|Dear SORAINEN client
We draw your attention to mandatory procedures and fast approaching deadlines:
1. APPROVAL OF ANNUAL REPORT
The annual report has to be filed with the commercial register within six months as of the end of the financial year. The annual report may be filed digitally via the Company Registration Portal. Companies often tend to overlook the set procedures for approval of the annual report, e.g. the supervisory board must present its opinion on the annual report, the approved annual report together with a proposal for distributing profit or covering loss must be approved by the general meeting of shareholders, and minutes must be prepared of the relevant shareholders meeting. Distributing profit or covering loss may not be recorded in the annual report of the following financial year based on a proposal by the management board but as an accounting entry must be based on a resolution of shareholders.
2. CONVERSION OF SHARE CAPITAL INTO EUROS
Please note that if you have yet to convert the share capital of the company into Euros, the relevant decision can be taken at the general meeting approving the annual report, followed by filing the documents with the commercial register.
3. EXTENSION OF TERMS OF OFFICE OF SUPERVISORY AND MANAGEMENT BOARD MEMBERS
When approving the annual report, we also recommend reviewing the terms of office of supervisory and management board members and auditors, and extending these 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 of association prescribe a fixed term. By law, the term of office of supervisory board members is five years unless a shorter term is prescribed by the articles of association. The law does not limit the term of authority of an auditor, but shareholders may nevertheless decide on a limitation at a general meeting.
4. CONFIRMING REGISTER OF ECONOMIC ACTIVITIES (REA) REGISTRATIONS
All companies registered with the Estonian REA had to confirm the accuracy of registered data by 15 April. Failure to fulfil the obligation in due time may lead to suspension of registration while a company in breach may face a fine for conducting business without registration.
5. MANAGEMENT BOARD MEMBER AGREEMENT
Our experience shows that a considerable number of management board members are performing their duties on the basis of an employment contract instead of a proper management board member agreement. Since the Employment Contracts Act does not extend to management board members, we advise signing proper management board member agreements with members of the management board. This allows sufficient protection of company rights and interests by defining non-disclosure and non-compete obligations. At the same time, the agreement also protects the management board member by laying down clear rules for performing duties and excluding cases where an employment contract of a board member is declared void and it is left for the court to decide how to interpret the arrangement between the company and the board member.