Of course when one opens a company, it is done with the goal to create a long lasting successful business. But doing business also means accepting certain risks that exist on the market, some of which we can’t predict or prepare for, the COVID pandemic being the best recent example.
As such, one must never rule out the situation where closing down the company may actually be the best available option to cut the losses.
Regular liquidation
In Estonia the procedure for closing down the company is called liquidation. Due to the specifics of the currently active Estonian laws, said procedure can take several months. Fortunately, with the recent updates to the Commercial code of Estonia, that came into force in February 2023, this procedure was somewhat simplified.
The main difference is related to the key person in the mentioned procedure – company liquidator, who carries out the whole process and manages the company during the liquidation period. This is a very important position, as the liquidator must adequately perform his duties to close down the company in the orderly fashion.
Previously such a position required at least one such person to be an Estonian resident, a factor that greatly increased the price of the procedure, as many companies, especially those owned and managed from abroad, had to hire a local specialist to act as the liquidator, even if they personally were competent enough to perform said duties.
But with the latest changes the residency of the liquidator is no longer a factor and as such a non-resident can also hold the position and perform the necessary functions. Of course, the procedure still requires knowledge of the applicable Estonian legislation, and a foreign liquidator may require assistance or consultations from local specialists, but the related costs will still be substantially lower when compared with the need to hire a separate person, with the necessary knowledge and willing to bear the full responsibility for the whole procedure.
Should be noted, that this change to the legislation works very well with the existing Estonian e-residency program. With an e-residency ID card a foreign liquidator can make best use of the Estonian e-state concept, that will allow him to handle the whole process online, without the need to come personally to Estonian or file paperwork through a notary, as in Estonian all is done digitally.
Close a company via a simple application
As was mentioned above, the situation on the market may change rapidly. A company that had great potential yesterday, may lose many opportunities the next day due to unforeseen circumstances without even getting a chance to start its activities.
It is quite unreasonable to make the owners of such a company go through a lengthy and costly liquidation procedure should they decide to close down the company, but until recently there were few other options. But with the recent changes that is no longer the case.
With the 2023 legislative changes it became possible to close down the company simply by presenting the application to the Estonian commercial registry, no other major requirements or long-term procedure being involved. This variant is only available for companies that did not start any activities. This means no transactions, no signed agreements, obligations, even no opened bank accounts.
If the company does fit said criteria, closing it down becomes far easier with the above-mentioned option provided by the new changes to the legislation. Furthermore, as with the first option we discussed, this variant works very well with the Estonian e-residency program. It will allow one to close down such a company online without any unnecessary costs, saving both the money and the time of those involved.
Conclusion
Overall, the recent changes to the legislation brought about many new options and features with the general aim to make all aspects of company establishment or management easier and faster. Their idea was to make the Estonian business environment as accessible as possible through both the already proven and tested Estonian e-residency program and the new options to use it and benefit from it.