Hedman Osborne Clarke Alliance is an international law firm with affiliated offices across Europe, including Tallinn Estonia. The firm specializes in business law, real estate and succession matters. For more information please see www.hedman-attorneys.com

or contact them at Narva mnt. 11D, Fifth Floor, Tallinn 10151, Estonia (tel: + 372 6116950). Their representative in Canada is Liisa Kaarid, an Ontario qualified solicitor, who may be contacted at 1-519-742-7031 orliisa.kaarid@bigfoot.com.”

Private Limited Companies

The most significant difference between a private and public limited company is that the shares of private limited companies cannot be listed on a stock exchange. Further, transfers of such shares have specific limitations, including a grant to other shareholders the right of first refusal. Also, Estonian law requires that a notarised agreement be signed upon sale of the shares. In addition, the minimum share capital of a private limited company is only 40,000 EEK compared to 400,000 EEK for a public company.

Some aspects of the management structure of a limited private company also differ from that of a public company. The most notable difference in management structure is that in many private limited companies no supervisory board or auditing is required. If a private company has less than three members on its management board, no supervisory board is required is required if the company has less than 400, 000 EEK in share capital. When a private limited company operates without a supervisory board, it functions much like a corporation would in the US that is not publicly listed. It should be noted, that similarily to a public limited company, Estonian law requires that at least one half of the members of the management board of such a company be residents of Estonia. The members of the management board do, on occasion, perform more ordinary daily tasks than aboard of directors of a US corporation would.

There are specific provisions of the Estonian Commercial code that allow companies to switch from being a public limied company to a private limited company or vice versa with relative clarity. For example, if a company chose to incorporate as a private company in order to have the smaller share capital requirement and the relative flexibility of the private form but now wishes to be listed o the stock exchange, the private limited company would need to be transformed to a public company. Fortunately, Estonian law provides a clear methodology for achieving this transformation as well as numerous other transformations, including the transformation from a partnership to a public or private limited company.

Branch

The last from of business organization that will be discussed is a branch (filiaal). A branch is an unusual form of business organization in that it is not recognized as a legal peron under Estonian law. The import of this is that the home company is responsible for all of the liabilities it incurs in Estonia. It is specifcally designed to be a representative of a foreign enterprise. Notwithstanding the fact that a branch is not a legal person, it must nonetheless have a director or directors, one of which must be legal resident of Estonia. A director directs and represents the branch and organises the accounting of the branch, inclding payment of taxes. the main point of this issue is that all companies tht sell goods or provide services in Estonia must register as at least a branch office if they do not register as some other organizational form.

(To be continued)

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