As is known, Estonian companies have to submit their annual reports to the Commercial Register within six months after the end of the financial year. So, in most cases, by June 30 at the latest. You can read more about annual reports here.
The question that has concerned many owners of Estonian companies was what actually happens if a company fails to submit the report within the determined period of time.
The answer to this question was quite satisfying for those who no longer wished to run a business in Estonia. Previously, the position of the state registrar was that such a company was subject to deletion from the Commercial Register after a certain space of time. So, it was some sort of a “simple way” for the dissolution of a company where the owner should not do anything but sit still.
However, this position has been changed recently. Instead of issuing a warning to a company on deletion from the Commercial Register, the state registrar is now issuing a precept indicating a new term when the report has to be submitted. And in this case, if the company still fails to submit its report, a penalty of up to 3,200 euros can be imposed.
But it is not the end of the story. The aforesaid precept will recur until the annual report is finally submitted. And if the company still expresses no wish in filing its annual report, a certain amount of money can eventually accumulate which may lead to unpleasant consequences in the form of litigation and enforcement proceedings.
PwC Legal Estonia has also pointed out that:
“According to the media, there are plans to deal with those who fail or have previously failed to submit reports by the required deadlines by imposing fines on such companies. The plan is to issue warnings and impose fines not only on legal persons but also on the members of their management and on liquidators.”
Therefore, it is now crucial to comply with the terms of submission of annual reports. And it is not an option to walk away and just wait for the state to delete the company from the Register. If an undertaking fails for some reason or the owners are ready to move on and run a new business, it is necessary to dissolve the existing business. And at the end of the day, the liquidation of a company appears to cost less than just walking away.