Attorney-at-law: 5 Legal Traps Foreign Founders Most Often Encounter in Estonia

21 spalio, 2025 Naujienos

Estonia is one of the world’s most convenient places where to start a business in; however, there are a number of challenges that can unexpectedly cause complications. WIDEN’s corporate law and M&A attorney, Martin Nikolajev, described at Tehnopol’s Foreign Founders Meetup the five most frequent stumbling blocks and gave practical tips for avoiding them.

1. Believing that Everything Can Be Done Online

Estonia is digital, but has still certain form requirements. Specific actions – such as share purchase agreements and changes to the articles of association or management board – often require a notary’s involvement or an Estonian digital signature. Internationally popular signing methods (e.g. DocuSign, Adobe Sign, etc.) are not accepted by notaries or the commercial register. Opening a bank account at a credit institution is a separate adventure and often requires physical presence in Estonia.

Solution: Map out when you need to visit a notary, when physical presence in Estonia is required, when a globally used digital signature or a paper signature is sufficient. To make life easier, arrange for e-residency from the start, which allows you to sign with an Estonian qualified electronic signature.

2. Forgetting that Every Country Plays by Its Own Rules

Signature requirements, the rights of board members and/or shareholders may not be directly comparable to other jurisdictions. The management model used abroad may differ significantly from local practices. Estonia is a digital country, and many things can be done with the help of e-residency, which is quite often an unfamiliar and relatively new way of conducting business for foreign founders.

Solution: Have contracts drafted or reviewed in advance by a local legal advisor, and clarify how processes generally work in Estonia. An informed and considered approach is always better than dealing with surprises later.

3. Setting Up the Company and Forgetting About It

Lack of a contact person or failure to submit annual reports can result in fines and, in the worst case, deletion of your company. Inaccuracies in management board or UBO (Ultimate Beneficial Owner) data can hinder transactions.

Solution: Regularly monitor your company. Set reminders to update relevant data and do so in good time. If you lack time, turn to a legal advisor who can help with these arrangements.

4. Updating the Cap Table but not the Register

In Estonia, ownership is often determined by the Commercial Register, not just by an agreement between a buyer and seller. If a share purchase agreement is not properly formalised, disputes may arise over who the “real owner” is. There is also a lack of understanding about how options are regulated in Estonia and what requirements must be met when issuing them.

Solution: Keep ownership relations clear and transparent – record all changes properly and submit them to the register in good time. This ensures clarity of ownership, a comprehensible company structure, and investors will thank you for it. If you have questions or doubts, consult a specialist—better to be sure now than regret later.

5. Too Casual of an Approach to Recruitment

“Freelancers” and “consultants” may be considered employees under Estonian law, with rights and protections under the Employment Contracts Act. Often, contract templates drafted abroad are used, which do not comply with Estonian law.

Solution: Ensure that contracts comply with local requirements and reflect the actual nature of the working relationship. To protect your interests, make clear agreements on confidentiality and non-compete clauses.

Why Is Estonia Still a Great Place for Entrepreneurship?

Most operations in Estonia can be done entirely online: bureaucracy is minimal, the Commercial Register works quickly, and digital signatures are a standard. Only distributed profits are taxed in Estonia – if profits are retained in the company or reinvested, there is no income tax to pay. This system supports flexible and sustainable company growth.

Additionally, Estonia’s legal environment is transparent and stable, company formation is simple, and the country’s digital solutions allow you to manage all administrative processes conveniently, even from abroad. Thanks to e-residency, it is possible to establish and manage a company entirely remotely.

Estonia combines an efficient e-government infrastructure and a business-friendly tax system, creating a strong foundation for both startups and established companies.

Practical Checklist

• Find out which actions require a notary visit, Estonian digital signature, paper signature or physical presence in Estonia;
• Have contracts reviewed by a local legal advisor;
• Keep your company’s Commercial Register data up to date and make changes promptly;
• Ensure that contracts with employees, consultants, and freelancers comply with Estonian law, meet your expectations, and cover all important aspects such as confidentiality, non-compete, and intellectual property clauses.

If any of these points sound familiar or you have any questions, feel free to contact us – WIDEN will help you find a suitable and practical solution for your situation.