Changes to the Commercial Code - a new obligation for every legal entity registered in Estonia

August 28, 2018

The legal landscape of doing business in Estonia will get a new chapter from the 1st of September from which date it is possible and an obligation to declare the  beneficiaries of a company (as well as foundations and non-profit organizations with a few exceptions).  While assessing and determining the beneficiaries is easy in most cases, it could be nearly impossible in others. The information will also become publically available in the Commercial Registry. The beneficiaries are determined as follows.

 

In  case of companies, a beneficial owner is deemed to be the natural person who ultimately owns or controls the legal person 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. Direct ownership is a manner of exercising control whereby a natural person holds a shareholding or an ownership interest of more than 25 per cent in a company. Indirect ownership is a manner of exercising control whereby a company which is under the control of a natural person holds or multiple companies which are under the control of the same natural person hold a shareholding or an ownership interest of more than 25 per cent in a company. 

 

Where the shares of a company are held by a trust, civil law partnership, community or legal arrangement, the beneficial owner is deemed to be the natural person who ultimately controls the association via direct or indirect ownership or otherwise and is the founder of such association or person who has handed over property to the asset pool; trustee or manager or possessor of the property; person ensuring and controlling the preservation of property, or the beneficiary or the class of persons in whose main interest such association is set up or operates.

 

In case there are several shareholders and the direct or indirect holding of none of them in the company is more than 25 per cent, the beneficial owners are deemed to be the members of a higher body of management (members of the supervisory board or, in case of a company without a supervisory board, the members of the management board).

 

The reasons for the amendments come from the effort to fight money laundering and the penalties for not complying can be very high.

 

We recommend to take this obligation very seriously and make it a priority if it already is not. 

 

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