Division of an Estonian Company (OÜ)
The division of an Estonian company is one way to restructure its assets and operations according to the wishes and needs of the shareholders The division of a Private Limited Company (OÜ) is a good option for distributing the company's assets, without having to deal with the sale of assets or the liquidation of the company, among different shareholders, or for separating different business activities and assets.
The most common reasons for dividing a company may include the following:
Risk management - By dividing the company into several units, different business activities can be separated to protect certain assets or operations from various risks.
Business restructuring - The division can be part of a broader restructuring strategy aimed at improving company operations and separating different business lines (such as production, consulting, product sales, etc.).
Tax optimization - Dividing the company can sometimes lead to more favourable taxation, especially if different business branches have different profit profiles or tax benefits. The transfer of property transferred during the division is generally exempt from VAT.
Attracting investors - Division can facilitate the sale of a part of the business or make it easier to attract investors interested in developing a specific area of operations.
Family business succession - Family businesses may decide to divide the company to ensure that each heir or family member has control over a certain part of the company or its assets.
There are 2 ways to divide a company:
1. Division - the property of the company being divided is transferred to the existing or to a new company that will be established during the dividing process, the company being divided ends and will be deleted.
2. Separation - only a part of the property of the dividing company is transferred to the acquiring company, and the dividing company remains.
The division of an Estonian company (OÜ) that has a simple structure takes usually 2 to 4 months. Certain deadlines are set by law, however, the exact timeframe can vary depending on factors like administrative efficiency, how quickly the necessary documents are prepared and approved, and the complexity of the division process.
Steps and timeframe (set by law) for the division:
Conclusion of a notarized division agreement in an Estonian notary by the management board members of all companies involved in the division.
Decision of the shareholders on the approval of the division agreement - not earlier than 2 (two) weeks after the date of the division agreement.
Submitting an application to the Business Register, together with the division agreement (depending on the type of division, the final balance sheet, the auditor's opinion on the inspection of the division agreement, the division plan, etc. must added also), to make an entry about the division - not earlier than 1 (one) month after the date of the shareholders' decision.
Publication of the division notice in the official publication “Ametlikud Teadaanded” - as soon as the division is entered in the Business Register.
Making entries in various registers (Land Register, Traffic Register, etc.) to change the owner(s) of the property.