company mergers in estonia: what you should know

Mergers are a common way to combine companies in Estonia. Which type of merger should you choose, and how do you do it right?

This article is by Fondia Estonia. Their 100 lawyers in Estonia, Lithuania, Finland, and Sweden offer expert legal services. Fondia is a certified member of the e-⁠Residency Marketplace.

There are two different ways to combine companies: mergers and acquisitions. An acquisition happens when one company buys most or all of another company's shares or assets to take control, while a merger combines two separate companies into a brand-new, single organisation. In this article, we will discuss mergers. 

A merger is a common way to combine companies in Estonia. The acquired company's assets, contracts, rights and responsibilities transfer to the acquiring company. The acquired company then ceases to exist without going through a separate liquidation process. 

The good news for e-residents is that most of the steps can be done without travelling to Estonia – much like setting up a company and running its day-to-day business. 

This article explains the basics of mergers and how to merge companies in Estonia.

What to keep in mind about mergers?

1. A merger takes place without liquidation. 
2. A merger can include more than two companies. The overall logic and process are the same, but you need to prepare more documents.
3. The acquired company's assets and responsibilities transfer to the acquiring company.
4. The merging companies must be Estonian companies entered in the e-Business Register. They can be of the same or different company types.
5. The shareholders of the acquired company become shareholders of the acquiring company as a result of the merger.

What types of mergers are possible in Estonia?

An e-⁠resident is likely to encounter one of two common scenarios – merging two Estonian companies or a cross-border merger. 

When two Estonian companies merge, for example, two private limited companies (OÜs), the goal is to bring the activities under a single roof or to simplify a group structure. In a cross-border merger example, you might decide to move business activity to Estonia.

• A merger by acquisition means one or more companies are merged into an existing company.
• Merger by formation of a new company means two or more companies combine to establish a new company, while the original companies cease to exist as separate legal entities. 
• A cross-border merger means an Estonian company and a limited liability company established under the law of another European Economic Area (EEA) country are combined into one.

The specifics of cross-border mergers

A cross-border merger is when an Estonian company and a company from a different country merge. 

The other company must be a limited liability company established under the law of a European Economic Area (EEA) country.  Also, the company's registered office, management board location or its main place of business must be in an EEA country. 

A cross-border merger is intended to move the business. A cross-border merger may not be possible if the company is already being closed down and its assets are being distributed to shareholders. It is also not allowed in certain situations involving reorganisation, bankruptcy or criminal proceedings.

If the company registered in Estonia participates as the company being acquired (i.e., the one moved across the border), the Estonian registrar issues a cross-border merger certificate to the corresponding authority of the destination country. 

The registrar may refuse to issue the certificate for many reasons:

• If the merger is planned for fraudulent or criminal purposes
• If it would threaten Estonian national security

To identify the purpose of the merger, the registrar sends an inquiry to the Estonian Tax and Customs Board and may contact other country or local government authorities or other public-law legal persons.

How long will a merger take?

Merging two Estonian companies takes around two to five months, provided the merger is straightforward and there are no legal or administrative issues. 

The timeline includes preparing the merger agreement and related documents, approving the merger, meeting requirements that protect creditors and registering the merger with the e-Business Register.

A cross-border merger involving an Estonian company typically takes several months to complete. While the exact timeline depends on the countries involved, the corporate structure and any regulatory or creditor-related requirements, a straightforward merger within the EU generally takes around five to seven months. 

The process involves preparing and disclosing merger documents, obtaining shareholder approval, meeting creditor and employee protection requirements, obtaining the necessary pre-merger confirmations and completing registrations in the relevant countries. Early legal planning can help identify potential delays and keep the process moving efficiently.

How to merge two Estonian companies

1. Management and shareholders sign the merger agreement
2. Prepare the merger report
3. Audit the merger agreement 
4. Prepare the decision and inform shareholders
5. Adopt the merger resolutions
6. File the application with the Commercial Register
7. The registrar makes the merger entry and informs creditors

For a more detailed overview, check out the article on company mergers in the e-⁠Residency Knowledge Base.

How to do a cross-border merger

1. Prepare and sign the cross-border merger agreement
2. Inform and consult employees, prepare reports
3. Audit the merger agreement
4. Publish documents before the merger resolutions
5. Adopt the merger resolutions and protect shareholder rights
6. Protect creditors
7. Submit the required application and confirmations, issue the merger certificate and make the entry

For a more detailed overview, check out the article on company mergers in the e-⁠Residency Knowledge Base.

Which platforms do you need for a merger?

You will use several platforms and portals to carry out a merger. As an e-⁠resident, you can log in with an e-⁠resident digital ID. With the e-⁠resident digital ID, you can identify yourself in an electronic environment and sign digitally.

E-Business Register (E-äriregister)

You sign and file the registration application for the merger in the e-Business Register. The e-Business Register portal is also used for filing other Commercial Register applications and supporting documents. Management board members can upload documents, sign applications and follow the progress of the proceedings.

Notary

A notary must authenticate the merger agreement. Notarial services can be used either by video call with the e-Notary services or in person at the notary's office. Each notary can decide whether to use remote authentication, i.e., by video call.  We strongly recommend checking with the notary's office before the transaction.

Official Journal (Ametlikud Teadaanded)

Notices that are required to be published by law are listed in the Official Journal.

Where to find sample documents

You can find plenty of sample documents online. However, the documents needed differ from one merger to another and depend on a range of circumstances. Therefore, using generic templates is not particularly recommended.

Some useful links to start from:

• Overview of the merger of companies – the official state-level summary for entrepreneurs;
• European Union guide to international restructuring – an overview of the general EU rules.

Don’t let legal complexity slow your business down

Mergers and cross-border transactions come with plenty of legal details, but navigating them shouldn’t become a job in itself. At Fondia, we work as an extension of your team, providing practical legal support from the first plan to the final registration.

We have a track record of completing one of the first cross-border transformations in Estonia by helping a Spanish e-⁠resident move their business here. 

Have a merger on the horizon? Let’s make it happen.

Check out Fondia on the e-⁠Residency Marketplace