‘Entrepreneur’ in this chapter means a person who was actively engaged in business before death – a partner in an active company (private limited company, public limited company, general or limited partnership) or self-employed (FIE). An entrepreneur is often a member of the management board of his or her company.

For the purposes of law, a company is the set of assets and contracts belonging to a commercial undertaking through which it operates, but for the sake of simplicity, in this chapter we will also refer to a commercial undertaking belonging to an entrepreneur as a ‘company’.

Important! If the bequeather was the owner of the company (shareholder), he or she owned a holding in the company (shares, collectively referred to as the holding), not the company’s own assets. The company’s assets (movable and immovable property, rights and obligations, etc.) belong to the company itself. Generally, only a person acting on behalf of the company (a member of the management board) can conclude transactions with the assets of the company, not the shareholder. If the bequeather was the only member of the company’s management board, the company is temporarily left without a director. An entrepreneur’s estate may include rights and obligations relating to his or her company – for example, loans granted to the company, or an obligation to return the company’s assets to the company, or guarantees given to secure the company’s obligations, etc.

Succession does not always require formal succession proceedings, but in the case of business-related assets (shares, securities), a notary must carry out succession proceedings in order to correctly identify the successors, legacies (an arrangement in a will whereby the testator assigns a material benefit, such as a share or stock, to someone without naming him or her as a successor) and the composition of the estate. As the list of shareholders is kept in the Commercial Register, a certificate of succession must be submitted to the Commercial Register in order to change the owner’s entry. In order to initiate succession proceedings, the person interested in the estate (usually the successor or legatee) must contact a notary as soon as possible after learning of the death of the bequeather.

Acting fast is important for two reasons. Firstly, the time limit for renouncing the succession is three months from the time when the successor knew or should have known of the death of the bequeather and his or her right to succeed. Secondly, acting fast will help avoid suspending the company’s operations. Succession proceedings are carried out in the usual way at a notary’s office.

If nobody initiates succession proceedings with a notary, the ownership of the property will pass from the testator to the successor, but without a notarised certificate of succession or a court order, it will not be possible to change the entries about the owner of the company in the Commercial Register or in the bank. Therefore, the entry in the commercial register about the owner of the holding remains incorrect – it still shows the testator, not the successor. For information on how to reregister a holding, see Transfer of holding in a company by type of business.

Commercial undertaking (private limited company, public limited company, general or limited partnership)
As a company is an independent legal entity, the death of the owner does not put an end to the company’s activities – the company continues to exist. Succession proceedings with a notary take a minimum of one month, but can take longer if it is difficult to identify the successors. If a dispute arises between the successors, for example over the validity of the will or the successor’s right to succeed, the successors must go to court and the true successor may only be identified after a lengthy court battle. During this period, the company’s activities may be hampered – if the necessary decisions of shareholders cannot be made without the participation of the bequeather. If the company has management board members other than the bequeather, the company can continue to operate on a day-to-day basis.

Self-employed person (FIE)
The situation is different in the case of a FIE. A FIE is not a separate legal entity, and in the event of the death of the FIE, the company loses its manager and the company ceases to operate. The FIE’s company can continue to operate after the end of the succession proceedings initiated before a notary. The right to resume the economic activities of an FIE is the right of the successor who became the owner of the inherited company.

Death of a management board member
The term of office of a management board member ends upon his or her death and his or her rights and obligations will not pass to the successor. A member of the management board is elected by a decision of the shareholders, subject to his or her consent. A member of the management board need not be a shareholder and a shareholder need not be a member of the management board.
If the bequeather was the sole shareholder and also the only member of the management board, the company will be left without a legal representative because until the succession proceedings are completed, there will be no shareholder to elect a member of the management board. A company cannot function in a reasonable way without a management board member. In such a situation, the solution is to apply to the court for the appointment of a substitute management board member. For this purpose, the interested person (e.g. another shareholder of the company or the successor) must file a request with the Tartu County Court. The need for a substitute management board member is explained in the request and, if possible, propose a candidate for substitute member. It must be kept in mind that these proceedings may take several months.
Problems arising from the death of a management board members who is a sole shareholder can be avoided by appointing several management board members or a procurator (the company’s representative entered in the Commercial Register). Authorisations granted by the company to carry out day-to-day operations (e.g. organising the accounting, paying salaries and taxes) are valid even after the death of the management board member.

