Dear SORAINEN client

The deadline for filing annual reports arrives in less than a month. In this connection, we draw your attention to certain mandatory operations and important deadlines.

1. ANNUAL REPORT

All management bodies of a company must be involved in the preparation and approval process of the annual report. The management board prepares the annual report and has it audited. The supervisory board shall prepare a written report concerning the annual report (which will include an opinion on decisions for profit distribution or covering losses) and shall establish the agenda for a shareholders’ meeting. The management board shall submit the supervisory board’s report and annual report to the shareholders’ meeting together with a proposal for the profit distribution or covering losses. The shareholders’ meeting should approve the report along with the profit distribution resolution.

If the company made a profit, the annual report shall be filed to the commercial register together with information regarding the general meeting’s profit distribution resolution (if this information is not included in the annual report). If the company made a loss, the management board shall file the annual report to the commercial register together with a notification on measures that the general meeting adopted for covering the loss. The decision to pay or not to pay dividends shall also be notified to the Estonian Central Register of Securities.

Please be advised that if a company’s net assets are less than a half of its share or stock capital or below the minimum capital threshold provided in the Commercial Code (EUR 2,500 for a private limited company and EUR 25,000 for a public limited company), the shareholders must decide how to bring net assets to the level required by the law. Please consult your auditor or attorney about the various methods for restoring net assets. According to the law, net assets can be restored to the required level by decreasing or increasing capital, implementing other measures, and a company may also be dissolved, merged, divided or transformed. If none of those measures are appropriate, a decision should be made to file a bankruptcy petition. Failure of the management and shareholders to fulfil this obligation may result in civil and criminal liability. The management board may also be liable if shareholders take no action to restore net assets to a legally required level, however the management board is convinced that the company is permanently insolvent.

2. CONVERSION OF CAPITAL INTO EUROS

We recommend resolving conversion of capital into Euros when approving the annual report, as conversion of capital into Euros must also be approved at the shareholders’ meeting and the decision can be taken at the same meeting where the annual report is approved. Conversion requires an amendment to the articles and, if needed, an increase or decrease of capital. Public limited companies or private limited companies registered with the Estonian Central Register of Securities should not forget to notify the Register before filing documents with the commercial register.

3. RENEWAL OF TERMS OF OFFICE

When approving the annual report, we also recommend checking the term of office of members of your supervisory board, management board and auditors, and renewing their term if necessary. Under amendments applicable from January 2011, management board members of a private limited company may be appointed for an unlimited term, unless the articles set a fixed term. By law, the term of office of supervisory board members is five years unless the articles set a shorter term. The law does not limit the term of authority of an auditor, but shareholders may nevertheless decide on a limitation during their meeting.