Transformation means changing from one legal form to another. If necessary, you can transform your company into another type of company; for instance a public limited company can be transformed into a private limited company. A commercial association cannot be transformed, nor can other forms of business be transformed into a commercial association.
Potential methods of transformation
- from a general partnership or limited partnership into a private limited company or public limited company
- from a private limited company or public limited company to a general partnership or limited partnership
- from a private limited company to a public limited company
- from a public limited company to private limited company
The transformation decision shall be made by the partners or shareholders in the company being transformed.
The management board or shareholders of the company being transformed shall prepare a transformation report in which they justify legally and economically the transformation, as well as the ratio of replacement of shares and if necessary the amount of cash payment. A transformation report is not required if the company has only one partner or shareholder or if all partners or shareholders are in agreement.
A new article of association or partnership agreement must be prepared for the new type of company.
In the case of a private limited company or public limited company, the members of the management board and, if necessary, members of the supervisory board shall be elected.
Transformation decision and report
The partners or shareholders of the company being transformed shall make the transformation decision. The management board or shareholders of the company being transformed shall prepare a transformation report in which they justify legally and economically the transformation, as well as the ratio of replacement of shares and if necessary the amount of cash payment. A transformation report is not required if the company has only one partner or shareholder or if all partners or shareholders are in agreement. A new article of association or partnership agreement must be prepared for the new type of company. A transformation resolution is made by the partners or shareholders of a company being transformed. The resolution shall be in writing. The transformation resolution approves the articles of association or partnership agreement of the new company. In the case of a private limited company or public limited company, the members of the management board and, if necessary, members of the supervisory board shall be elected.
The transformation resolution shall state the type of company the company is transformed to, the business name of the company, the exchange ratio of shareholders, the rights of shareholders, the consequences of transformation for employees, the size of the share capital, and the balance sheet date of the transformation.
Submission of an application to the commercial register
The management board of or the partners entitled to represent a company being transformed submit an application for entry of the transformation in the commercial register not earlier than one month after the approval of the transformation resolution.
Public disclosure of transformation
Creditors must be informed of the transformation after entry into the commercial register. To do so, a notice of transformation shall be published in the publication Ametlikud Teadaanded and the possibility to submit claims to receive collateral within six months from the publishing of the notice shall be announced.
Compensation claims
If you are the partner or shareholder of the company being transformed, but did not consent to the transformation, you will have the right within two months of the entry of the transformation into the Commercial Register to demand monetary compensation for your share in the company. If the company was transformed into a general partnership or limited partnership, you may demand compensation upon leaving the company.