Death of an FIE
In the event of the death of an FIE, the manager of the company disappears, but the authorisations granted by the FIE to carry out day-to-day operations generally remain valid.

Death of a shareholder
It is not possible to exercise a shareholder’s rights after the death of the shareholder until the successors are known. Thus, important decisions (such as electing new management board members or auditors, amending the articles of association, changing the share capital, etc.) cannot be made until then. A resolution of shareholders may also be required, for example, by banks in order to refinance loans or change the terms of loans. The management board can submit the annual report to the Commercial Register without the approval of the shareholders and thus avoid the company being deleted.

Practical problems during succession proceedings
Taxes, the salaries of employees, loan, rent and other payments must be paid on time, even in the event of the death of the FIE or the sole management board member of a company, even if the succession proceedings have not yet been completed and the successors have not been identified. In this case, the presumed successor should communicate with the company’s employees, creditors, service providers, the Tax and Customs Board, etc., in order to find out under what conditions the company can continue to operate until a new management board is elected. It must be kept in mind that not all creditors may accept a delay in the performance of obligations. If the presumed successor fulfils the company’s obligations (e.g. pays the salaries of employees), the successor should be able to recover the necessary expenses from the company at a later stage.

As long as the successor has not been identified and there are no other solutions, it is possible to apply to the court for the appointment of an administrator of the estate or to take other measures to safeguard the estate. For this purpose, the interested person must submit a request to the court of the bequeather’s last place of residence, explaining the circumstances of the request and, if possible, proposing a candidate for the role of administrator of the estate. If necessary, the court will itself specify which steps are necessary in a particular case.The court may order the administrator to possess, use and dispose of the property. Usually, the administrator of the estate is the person who can represent the share of the deceased shareholder during the succession proceedings, for example to vote at a meeting of the shareholders, but this requires a court order.

Restrictions under the law and the articles of association
It is not possible to bequeath all holdings, for example a holding in a law firm in which, by law, only an attorney-at-law can be a shareholder. Restrictions on bequeathing a holding may arise from the law, the company’s articles of association or the shareholders’ agreement/partnership agreement. See Transfer of holdings by type of business below for restrictions arising from articles of association.

Persons with restricted active legal capacity as successor
A person with restricted active legal capacity is a minor (under 18 years of age) or an adult who, because of mental illness, developmental impairment or other mental disorder, is permanently incapable of understanding or controlling his or her actions. Such a person can also inherit a company, but there are important restrictions on how the company can continue to be managed.

Compulsory inventory of the estate in succession proceedings
An inventory of the estate is compulsory if the successor is a person with restricted active legal capacity. If the legal representative of a successor with restricted active legal capacity has not requested an inventory of the estate in the interest of the successor, he or she is personally liable for the debts of the bequeather for which the estate was insufficient.

Representation and exercise of rights
A person with restricted active legal capacity cannot exercise all their rights independently; a legal representative acts on their behalf. In the case of a minor, the legal representative is usually the parent, in the case of a ward, the guardian.
The rights of shareholders in relation to the company, including the right to vote at the meetings of shareholders, are exercised on behalf of a person with restricted active legal capacity by his or her legal representative.
Unless otherwise provided by law, only a natural person with active legal capacity may be a member of the management board of a legal entity or of a body replacing it. Therefore, a person with restricted active legal capacity cannot be a management board member.

