May I use a nominee director in an Estonian company?

According to the law, the Estonian company structure must be transparent, and it is not permitted to hide shareholders, board members, or UBOs. This means that for hiding purposes, it is not allowed to use somebody else in the position of the director, shareholder, or UBO.

However, if local presence and know-how are required, then hiring a local sole or second director is fully legal. To avoid misunderstanding, the remuneration for the local director is better paid as a salary rather than issued as a management services invoice.

The positive side of salary payments is that they make the company clearly local, and everyone can see from public sources that the company pays salaries and taxes.

Often, the local director is needed for a part-time job, and their powers are quite limited. This means that using a local (co)director is not definitely expensive. In the board members' agreement, both sides can agree on the scope of responsibility and the amount of remuneration.

A board member's agreement can be terminated, usually with very short notice or even immediately, by recalling the board member.

Related topics:

How can I create local presence for my Estonian company?

Nominee Director in Estonian Law

The concept of "nominee director" is not regulated or recognized in Estonian law.

Who is a nominee director?

A nominee director is a person who is formally registered as a member of the management board of a company in the Business Register, but who does not actually manage the company or participate in day-to-day management decisions.

Consequences of using nominee directors

The use of nominee directors leads to significant problems on multiple levels:

• Financial institutions – banks and other financial institutions often refuse to provide services to companies with nominee directors or apply stricter controls

• State supervisory authorities – the Tax and Customs Board, the Police and Border Guard Board, and other supervisory authorities view the use of nominee directors with suspicion.

• Business partners – credible cooperation partners and clients may refuse to cooperate if the company's management is not transparent.

• Legal risks – the liability of a nominee board member under the law is no less than that of an actually operating manager.

Estonian legal and business environment is built on the principle of transparency, and nominee directors are the opposite of this.