Transfer of employees from the existing company to a newly established subsidiary. Termination of employment.
The legal act which prescribes the legal relationships between an employer and employee is the above mentioned Estonia Employment Contracts Act, Article 71, according to which an employment agreement may be terminated as follows:
1. With the consent of the parties;
2. If the term of the agreement expires;
3. On the initiative of an employer;
4. On the initiative of an employee;
5. On demand of a third party;
6. Due to reasons independent of the parties’ will.
In each of the aforesaid cases, the obligations of the parties are different. In the current article we provide and describe the case under number 3 set forth above: “The obligations of an employer when an employment agreement is terminated on the initiative of the employer”.
Article 88 of the Estonia Employment Contracts Act stipulates that an employment agreement may be terminated on initiative of an employer only up on an extraordinary order and in the following cases:
1. Extraordinary termination of employment agreement for reason arising from employee would be possible in the following case:
a. for a long time been unable to perform his or her duties due to his or her state of health
b. for a long time been unable to perform his or her duties due to his or her insufficient work skills;
c. in case of disregarded the employer’s reasonable instructions or breached his or her duties;
d.in case of been at work in a state of intoxication
e. the loss of the employer’s trust in the employee
f. a third party’s distrust in the employer;
g. damaged the employer’s property or caused a threat of such damage;
h. violated the obligation of maintaining confidentiality or restriction of trade.
2. Extraordinary termination of employment agreement for economic reasons where an employer may extraordinarily terminate an employment agreement if the employer cannot continue the employment relationship on the mutually agreed conditions due to:
a. a decrease in the work volume;
b. a reorganization of work;
c. upon lay-off of employees:
- upon cessation of the activities of employer;
- upon declaration of bankruptcy of employer.
In the present article we describe the obligations point 2.c. of the above, where the employer will have to lay off employees. Thus, the obligations of an employer, when the employer lays-off his employees, are:
1. The employer must give to each employee a written advance notice on the following terms:
1.1 If the employer has employed an employee less than 1 year, an employer must give not less 15 days an advance notice.
1.2 If the employer has employed an employee from 1 to 5 years, an employer must give not less than 30 days an advance notice.
1.3 If the employer has employed an employee from 5 to 10 years, an employer must give not less than 60 days an advance notice.
1.4 If the employer has employed an employee from 10 and more years, an employer must give not less than 90 days an advance notice.
1.3 If such a notice is not provided in advance within the required term (one month) by the employer, the employer is required to pay compensation to the employee in the amount of the employee’s average daily wages for each working day short of advance notice of termination of employment contract.
1.4 The employer must offer to the employee, prior to termination of an employment agreement due to lay-off, another position with the company if possible.
1.5. The employer is also required to pay a compensation to the employee upon termination the agreement due to lay off of employees,
1.5.1. If the employee has been employed by the employer, in the amount of a compensation is one month of an average salary.
According to the Estonian Unemployment Insurance Act the Unemployment Fund also pays to the employee upon termination the contract due to lay off of employees if such employee works at the company for not less than 10 years, an amount equals to 1 month of an average salary of such employee.
Also, an employee whose employment agreement was terminated due to lay off, up on a registration with the Unemployment Insurance will have rights to receive the following compensations (the amount of the compensation depends on the size of an average salary received by the former employee and depends on a number pf years such person has been employed).
Property check
First the Buyer would need to select a property. Knowing local real estate market and current situation, on many occasions, our Firm’s attorneys were able to advise Clints the correct price for properties and negotiate the price. When an appropriate real state has been selected, the Buyer need to pay attention to the following things:
- The Buyer must collect and review all documents including but not limited to ownership of the property, list of registered persons, the project of the house and whether it corresponds to the constructed object as it is, permit for the living, etc. Before the Buyer purchase a property, we would advise to use a construction expert who will review the property and provide his expertise. Such expert’s analyses usually save the Buyers money. In many case after the expert conduct a research we were able to negotiate down the prove.