Consent of the court to transactions
Certain transactions also require the permission of a court, such as the division of an estate on behalf of a ward, giving the company on rent and the conclusion of a contract for the acquisition or transfer of a company. The same principle applies to parents when representing minor children: parents must have the consent of the court to carry out transactions on behalf of the child in the cases where the consent of the guardian is also required pursuant to the Family Law Act.

Renunciation of succession
The court’s consent is not required for renunciation of succession if the child’s right to succession has arisen as a result of the renunciation of the succession by the parent who has the right to represent the child. In other cases, the consent of the court is required to renounce the succession on behalf of a person with restricted active legal capacity.

Resumption of the activities of an FIE
In the case of succession of an FIE, the situation is more complicated because the status of the FIE is inseparably linked to the person and a person with restricted active legal capacity cannot continue the activities of the FIE independently. In the case of a minor, depending on the age and development of the successor, it is possible to request from the court an extension of his or her legal capacity (possible in the case of those over 15) or to wind up the FIE’s company.

Joint property of spouses
It must be kept in mind that if the holding or share is acquired during the marriage and the spouses have a community of property and there is no marital property agreement in respect of the holding, the holding may be included in the joint property of the spouses. If one spouse dies, the estate does not include the entire holding, but only the part belonging to the deceased spouse.

Non-disposable part of an estate
The non-disposable part of an estate must also be taken into account when the property of entrepreneur is bequeathed, which can be inherited by the descendants (children, grandchildren), parents, spouse or registered partner with resect to whom the bequeather had a maintenance obligation at the moment of death. This means that if the bequeather deprives the beneficiary of the non-disposable part of the estate of the estate in his or her will, the beneficiary of the non-disposable part of the estate has the right to make a financial claim against the successors.

Private limited company
Upon the death of a shareholder, the share will transfer to their successors, unless otherwise stipulated in the law or the articles f association. The prohibition or restriction on the transfer of a share to the successor included in the articles of association does not apply if the articles of association do not provide for a time limit and a procedure for the payment of the appropriate compensation to the successor. Joint ownership of the share by co-successors emerges in the case of multiple successors.

Once the notary has finalised the succession proceedings and certified the certificate of succession, the holding in the company is not automatically transferred to the name of the successor in the register. The hew holder is required to immediately notify the management board of any changes in the data of shareholders. The management board is required to immediately notify the Commercial Register of any changes in the data of shareholders. This means that the successor notifies the management board, which in turn notifies the Commercial Register in e-Commercial Register portal or through a notary.

Public limited company
Upon the death of a shareholder, the share will transfer to their successor. If the share belongs to several persons jointly, these persons may only exercise the rights relating to the share jointly and the joint holders of the share are solidarily responsible for the performance of the obligations arising from the share. Unlike a private limited company, the articles of association of a public limited company cannot impose restrictions on the succession of shares.
Similar to shares in a public limited company, the inheritance of shares by several successors creates joint ownership of the shares by the co-successors. This means that when three shares are inherited by three successors, each successor does not inherit one share, but the three of them together acquire three shares between the three of them. In order for each person to acquire one share, the joint ownership of these shares must be terminated by an agreement to that effect. This is a simple agreement, usually drawn up by the bank holding the shares on the basis of a notary’s certificate of succession and the declarations of the co-successors.
If the share or shares were held in the bequeather’s securities account, the certificate of succession must be presented to the bank where the securities account was opened and the securities will be transferred to the securities accounts opened by the successors at their request. If you have further questions, you can contact a notary or the bank.

General partnership
In the event of the death of a partner, his or her successors have the right to join the general partnership if this is provided for in the partnership agreement or if all the partners agree.
If the successor does not want or is unable to join the general partnership, or if the other partners do not agree to the successor joining the partnership (a general partnership is by its nature a ‘closed partnership’, where the inclusion of third parties requires the consent of the existing partners), the successor is entitled to receive a share of the compensation corresponding to his or her share of the estate which the deceased partner would have received if he or she had left the partnership.
The articles of association may also provide that the partnership will be dissolved if a partner leaves the partnership, or in the case of the bankruptcy of a partner, the death of a partner who is a natural person or the termination of a partner that is a legal entity. The successor may apply to join a general partnership within three months of the day on which he or she became aware of his or her right of succession. The request is submitted to the other partners.

