Public limited company (AS)
The public limited company is probably the most sophisticated company type that you can create in Estonia out of all the legal entities. It is the only corporation in Estonia that can offer shares of the company to the public and has a supervisory board along with a separate management board.
According to Centar’s research, there were 2997 Estonian public limited companies in Estonia in 2018, which put the corporation type in the 3rd place in terms of numbers of registered and active companies. In years before 2018, the AS company type had always been the 2nd most popular, however, Estonian limited partnership (UU) companies have become more popular recently. Private limited company (OÜ) remains the most popular establishment type to this day.
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Comparison of an AS with an OÜ
The benefits of an AS mainly lie in the differences that arise when comparing with an OÜ. Both business types offer liability protection to all owners and shareholders, which other traditional Estonian corporations do not offer. Also, that is why it is important to compare these two to show why and when a public limited company should be created instead of a private one, and vice versa.
Public vs. private
The immediate difference between them becomes clear in their names. AS is a company with shares registered in the Estonian Central Register of Securities or in another depository, and with the ability to sell its shares on a stock exchange to private and legal persons. While an OÜ company is private, and its shares cannot be listed publicly. This also means that the value of an AS can depend on the stock price and its fluctuations if listed on a stock exchange. The value of an OÜ cannot be influenced by this factor and will in most cases rely on sales revenue, costs, assets, and liabilities in its valuation.
Management and supervisory
The second biggest difference is that an AS requires having a management board and a supervisory board, but an OÜ needs a management board only, which can consist of only one person as well. This difference translates into a more bureaucratic business with an AS, where the management board reports to the supervisory board. That being said, more bureaucratic does not always mean something bad. Here it provides a lot of safety to the shareholders and it makes sure that their opinions and desires are considered. The advantage of having only a management board is that decisions can be taken quicker, and the company is thus more agile.
Foundation
The costs around establishing a public limited company are considerably higher, to be exact, 10 times higher than of the private limited company. To establish an AS, the minimum starting capital of €25,000 must be contributed immediately upon the foundation. The OÜ only requires €0.01 as of February 2023 and even here the minimum capital contribution can be deferred until dividend pay-outs or changing the share capital amount. Regarding the share capital contribution, both companies can use an EEA business bank account.
The next thing to consider here is that to incorporate a public limited company, the founding member (s) have to visit an Estonian notary and do it in person or prepare a Power of Attorney. These methods of incorporation can be used with an OÜ as well, however, using e-residency can prove to be more effective as it allows to establish a private limited company completely remotely and within one day, which cannot said for the AS.
These are the key differences between an Estonian public limited company and a private limited company that we thought to be necessary to bring out, however, there might be some additional nuances.
Public limited company’s requirements
In case you skipped over the second chapter, we have brought out a quick overview of the requirements to show them better for the readers, who wish to get information quicker. The requirements to establish an Estonian AS are:
- Minimum share capital of €25,000;
- At least one founder/shareholder;
- A management and a supervisory board;
- A European Economic Area business bank account;
- Shares to be registered at the Estonian Central Register of Securities or in another depository;
- In order to be a shareholder of a public limited company, you must have a personal bank account at an Estonian bank;
- An auditor who goes over your documents regularly.
Accounting for an AS
The accounting requirements for a public limited company are a bit more demanding as they are for the other business types that you can establish in Estonia. For example, an AS company must have an auditor, whereas for an OÜ, the need for an auditor depends on the number of assets, revenue, and employees. This means that the auditor must go over all the annual reports before they can be submitted to the Estonian Tax and Customs Board. The annual report of an AS comprises a balance sheet, an income statement of annual accounts, and an activity report.
Also, if you know that the annual taxable income will exceed €40,000, you must register for an Estonian VAT number and start paying it to the state every month. In case the corporation will not exceed the threshold, you can still voluntarily register for VAT, which may improve business and partnership opportunities.
Besides this, everything else is the same as with every other company type – you must keep all transaction documents and write them into a journal or a ledger. Also, in case the company will have Estonian employees, there will be a need to make monthly tax contributions to the state and payments to your employees’ accounts.
Registration of an AS
As mentioned earlier, registration of an AS cannot be done digitally using the e-Business register and the e-Residency card. This means that a public limited company must be incorporated at a notary’s office in Estonia by visiting one or using a Power of Attorney. The fees regarding the establishment may vary as the price of using a notary depends on the desired share capital amount and the amount of founders the company will have. In addition, you may need to notarise some documentation that is needed for founding. Last, there will be a state fee of €145 for the registration.
If your company will operate in a regulated industry, do not forget to get the appropriate licence or to give notice about doing business in such a field in Estonia.
Incorporate offers a full suite of business services
We offer corporate services in Estonia for all local and global entrepreneurs who wish to take advantage of Estonia’s business-friendly environment. Our services range from company establishment to bookkeeping, and everything in between to provide you the best experience in operating a location-independent business.
If you would like to find out which type of company would suit your needs the best, please feel free to contact us, or read about establishing a company in Estonia here.
