commercial Code in 1995, the share capital requirement has stood at 40,000 Estonian crowns, which was subsequently converted to 2556 euros upon the adoption of the euro in 2011. This amount was later rounded down to 2500 euros.
However, starting from 1 February 2023, founders and shareholders must assess the appropriate share capital amount required to initiate and sustain a private limited company. According to §148(1) of the Commercial Code, the minimum nominal value (face value) of a share is one euro cent. Therefore, an Estonian limited company can now technically have a share capital as low as one euro cent if it has a single founder and shareholder. This minimal amount is also displayed as the default value in the e-Business Register.
With each additional shareholder, the share capital increases by at least one euro cent. While this amount is a hundred times higher than the new minimum, one euro appears more appealing than one cent when someone reviews your registration details in the e-Business Register.
Interestingly, the removal of the option to postpone share capital payments has introduced a controversial clause (§141) in the Commercial Code, specifying that share capital payments should be made before company registration into a business bank account. However, in reality, very few e-resident companies gain access to a pre-registration startup bank account in an Estonian bank. Foreign financial institutions are hesitant to open a business account before the completion of company registration. As a result, founders are required to confirm that the share capital has been paid or utilize a court deposit account.