Important warning:A person who becomes a partner in a general partnership is also liable for the partnership’s obligations that arose before he or she became a partner. This means that before joining a general partnership, it is worthwhile to look carefully at all the partnership’s previous liabilities and debts, as the successor will take them over even if they arose before he or she became a partner.

Limited partnership
There are two types of partner in a limited partnership: general partner and limited partner. A limited partner who has paid the contribution in full is not liable for the obligations of the limited partnership. If the limited partner has not paid the contribution in full, he or she is liable for the obligations of the limited partnership to the extent of the unpaid contribution.
This is very different from a general partner, who is liable for the partnership’s obligations with all his or her personal assets. It is therefore important to establish what type of partner the deceased was before succession. For this purpose, it is necessary to read the partnership agreement and communicate with other partners.

Self-employed person
In the event of the death of a self-employed person, the following persons are entitled to continue the economic activities of the self-employed person: the successor; the person possessing the company of the bequeather until the existence of a successor or executor is established or an administrator of the estate is appointed; the executor until the end of the succession proceedings if an executor has been appointed in the will; the administrator of the estate until the end of the succession proceedings if an administrator has been appointed.
The successor who became the owner of the company that belonged to the estate has the right to continue with the economic activities after the end of the succession proceedings. In the case of co-successors, they must submit the notice on resumption or the request for transfer of authorisation jointly.
For certain economic activities, the law provides for an authorisation or notification requirement (e.g. building audit, sale of electricity, etc.). All notices on economic activities are submitted to the Register of Economic Activities (MTR) kept by the Consumer and Technical Regulatory Authority.
In the case of an area of activity with the obligation of notification, the person entitled to resume is obliged to notify the registrar of the MTR of the resumption without delay, but no later than within five working days. In the event of the death of an FIE, the person who submitted the notice during the succession proceedings does not have to submit a new notice after the end of the proceedings.
In the case of activities subject to authorisation, the person entitled to resume must apply to the national authority dealing with these authorisations for the transfer of the authorisation within 30 days of the right to resume the economic activity arising. During the succession proceedings, the economic activity may be resumed without applying for the transfer of the authorisation by submitting a notice on resumption of the economic activity. If you have further questions, you can contact the Register of Economic Activities or a notary.
If a natural person acquires a company by succession, the acquirer can continue to trade under the present business name. The successor can make the necessary entry in the Commercial Register.

If there are more than one successor and the will or succession contract does not provide otherwise, the estate (including the holding in a company) belongs to them jointly (community of the estate). This means that the successors must make all decisions relating to the holding jointly. If the successors do not reach a consensus, the decision will not be made.
In order to exercise the rights arising from a share, the successors can appoint a joint representative by entering into an agreement and/or preparing a power of attorney.
If the successors do not wish to jointly exercise the rights arising from the holding, it is possible to terminate the joint ownership and conclude an agreement on the division of the estate. Co-successors divide the estate by agreement. The agreement must be concluded in the same form as the transfer of the corresponding assets (the agreement on the division of the share as the estate is usually notarised form the agreement on the division of shares as the estate is in unattested (digitally signed) form). In the case of a dispute, a courtwill divide the estate at the request of a successor.

The division of the estate can only be requested if all the successors are known.

Right of pre-emption of co-successors
If there are several successors and one of them wishes to sell his or her share of the community of the estate to a third party, it must be taken into account that if the co-successor sells his or her share of the community of the estate to a third party, the other co-successors have the right of pre-emption. The time limit for exercising the right of pre-emption is two months from the date of becoming aware of the transaction. The transferor of a share must immediately notify the co-successors of the transfer of ownership of the share. This means that co-successors can buy the share being sold instead of it going to a third party.

