Estonia boasts one of the world’s most transparent business environments, emphasizing the importance of clear ownership control for every company.

This transparency ensures the global trustworthiness of Estonian businesses, even when managed entirely online by Estonians and e-residents. As a director of an Estonian company, it is a legal obligation to declare the individuals benefiting from the company’s activities, known as ‘beneficial owners.’ This declaration must be made by all directors and promptly updated within 30 days in the event of any changes to the company’s beneficial owners.

Defining ‘Beneficial Owner’

The concept of ‘beneficial owner’ may seem intricate, but it can be simplified. In Estonia, only individuals who own more than a quarter of a company, whether directly or indirectly, are considered beneficial owners. This distinction means that not all shareholders need to be registered as beneficial owners. Additionally, a beneficial owner can extend to individuals benefiting from the company’s activities and profits, even if they are not formally registered as owners. This may include those exerting influence over the company or expecting returns, irrespective of formal ownership status.

Estonia’s Legal Framework

In 2018, Estonia amended its Money Laundering and Terrorist Financing Prevention Act to make it mandatory for Estonian companies to identify their beneficial owners and publicly disclose this information on the Estonian Business Register. The legal framework regarding beneficial owners is outlined in Section 9 of the act.

Identifying Your Company’s Beneficial Owners

For many Estonian companies, especially those with a single shareholder and straightforward ownership structures, the beneficial owner is often the sole director and shareholder — possibly you. Even in such cases, the process of declaring oneself as the beneficial owner must be followed. To determine other potential beneficial owners, Estonia defines a beneficial owner as the natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of shares, voting rights, or ownership interest.

Understanding Ownership Structures

Ownership structures can become complex, involving direct and indirect ownership. For instance, if an individual owns more than 50% of a company that, in turn, owns 50% of your company, that person is considered an indirect beneficial owner of your company. Calculations may be necessary to identify those with ownership exceeding 25% indirectly.

Ensuring transparency through the registration of beneficial owners is a vital step for Estonian companies. By complying with legal obligations and understanding the nuances of beneficial ownership, directors contribute to the overall integrity and trustworthiness of the Estonian business environment. This article aims to demystify the process, providing clarity for company owners seeking to adhere to Estonia’s stringent transparency standards.

So, how to declare beneficial owners after starting an Estonian company?