Government approves nixing requirement for company board to be located in Estonia (1)

Estonian-registered businesses can soon be managed from abroad as well. (Postimees/Scanpix)
12/1/2016 3:18 PM
Source: BNS
Category: Business

The Estonian government approved a proposal on Thursday, made by Minister of Justice Urmas Reinsalu in connection with Estonia's e-residency project, to repeal the requirement that the management board of a company registered in Estonia must be physically located in the country. The change is to take effect in January 2018.

The law will create the opportunity to manage businesses registered in Estonia from abroad. In such situations, however, the company would have to specify a contact person through which a connection to Estonia would be preserved, spokespeople for the Estonian government said.

Minister of Justice Urmas Reinsalu had asked for ministries' opinions in May already. During that stage, the Supreme Court of Estonia did not grant its approval of the plan, criticizing it as potentially harmful. Minister of Finance Sven Sester has also expressed skepticism of the plan, stating that it posed the threat of Estonia becoming a tax haven.

According to current laws, a legal entity's designated location, including that of the management board, must be in Estonia. The government found that this requirement likely makes Estonia less attractive for e-residents of the country. The new regulation, however, would allow for the management of a company from abroad.

The new law will also make submitting the email address of the company's owner to the Central Commercial Register compulsory. Currently about 7 percent, or nearly 14,000 business-owners, have not submitted their email addresses to the centralized register.

Estonia is the first country in the world to provide e-residency, which it launched on Dec. 2, 2014. E-residency is a state-issued secure digital identity for non-residents that allows people living abroad to operate in Estonia's e-environment and use e-services on par with Estonian residents.

E-residency is provided by the Government of the Republic of Estonia, however it does not bring with it physical residency rights or the right of entry to Estonia or the EU. E-residency likewise does not entail any residential or citizen rights and cannot be used as a physical identification card or travel document.

Editor: Aili Vahtla

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