The division of companies is possible in two ways: as a full division or a partial division.
In the event of a division, all the assets of the company being divided shall be transferred to existing or newly created companies and the company being divided shall cease to exist. The shareholders of the company being divided shall become the shareholders of the company being acquired.
In the event of a partial division, only a part of the assets of the company being divided shall be transferred to the acquiring companies and the company being divided shall be retained. The shareholders of the company being divided shall become shareholders of the acquiring company.
Division agreement
A division agreement must first be concluded, indicating how the assets to be transferred will be divided between the participating companies. It is important to make a list of the assets together with the liabilities forming part of the assets as well as of their distribution among the companies involved in the division.
Division report and decision on division
Secondly, a division report must be drawn up by the managements of the participating companies. The report shall explain and justify the division from a legal and economic perspective. In certain cases, the division agreement must also be verified by an auditor. The division agreement must be authorised by a decision of all the companies participating in the division.
Submitting an application to the commercial register
The management board of the company involved in the division or the shareholders and entitled to represent that company shall apply for the division to be entered in the commercial register not earlier than one month after the approval of the division agreement. The division is deemed to have taken place when it has been entered in the commercial register.
Disclosure of the division
After the division has been entered on the register for the company being divided, the publication Ametlikud Teadaanded [Official Announcements] shall announce the division and the possibility to lodge claims for security within six months of the publication of the notice. The company involved in the division shall, within six months of the date of publication of the notice, secure the submitted claims of creditors if the creditors are unable to demand satisfaction of their claims and justify that the division may jeopardise the satisfaction of those claims.
Liability
The companies involved in the division shall be jointly and severally liable for all the obligations of the company being divided that arose before entering the division in the register.
The companies involved in the division are jointly and severally liable to the creditors. This means that each of them may be required to fulfil their obligations in full.