- The Buyer would need find out whether there has been any redevelopment or reconstruction of the property and if any then to see the permits and projects for such work that are registered with the building register.
- Another important issue is the period for vacating the property. The law allow one month for vacation of the property. However, we would advice to specify such period in the Agreement.
- The Buyer shall also receive information (copies of all unpaid utility invoices, information on any debts and obligations) that are placed on the property to be purchased.
Preparation of Documents
The Buyer and the Seller must have a sales purchase agreement file it with the notary office for notary’s review and confirmation. After the notarial review the agreement the notary appoint a time for the verification of signatures and identification of the Buyer and the Seller, after that the notary signs the Agreement and the documents delivered to the State Register.
The Seller will also be required to provide a personal ID document, if the Seller is married, then a Consent of the Spouse and a marriage or divorce certificate. For a corporate transaction the Seller would need to provide a Minutes of the Shareholders Meeting, Decisions of an authorized person of the company.
Payment of taxes
There is no property tax in Estonia. But after the notarial transaction, you need to pay a fee to the Ministry of Finance for changing the owner in the real estate register. Usually this is a small amount, which is calculated at the notary office.
Payment of Notary fees
The Buyer must pay the Notary fees for the transaction. This amount of the Notary fees depends on the price and is also calculated at the notary office.
Land taxes
In Estonia there is a land tax, which depends on the region. However if the Buyer is registered in this facility, then such buyer do not need to pay the fee. Payment is made to those who were the owner on January 1 of the current year. The tax amount is calculated by the tax department and sent to you by email.
Registration of a transaction
After the purchase and sale transaction, the notary sends the application to the real estate register, and the judge who works in this register will enter the new owner into the register and remove the old one. The same judge registers the mortgage, if necessary. After this you become the owner of the object
Attorneys of our Law Firm in Estonian will provide legal services, draft and collect all required documents on behalf of our Clients who would decide to purchase or sale property. From the years of experience in the real estate filed we do work with construction experts who on many occasions have saved quite a lot of money to our Clients.
The liquidation process normally takes approximately 8 months until the time the legal entity will be deleted from the Estonian Commercial Register.
According to Estonian Commercial Act a private limited company shall undergo a liquidation procedure upon dissolution unless otherwise provided by law.
A privet legal entity shall appoint liquidators and agreed on the sums to be paid for services to be provided by the liquidator. According to the law the appointed liquidator shall be a resident of Estonia. The current legislation prescribe that the management board shall submit a petition for entry of the first liquidators in the commercial register.
A private limited company undergoing liquidation shall organize its accounting pursuant to the procedure provided by the Accounting Act.
According to the Accounting Law, within three months after the date of the dissolution resolution, the liquidators, together with a bookkeeper shall prepare, taking account of the provisions concerning the balance sheet contained in the annual report, the opening balance sheet of the liquidation and a report explaining such balance sheet.
At the same time the liquidators shall promptly publish a notice of the liquidation proceeding in the State Newspaper and collect all provided claims against the private limited company within four months after publication of the notice.
After satisfaction of the claims of all creditors and the deposit of money (if any), the liquidators together with a bookkeeper and accountants shall prepare the final balance sheet and distribution plan for the assets remaining upon liquidation.
As the final stage liquidators shall submit a petition for deletion of a private limited company from the commercial register after the conclusion of the liquidation.
The liquidators shall deposit the documents of a private limited company with a liquidator, a person maintaining an archive or another trustworthy person. Such documents shall be kept for the period of 7 years.
Attorneys of our Law Firm in Tallinn will provide services of liquidator and assist Clirnts to liquidate the company in Estonia
Process of receipt of an online gambling license for game of chance in Estonia.
In general the process of application for the license is divided in 3 steps.
First step is preparation of client’s documents and draft an application, usually this process take from three weeks up to 2 months and very much depends on the client providing all required information and documents.
Second step is filing for an activity license with Estonian Tax and Customs Board.
Third step is preparation of the documents and information, draft an application and filing for an operation permit.
