Estonian companies may be managed from foreign countries in the future. Legally.

Triniti

According to the current law, it is not allowed to manage Estonian companies from abroad. However, such a possibility is provided for starting next year, but in that case a contact person located in Estonia has to be appointed to receive documents.

Since 2014, persons can apply for the e-Resident’s digital identity card. The e-Resident’s digital identity card enables the use of different Estonian e-services and its purpose is that e-Residents could engage, inter alia, in Estonian business and thereby contribute to the development of Estonia. One such e-service is the possibility to found companies through the web-based enterprise portal.

One of the bottlenecks upon the foundation and operation of companies, however, is the fact that pursuant to the current law, the location of the management board of Estonian companies must be in Estonia. The location of the management board is a place where the management board carries out the daily management of the company. As e-Residents generally do not reside in Estonia, this requirement does not contribute to achieving the above objective.

Therefore, the Estonian Parliament adopted in April and the President proclaimed the amendments to the Commercial Code pursuant to which the location of an Estonian company may be from now on also in a foreign country. The relevant amendments will enter into force as of January 15 next year.

A reliable contact person must be appointed if the management board is located in a foreign country

Although in practice the management boards of many Estonian companies are located abroad also now, it is not legally permitted. New regulation will change this. However, since the company’s connection with Estonia may become practically non-existent in such a situation, it is necessary to ensure that other persons, including the creditors, would have a real possibility to get in touch with the company.

For that purpose, the company, which management board is located in a foreign country, must appoint a contact person who is located in Estonia and enter the contact person in the register. Contact person is a person to whom, at the contact person’s Estonian address, the procedural documents of the company and declarations of intent addressed to the company can be delivered.

So as to ensure the contact person’s reliability both for the company and third persons, the law prescribes that only a person from among the persons who comply with heightened requirements and from the following professions – notary, notary office, advocate, advocate’s law office, sworn auditor, audit firm, tax representative holding an activity licence or providers of trust and company services – can be elected as a contact person. As an exception, a member of the management board, a partner, a shareholder or a procurator of the company may also be appointed as a contact person, if the person resides in Estonia. However, for example, the company’s place of business (e.g. the address of a plant or production unit) cannot be appointed as a contact person – it must be a specific person and the person’s address.

Documents delivered to a contact person shall be deemed to be delivered to the company itself

Contact person is a passive representative of the company. This means that the contact person’s task is only to receive the procedural documents and the declarations of intent made by third parties that are addressed to the company. The contact person does not have the right or competence to make any declarations of intent on behalf of the company.

If a contact person is appointed, the contact person’s address is considered to be the company’s address. Consequently, if a contact person receives a declaration of intent or document addressed to the company, it shall be deemed that this declaration of intent or document has also been received by the company.

Appointment of a contact person and liability of the management board

Digitally signed consent of a person or a consent verified by a notary is required to appoint the person as a contact person. If the contact person no longer wishes to perform the contact person’s role, he/she has to make a corresponding application to the management board of the company that must ensure that a new contact person is appointed and entered in the register. The management board of the company must see to it that the contact person’s details in the register would be correct and true. If the company has not entered a (new) contact person on the registry card, although it has the obligation to do so (because the management board is located in a foreign country), the register has the right to fine the company.

The company itself will decide whether the company will be managed from Estonia or a foreign country. Consequently, the need for a contact person will depend on how an undertaking will decide to conduct its business. In this context, it is also important to stress that the management of a company from a foreign country will not change the obligations or responsibilities of the management board of the company.

 

If you have any questions concerning the aforementioned or if you wish to use the Estonian contact person’s service provided by us, please contact me.

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