For the last six years the private persons have had the option to establish a private limited liability company without paying in the share capital. In such case the memorandum of association or foundation resolution provide that the founder(s) do not have to pay the share capital at the founding of the company and after the company has been registered the registry card will include a notation that the company has been founded without making contributions.
The option to establish companies without making contribution to share capital has been used quite extensively, which is understandable as it provides the opportunity to establish a company quickly and without significant costs. However, it must be kept in mind that until the share capital contributions have not been made by the shareholder(s) there are certain restrictions on the company.
Amendment of the size of the share capital
Until the share capital contributions have not been made the company may not increase or decrease the share capital.
The shareholders may need to change the amount the share capital, for example, for involving new shareholders or in order to comply with the minimum equity requirements deriving from law. If, however, the share capital contributions have not been made it is not possible to carry out the decrease or increase of the share capital. Until the commercial register contains the notation that the company has been founded without making contributions the register will not accept any petitions for amendment of the size of the share capital.
Payment of dividends
Until the share capital contributions have not been fully made the company may not perform any payments to the shareholders. The restriction on the payments does not preclude payment of salary or other such fees (e.g. fee for management board member), but division of profit – i.e. payment of dividends – may not be decided or performed before the share capital contributions have been paid in full.
If such forbidden decision is made and dividends are paid to the shareholder(s) then in such case the law provides that if a shareholders has received a payment which he/she was not entitled to, he/she must return the wrongly obtained amounts to the company. The claim to return such unfounded payment is valid for five years from the date the payment was made to the shareholder.
Activities for payment of the share capital contributions
In order to pay the contributions of the share capital it is not enough to just perform a money transfer to the account of the company with the description “share capital contribution”.
For registering the share capital contribution in the commercial register a respective shareholder’s decision must be adopted and a petition must be submitted to the commercial register along with the decision and the documents proving the payment of the contribution.
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