If you find a partner who is interested in cooperation - for instance a competitor in the same field or a company with a bigger turnover - you may decide to merge. You may either merge with another company or establish a new company together. Different types of companies may merge and the company being merged may be from another EEC state (does not apply to commercial associations).
Upon merger the assets and liabilities of your company will be transferred to the acquiring company. Upon merger, no liquidation proceedings take place; your company is considered dissolved and deleted from the Commercial Register. The partners or shareholders in both companies become the partners or shareholders in the acquiring company.
Merger agreement and merger resolution
To merge, the management boards or shareholders of the companies sign a merger agreement, which must be notarised. The merger agreement shall specify, inter alia, the names and registered offices of the companies, the agreement to transfer the assets of the company being acquired against the shares in the company being acquired, the replacement ratio of the shares in the companies and, where appropriate, the amount of the cash payment, as well as the rights conferred on the shareholders of the company being acquired, the consequences of the merger for the employees of the companies, and the closing date of the merger.
The merger agreement need not be audited if all the shares in the company being acquired are owned by the acquiring company or if all the shareholders agree.
The rights and obligations arising from the merger agreement shall be subject to the approval of the merger by all the merging companies. The merger resolution, or approval of the merger agreement, must be in writing and must be made by the shareholders.
Merger report
The management boards or shareholders of the companies shall prepare a merger report in which they: explain legally and economically the transformation, and the merger agreement. The merger report does not have to be prepared if the sole share or all shares belong to the company being acquired.
Filing an application with the commercial register
The management board of the merging company or the shareholders entitled to represent the company shall submit an application for entry in the commercial register of the merger not earlier than one month after approval of the merger agreement.
Disclosure of merger
After the registration of the merger on the registry card of the acquiring company, the Official Announcements must be notified of the merger and of the possibility of lodging a claim with the acquiring company within six months.
Compensation claims
If you are the partner or shareholder of the company being acquired, but did not consent to the merger, you will have the right within two months of the entry of the merger into the Commercial Register to demand monetary compensation for your share in the company. If the acquiring company is a general partnership or limited partnership, you may demand compensation upon leaving the company.
Concentration control
A merger of undertakings which have previously acted independently and the acquisition by one undertaking of a dominant influence over another undertaking or its part shall be regarded as a concentration. A concentration shall also be deemed to exist where a natural person who already has a dominant influence in least one undertaking acquires a dominant influence over another undertaking or its part.
If for the preceding financial year, the aggregate turnover in Estonia of the parties to the concentration exceeded EUR 6 000 000 and the turnover in Estonia of each of at least two of the parties to the concentration exceeded EUR 2 000 000, the concentration is subject to a control by the Estonian Competition Authority. The Competition Authority shall not control a concentration if it is within the competence of the European Commission under EU Regulation 139/2004/EC unless the European Commission refers the concentration to the Competition Authority for processing.
A concentration which is subject to a control by the Competition Authority may not be put into effect until the decision authorising the concentration has been taken.
The Competition Authority shall be notified of a concentration to be controlled before the concentration enters into force and, as a general rule, after the merger agreement is concluded or a transaction or another act to acquire a dominant influence is carried out. The notice of concentration shall be submitted in writing and shall contain the information listed in Section 26 of Competition Act, including information regarding each party to the concentration and their turnover for the previous financial year, a description of the concentration, details of the product markets, and a description of the effects of the concentration on the product market.
The notice of concentration shall be accompanied by the following documents:
- registry extracts for the parties to the concentration entered in registers of other countries;
- the documents on the basis of which the concentration is put into effect (e.g. merger agreement);
- annual reports of the parties to the concentration for the financial year preceding the concentration;
- a document certifying the authority of the notifying party;
- proof of payment of the state fee;
- analyses, reports, studies, surveys and other documents to assess or analyse the concentration in terms of market shares, conditions of competition, potential growth or expansion of sales to other markets, or general market conditions;
- a list of documents attached to the notice of concentration.
The state fee for the processing of the concentration is EUR 1 920. The instructions for submitting a notice of concentration have been established by a regulation of the Minister of Economic Affairs and Communications.
Within 30 calendar days as of the submission of a notice of a concentration, the Competition Authority shall make one of the following decisions:
- decision to grant permission;
- decision to initiate supplementary proceedings;
- decision that the concentration does not fall within the scope of concentration;
- decision that the concentration is not subject to control.
In the course of supplementary proceedings the Competition Authority shall make one of the following decisions within four months of the beginning of the supplementary proceedings:
- grants permission to concentrate;
- prohibits the concentration;
- terminates the proceedings if the parties to the concentration decide not to concentrate.
In its assessment of the concentration, the Competition Authority shall consider the need to maintain and develop competition, taking into account the structure of the product markets and the actual and potential competition on the product market. A concentration shall be prohibited if it significantly damages competition on the product market, in particular through the creation or strengthening of a dominant position.
The rules for controlling a concentration apply in the same way to all undertakings and may also apply to the acquisition of a dominant influence in an undertaking by a natural person. Certain special rules have been established by the Competition Act for credit and financial institutions and insurance companies.
Further information on control of concentrations can be found on the website of the Competition Authority.