Private limited company and public limited company
As s company is a separate legal entity and the successor inherits a holding in the company, the successor does not personally inherit the debts of the company. The debts of the company remain the responsibility of the company and the successor is only liable for them with his or her holding in the company and not with personal assets.

General partnership and limited partnership
The partners of a general partnership are jointly and severally liable for the obligations of the partnership with all their assets. This means that the successor assumes personal liability for the partnership’s debts – a person who becomes a partner in a general partnership is also liable for the partnership’s obligations that arose before he or she became a partner.
The situation in a limited partnership is different: only the general partner is liable for the obligations, but a limited partner who has paid the contribution in full is not liable for the obligations of the limited partnership. Therefore, before accepting the succession, it must be established whether the bequeather was a general or a limited partner.

FIE
The obligations of an FIE are part of the estate, so the successors inherit the debts of the FIE with the assets. The successors have the right to decide whether to terminate the activity of the FIE and take the inherited assets for personal consumption, to continue the FIE’s business and take over the assets and liabilities related to the business, or to transfer the assets of the FIE to a company and continue the activity in another form of business. In the case of inheritance of the assets of an FIE, it is advisable to consult the Tax and Customs Board in order to determine the tax arrears by submitting a request for clarification.

What should I do if the debts exceed the assets?
In order to avoid the successor becoming personally liable for the debts inherited (e.g. in the case of an FIE or a general partner), the successor has the option of renouncing the succession or accepting the succession by requesting an inventory and/or filing a petition with the court to declare the bankruptcy of the estate. It must be kept in mind that if a person renounces the succession, the right to receive the estate passes to the next relative (e.g. the children of the renouncer), so it may be more practical to accept the succession with the requirement of an inventory. If the inventory reveals that the debts exceed the value of the estate and the successor does not wish to cover the shortfall with his or her own assets, a petition must be filed with the court to declare the estate bankrupt.

Inventory
A successor is required to perform all the obligations of the bequeather. If an estate is insufficient, a successor shall perform the obligations out of the successor’s own property unless the successor has, after making an inventory, performed the obligations pursuant to the procedure provided by law, the estate has been declared bankrupt or the bankruptcy proceedings have been terminated by abatement without declaring bankruptcy.
The inventory does not release from the payment of the bequeather’s debts, but only limits the successor’s liability to the value of the estate. After an inventory, the liability of an successor for the obligations related to the estate is limited to the value of the estate. In order to carry out the inventory, the heir submits a request to the notary for an inventory, on the basis of which the notary appoints a bailiff to carry out the inventory. An inventory of the estate is compulsory if the successor is a person with restricted active legal capacity, a local authority or the state.

Bankruptcy of the estate
If the estate is not sufficient to perform the obligations, it is wise to file a petition for bankruptcy of the estate. A successor, executor of will or administrator of estate is required to submit a petition for the declaration of bankruptcy of the estate to the court within three months after the person becomes aware or should have become aware of the circumstances from which it can be presumed that the estate is insufficient for covering the claims and the successor does not agree to satisfy the claims out of the successor’s own property. If the successor is prepared to pay the debts of the bequeather with personal assets, there is no need to file for bankruptcy.
After filing for bankruptcy of the estate, the liability of an successor for the obligations related to the estate is limited to the estate. A petition for the bankruptcy of the estate must be filed with the county court of the bequeather’s last place of residence (if the bequeather died after a petition for his or her insolvency was filed, the bankruptcy proceedings of the estate will continue in the same court). The successor is required to transfer to the bankruptcy estate the share the successor has received from the property of the bequeather in relation to the opening of the succession.

