key things to know when closing a company in estonia

If you're looking to close a company in Estonia, get to know the types of liquidation, their processes, and how to choose the right path

This guest post about how to close a company in Estonia is written by Margus Randma, CEO of Liquidation Helpway, which supports e-⁠resident businesses to close in legally compliant and efficient ways and is a trusted member of the e-⁠Residency Marketplace.

E-⁠Residency has made it easier than ever to start a business with minimal paperwork and administrative hassle. It allows entrepreneurs to establish a company and manage their operations remotely. So far, e-⁠residents have created over 33,000 companies. Many of these businesses are financially strong, while some are doing moderately well. Naturally, some companies are struggling financially, which is common in any business environment.

If your company is experiencing financial difficulties, you need to carefully consider your next steps to close or restructure the business. Common paths to consider are: (A) Voluntary liquidation – Closing the company in an organised way, (B) Reorganisation – Trying to fix financial problems and keep the business running, or (C) Bankruptcy – If the company cannot recover and must legally close. In this article, we'll introduce each of these three processes and briefly outline when a company should consider each path.

A. Voluntary Liquidation

Voluntary Liquidation (also known as voluntary dissolution) is a decision made by a company's shareholders to close the company according to a dissolution resolution. Following the resolution, the company will need to petition the e-Business registry, publish a notice of liquidation, and prepare reports relating to the liquidation, net asset allocation, and any tax consequences. This process is relatively straightforward and efficient, and is a good way to manage the closure of a company that is dormant or struggling to gain financial or market traction.

When Should You Consider Voluntary Liquidation?

There are a few reasons you might decide to liquidate your company.

• Your business is losing money and/or your company’s net assets are decreasing over time, it might be the right choice to liquidate. This is especially the case if closing the company now would leave you with more funds than waiting.
• Your company is dormant. If your company is no longer active and maintaining it feels like an unnecessary burden, perhaps it's time to liquidate. Even though Estonia has one of the simplest company reporting systems in the world, you may not want to deal with filing an annual report or paying an accountant to do so anymore.
• If market conditions change, this could be another reason to liquidate your company. For example, tax changes might negatively impact your business, so closing your business could be a viable option. On this point, please be aware that from 2026, Estonia will introduce a 2% corporate tax on profits (payable quarterly based on the previous year's profits). Plus, from July 2025, the VAT rate will increase from 22% to 24%.

How does Voluntary Liquidation work?

Voluntary liquidation is a relatively simple process that can be handled with the help of consultants. Here’s what you need to know:

• The process will take 7–8 months in total, but most of the time, you don’t need to do anything.
• A consultant will manage most of the process, guiding you when necessary.
• In an ideal case, you would only need to sign a few documents using your e-⁠Residency ID card.
• Your e-⁠Residency ID must be valid to start liquidation. If your ID card has expired, you cannot begin the process.

Important Warning: Be Honest About Debts!

One of the biggest mistakes during liquidation is hiding financial debts. Some business owners assume that, after liquidation, creditors may not notice missing payments. However, if false information is provided, legal claims can be made against the liquidator. Additionally, some believe that being in another country protects them from legal action, but this is not true. Countries cooperate internationally to recover unpaid debts. Furthermore, if unfair practices are discovered, the business register may ban the liquidator from future business activities.

B. Reorganisation

Reorganisation is a process of restructuring a business to save it from bankruptcy. It is a more complex process than voluntary liquidation as it involves more parties, requires negotiation and agreements to restructure its finances, and aims to restore profitability in the long-term.

When should you consider Reorganisation?

Reorganisation may be a better choice than voluntary liquidation if your company is struggling but not completely bankrupt. The company may be able to recover if changes are made and there is a realistic chance of improving the business. If the company has potential to become financially stable again, reorganisation could be the right solution.

What Happens During Reorganisation?

Reorganisation is a more complex process because it involves more parties – including the board, creditors, the court, and a professional reorganiser. It will also involve negotiations between the parties to restructure the company's finances, make agreements, and get the business back on a sound footing.

Reorganisation involves careful planning. The goal is to restore profitability and ensure long-term success. Trust is key! If a company misuses the reorganisation process, it is unlikely to get another chance. In most cases, companies cannot be successfully reorganised more than once.

C. Filing for Bankruptcy / Insolvency

Bankruptcy (or insolvency as it's also known) is essentially a court-ordered closure of the company. Where the company's net assets are not positive, the liquidation is carried out in accordance with the statutory procedure provided for bankruptcy proceedings.

In what case is the company's net assets not positive? A company's net assets are not positive if the company's financial liabilities are greater than its assets.

When should a company file for bankruptcy?

Consider filing for bankruptcy if:

1. The company is completely insolvent and cannot pay its debts, or
2. The company’s net assets are negative, meaning it no longer has enough value to cover its obligations.

What Happens in Bankruptcy?

A bankruptcy trustee will review whether the company can be saved (e.g. through reorganisation) or must be closed. If closing is necessary, the trustee will sell the company’s assets and distribute funds fairly. Business owners should not try to hide or transfer company assets before bankruptcy, as such transactions can be reversed.

Be Prepared for the Process

If there is a chance that liquidation may lead to bankruptcy, it’s best to cooperate with legal authorities rather than resist. This might even give you some control over the process, such as negotiating to buy back valuable company assets.

Choosing the Right Path

So now you know the basics of the three mains ways to close a company in Estonia. Here are a few things to remember when choosing your path:

• Whether you choose liquidation, reorganisation, or bankruptcy, it is important to follow the law and act ethically.
• A good consultant can help make the process smooth and cost-effective.
• Trying to hide debts or assets can lead to legal trouble and financial losses in the long run.

Closing or restructuring a business is never an easy decision. However, making the right choice at the right time can protect your finances and reputation. Read more on the e-⁠Residency Knowledge Base.

Contact Liquidation Helpway

Liquidation Helpway offers e-⁠resident business owners help if there is a need to close a company in Estonia. We specialise primarily in voluntary liquidation, but our professional team and partner companies can also advise the company's board and guide the company through bankruptcy proceedings. The goal of Liquidation Helpway is to carry out all closure operations in accordance with the law, while also taking into account the rights and obligations of all parties in the process.