help! my company was deleted from the business register

Estonia introduced laws in 2023 allowing the Business Register to delete companies in certain circumstances. Learn what they are and what to do if this happens to your company.

This guest post was written by 1Office, a team of more than 50 skilled professionals who specialize in law, accounting, taxation, customer service and support for cross-border entrepreneurs. Find them on the e-⁠Residency Marketplace.

Typically, as a business owner, you are responsible for making decisions about your company. However, there are instances where the government can step in and make those decisions on your behalf. We'll be covering one such instance in this article involving the public Estonian Business Register, which has already affected thousands of e-⁠residents.

New legislation in Estonia

In 2023, the Estonian government introduced new legislation that empowers the Estonian Business Register to delete companies whose owners do not comply with legal requirements.

The Business Register monitors whether company directors are fulfilling their legal obligations. If they fail to do so, the register can impose penalties or decide to delete the company. Deletion occurs in two main scenarios:

• Failure to submit the annual report (remember the deadline for most companies is approaching fast - 30 June), or
• Lack of a registered contact person.

While for some this may appear to be an extreme step, it has been put in place to retain corporate safety, efficiency, and transparency in Estonia's business environment.

Impact of non-compliance

By May 2024, more than 20,000 companies, including over 4,000 e-⁠resident companies, had been shut down by the Business Register. Losing your company can lead to legal and financial issues and may result in personal tax liability for the owners.

Criteria for deletion without owner approval

The Business Register can delete a company without the owner’s approval if the following conditions are met:

• The company has no assets registered in Estonia. Assets outside Estonia, including money in a bank account, do not prevent deletion.
• The company is not involved in any ongoing court, criminal, or enforcement proceedings. Legal disputes outside Estonia do not prevent deletion by the Estonian Business Register.
• The tax office has given its consent. Companies with a VAT number or other tax liabilities, such as unpaid salaries or management fees, will not be approved for deletion and will face penalties instead.

Shift in practice: penalties over deletion

Recently, the Business Register has shifted its approach, opting to issue penalties for non-compliance rather than deleting companies. The initial penalty is 200 EUR, which increases until the deficiencies, such as submitting the annual report and registering a contact person, are corrected. It’s important to note that penalties are subject to a 25% income tax.

What to do if your company is deleted

If your company is deleted, it does not affect its legal rights and liabilities. The company's obligations must still be fulfilled, and creditors can submit claims against the directors.

Depending on your business goals, you have two options:

• Continue business activities: Apply for reinstatement of the company, pay the state fee, and correct the issues that led to the deletion.
• Liquidate and access company assets: Apply for liquidation. A court-appointed liquidator will distribute the company’s assets to the owners.

Impact on e-⁠residents

E-⁠Residency intends to promote the development of the Estonian economy. If an e-⁠resident's company is deleted from the Business Register, the Estonian Police and Border Guard may revoke e-⁠Residency status. Losing e-⁠Residency means losing access to Estonia’s digital services, which are amongst the most advanced in the world.