An applicant must have a minimum share capital in the amount of 1,000,000.00 Euros.
First we need to apply and receive an activity license for organizing gambling. A Sate Fees for an activity license are 47,940 Euros. The State Authorities has rights to review documents up to 4 months and may extend its time for an expert’s opinion for not more than additional 2 months. However, the process to apply and receive a license takes approximately up to 3 months. The activity license is issued for unspecified period.
According to Estonian law that regulates the organization of gambling, the State supervision extended over the organization of gambling on the territory of Estonia and on ships that has been entered in the Estonian register of ships. The licenses issued is issued to Estonian company and all activities of the holder of the license are subjects to Estonian laws.
An online gambling game of chance in the internet environment established in accordance with Estonian legislation allows any person, whose physical location is outside Estonia, after appropriate registration, attend this game of chance.
The law allows to place a server outside of the territory of Estonia. However, there is no any direct information or listings of countries that are appropriate for the allocation of the server. The general requirements of the law, for those applicants whose server located outside of Estonia to provide an evidence regarding the legal basis and possibilities of the supervisory authority for gambling and of the authority dealing with prevention of money laundering in the country of location of the server to cooperate with the Estonian Tax and Customs Board and Estonian Financial Intelligence Unit.
After receipt of the activity license, the applicant will need to apply for an operating permit. The process for the review and issue of an operating permit takes approximately up to 2 months but the regulator may have an extension time for the review of experts opinions for additional 2 months. The State Fees for applying for an operating permit are 3,200 Euros. The operating permit for online gambling is issued for the period of 5 years.
Depends on services and activities the company plans to provide, the share capital of the company must be a minimum of 50,000 euros, if the company provides the following services or activities:
1. reception and transmission of orders related to securities;
2. execution of orders related to securities in the name of or for the account of the client;
The company must have a minimum share capital in the amount of 125,000 euros, if the company provides the following services:
1. securities portfolio management;
2. organizing an offer or issue of securities;
3. safekeeping and administration of securities for a client and activities related thereto, including receipt of securities transfer and pledge orders and other orders related to the encumbrance of financial securities from clients and forwarding or execution thereof;
And the company must have a minimum share capital in the amount of 730,000 euros, if the firm:
1. dealing in securities on own account;
2. guarantee of securities or guarantee of the offer, issue or sale of securities;
If planned business activities of Estonian company will fall under one of the above services, then the company would need to apply for a financial license before start business activities.
The time frame for the preparation of all required documents take 2-3 months, in addition the Estonian Financial Inspection take six-month period to review all provided documents and yet the State authorities have rights to ask additional confirmation depends circumstances.
Our attorneys in Estonian office provide legal services and advices to Clients with receipt of the financial licenses.
According to Estonian Law on Obligation Act, the owners of the company shall set the sales purchase price for the existing company that would satisfy both parties.
The buyer would need to conduct a due diligence on the existing company. Such report should include including financial, accounting and legal due diligence reports.
If the Buyer or a Seller of Estonian company is not in Estonian then either the buyer or the seller would need to send to Estonian an authorized representative who will sign the sales purchase agreement in front of Estonian notary or as an alternative, to issue a Power of Attorney to our law Firm’s Estonian attorney who will represent the buyer of the seller and sign the sales purchase agreement at a notary office and file all documents with the Commercial Register and up on registration of a new owner provide a new Certificate of Registration with a new owner on it.
Before the sale purchase transaction, the buyer would need to prepare and provide for the transaction the following documents:
- Sale Purchas Agreement;
- By-Laws;
- Certificate of Registration;
- Certificate of Good Standing issued by the Secretary of the State;
- A letter issued by the Registered Agent on the current Stats of the company;
- Minutes of the general meeting of shareholders with respect to the purchase of the Estonian company;
- Copies of the passport of the authorized person, the representative of the buyer;
- Contact information of the representative of the buyer (phone, email address);
- Document showing the shareholder(s) of the buyer;
- Document showing the authorized person who has the rights to represent the buyer.
