Company with unpaid capital

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Crowe DNW
estonia company

Do you know that natural persons (including foreign citizens) can establish a private limited company in Estonia without contribution in capital?

In this way, the company's economic activity can be started in a simplified manner, without involving the amount required for the share capital contribution.

This is the only way to register a private limited company owned by non-residents and e-residents in a situation where banks and payment institutions refuse open start-up accounts for the payment of share capital if owners or member of the management board will be non-resident (including e-Residency)  and majority of company operation will not be related to Estonia.

The required minimum share capital of EUR 2,500 will be registered, but it should not be paid on company's set up. This allows the business to develop more calmly in the initial phase, even if the net assets fall short of the criteria set out in the Commercial Code in the annual report. In practice, however, this does not mean that net assets can become negative for long time because it can cause claims from regulators and creditors. 

Restrictions are imposed on a private limited company established without a contribution

The Commercial Code does not set a time limit within which the share of a private limited company so established should be paid for. Thus, there is no regulatory pressure to raise funds in addition to setting up a business during its development. The shareholders still have a liability - until they have paid the share capital contribution in full, they are liable to the private limited company for the amount of the unpaid contributions.

There are certain restrictions on a private limited company with unpaid capital

  • Such a private limited company is not permitted to distribute dividends. Assuming that one of the objectives of each company is to make a profit within a reasonable timescale, it must be borne in mind that the share capital must be paid up before the shareholders can pay out the ownership income.
  • When establishing a private limited company without the involvement of a notary and without paying for the shares, only the standard articles of association used in the expedited procedure may be approved upon establishment. Thus, such a private limited company is not in a position to make a contribution in kind or to increase its share capital until the share capital payment.
  • it is not possible to raise additional share capital, ie also new shareholders, until the existing shareholders have paid in full as a cash contribution to the registered share capital. The resolution of the shareholders can then approve the amendment of the articles of association, which would allow to increase the share capital with both monetary and non-monetary contributions
  • Unlike the company portal, where the founders have to confirm that they pay for the share capital with a cash contribution, when establishing a private limited company without a contribution with a notary, it is possible to approve the articles of association, which allow both monetary and non-monetary contributions. The memorandum of association must state how the shares will be paid for.

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