The Ministry of Justice and Digital Affairs has finalised legislative amendments introducing more than 100 changes to the Commercial Code. The main aim of the reform is to make the operation of private limited companies (osaühing) and public limited companies (aktsiaselts) more flexible, reduce restrictions, and resolve a range of practical problems that have emerged in day-to-day corporate life.
The most significant changes affecting private limited companies are set out below:
- Abolition of the quorum requirement at shareholders’ meetings. The general quorum rule for adopting resolutions will be abolished. Until now, more than half of the votes had to be represented at a meeting; going forward, there will be no automatic quorum requirement. Companies will, however, retain the option of setting a quorum requirement that suits them in their articles of association.
- Simpler incorporation and increase of share capital. When incorporating a private limited company, a monetary contribution can be made via the registrar’s deposit account, while the existing option of using a start-up account opened through the e-Business Register will be discontinued. Where the monetary contribution does not exceed €50,000, confirmation from the management board alone will be sufficient proof. In that case, neither incorporation nor an increase in capital will require opening a separate payment account or using a court deposit — the management board simply confirms to the Business Register that the funds have been paid.
- Easier conversion of loans into share capital. Where a company’s share capital is increased by a non-monetary contribution consisting of a loan and interest claim credited to the company’s bank account, an auditor will no longer need to verify its value — even where the value of the claim or the share capital exceeds €25,000.
- Stronger protection for shareholders when a company sells its own shares. The new rules improve shareholder protection in situations where shares held by the company itself (“own shares”) are transferred:
- the sale of own shares may only take place on the basis of a shareholders’ resolution;
- shareholders have a pre-emptive right to purchase shares held by the company, in proportion to their existing shareholding.
This pre-emptive right can only be excluded by a joint resolution of the shareholders.
- This change prevents the previous practice of using sales of own shares to covertly shift shareholding proportions in favour of selected shareholders.
- Stricter non-competition rules and a longer limitation period for management board members. A management board member may not, without the consent of the shareholders (or supervisory board), enter into an employment or contract-for-services agreement with a company operating in the same field of activity — the only exception being companies within the same group. The limitation period for claims arising from a management board member’s breach of the non-competition obligation will be extended from three years to five years.
- Delivery of declarations of intent where a company has no management board. Where a private limited company has no management board member at all, official notices and declarations of intent addressed to the company may in future be delivered personally to any shareholder. This simplifies dealings with companies that lack a functioning management body.
- Designation of different classes of shares in the articles of association. Where a private limited company has different classes of shares, these must be designated in the articles of association in order of the Latin alphabet (e.g. Class A shares, Class B shares, and so on). Companies will have until 1 April 2028 to make this change to their articles of association, and the amended articles must be submitted to the Business Register no later than 1 November 2028.