All above listed documents must be notarized with an apostille on them. Up on receipt of the originals the documents must be translated into Estonian language and notarized.
According to Estonian Employment Contracts Act, Article 112, up on reorganizing of a legal entity or changing the ownership, employment agreements with employees cannot be terminated if the legal entity continues to carry out the same or similar economic activities. In this case, the employment agreements will remain unchanged and transferred to the acquirer of the enterprise, regardless of the consent of the parties.
Article 113 of the Employment Contracts stipulates the obligation of the authorized person of the existing company authorized person of the buyer, in advance, but no later than one month before the acquisition of the company, to inform employees in writing regarding the transfer of the owners.
The sale and purchase transaction can be done within 3 days after submitting all documents.
Attorneys of our Law Firm in Estonia assists Clients to prepare all necessary documents provide all information to our Clients as well as to conduct an Accounting Due Diligence, a Financial Due Diligence and a Legal Due Diligence on behalf of our Clients
In order to establish of a subsidiary or a daughter company in Estonia, , the US legal entity would need to send an authorized representative or issue a Power of Attorney to an attorney of our Law Firm who will act on behalf of the US company and represent the shareholder at the meeting with a notary to establish of a legal entity.
The shareholder, a US company, would need to provide the following documents:
- By-Laws;
- Certificate of Registration;
- Certificate of Good Standing issued by the Secretary of the State;
- A letter issued by the Registered Agent on the current Stats of the company;
- Minutes of the general meeting of shareholders with respect to the purchase of the Estonian company;
- A decision of the authorized body to appoint a member of the Management Board;
- A statement from the member of the board to accept such position;
- Copies of the passport of the authorized person, the representative of the buyer;
- Copy of the passport of the member of the management board;
- Contact information of the new member of the board (phone, email, address);
- Contact information of the representative of the buyer (phone, email, address);
- Document showing the shareholder(s) of the buyer;
- Document showing the authorized person who has the rights to represent the buyer;
- Power of Attorneys.
The documents listed above must be notarized with an apostille on each of them. Up on receipt of the originals the documents must be translated into Estonian language and notarized. Each document must be tide by a thread with the notary dead and the apostille so that all pages are together as one document.
Up on registration of a new company since the shareholder and the Member of the Board are non-residents, the shareholder would need to appoint a Tax representative, a resident of Estonia who will be responsible in front of State agencies.
After the registration of the new company at the Commercial Register (approximately such procedure will take 2 weeks), the member of the board would need to open a bank account. Opening a bank account usually it takes from 7 to 10 days after the application is filed with the bank. First the Member of the Board must fill out forms at the bank. Bank takes 7-10 days, according to Estonian law on Money Laundering and Terrorist Financing Prevention Act, banks must review the background of the applicants including the Member of the Board of the newly established company, the director of the mother company in US and shareholders of the mother company including the background of the end beneficiary of the mother company in the US and business activities of Estonian company. On the basis of information received the bank will issue its decision.
After the bank account will be open, the company may to apply for VAT number.
Attorneys of our Law Firm in Estonian can help you and your US company to establish either a daughter of US company or a separate Estonian legal entity and provide farther support related to business activities of your company in Estonia.
To establish an Asset Management Company in Estonia and obtain a financial license from the Estonian Financial Supervisory Authorities the applicant will require:
-To establish a legal entity in Estonia;
-To prepare all necessary documents:
-To prepare an application and file a set of documents with the Estonian Financial Authorities on behalf of the registered company in Estonia.
The company would need to hire minimum 2 professionals. All founders and directors must have good background, clean reputation.
The company’s share capital in the amount of 50 000 Euro is a required capital if the legal entity provides the following services:
-reception and transmission of orders related to securities;
-execution of orders related to securities in the name of or for the account of the client;
The company must have an office, provide a Business Plan, and an IT system for operation and pay a State fees in the amount of 1,000 Euros.