Important exception: In bankruptcy proceedings against the estate of the bequeather, the claims of the creditors in the bankruptcy proceedings will not be satisfied out of the personal assets of the successor, unless an obligation arising from law has been breached to the extent that the creditors in the bankruptcy proceedings have suffered damage. This means that the personal assets of the successor are not protected – if the successor has breached his or her legal obligations (e.g. by filing for bankruptcy late), the successor’s personal assets can also be used to satisfy the claims of creditors. It is therefore important to respect the deadlines for filing for bankruptcy.

Tax liabilities
In Estonia, there is no inheritance tax, but the notary’s fees for the authentication of transactions and the issue of documents, as well as state fees for registration, must be taken into account. The successor must also take into account that making payments to the successor from the company may involve other tax liabilities (e.g. when paying dividends).

Succession abroad
The situation where the estate includes a company registered abroad (e.g. a commercial undertaking, shares in a private limited liability company, shares in a public limited company, etc.) is complicated due to the interaction of several laws. Even if Estonian law is applied to succession, a company registered abroad is itself regulated by the country where it is registered.

In the case of a company registered abroad, the notary may not be able to obtain all the information themselves – the successor will probably have to provide the relevant documents from the foreign country’s register. It is advisable to consult a lawyer in the country where the company is registered, as the transfer of a holding and registration requirements depend on that country.

Given the above, it is reasonable for the entrepreneur to decide during his or her lifetime what will happen to the company after his or her death and how its day-to-day activities can continue without interruption. This helps to protect the value of the business after the death of the entrepreneur, as well as avoid disputes between successors.

For this purpose, the entrepreneur could consider, among other things, appointing more than one person to the company’s management board, or granting authorisations or a procuration on behalf of the company. It must be kept in mind that it is not possible to grant a general authorisation, but that the authorisation must cover specific tasks. In addition to appointing persons, the entrepreneur can also lay down the company’s development directions, strategic objectives and operating policies for future management during his or her lifetime.

Transfer of a company during lifetime
The transfer of a company to the chosen person can also be arranged during the lifetime of the entrepreneur, for example by giving the shares to a descendant as a gift. A disposition for the transfer of a share must generally be authenticated by a notary. Shares can be transferred by a securities transfer through a bank.

Will and succession contract
It is possible for an entrepreneur to settle the succession of his or her business as a legacy by stipulating it in a will or succession contract, which can only be done during the entrepreneur’s lifetime. In the case of succession, the legatee acquires exclusive ownership of the shares in the company belonging to the particular bequeather. This is a sensible solution because, in the case of a statutory succession, the successor can only inherit a holding in a company as part of the estate as a whole, which includes the various assets and liabilities as a set. In the case of multiple successors, this means that each successor acquires only a legal share of the total property of the bequeather, including shares as well as real estate and debts.

In the case of multiple successors, a will or succession contract can determine how the company is divided between them. An unequal division (e.g. a holding share to a successor who actively deals with the company) may be fair but requires planning. It would be worth considering compensation that offsets the value of the holding to avoid future disagreements between the successors. Disputes between successors can seriously damage the inherited company.

When making a will or a succession contract, it is possible to appoint an executor who can be entrusted with the execution of legacies, testamentary obligations, testamentary directions and other obligations arising from the will or the succession contract. The executor of the will is required to administer prudently and ensure the preservation of the estate necessary for performance of her duties. The executor of a will is required to take an object forming part of an estate into his or her possession or to ensure in other ways the separation of the object from the property of the successor if it is necessary for the performance of the duties of the executor of the will. The executor of the will has the right to assume obligations with respect to a succession and dispose of objects forming part of an estate if it is necessary for the performance of the duties of the executor of the will. The executor of a will shall be liable for any damage caused wrongfully to a successor or legatee by violating his or her duties. The executor of will is required to submit a petition for the declaration of bankruptcy of the estate to the court within three months after the person becomes aware or should have become aware of the circumstances from which it can be presumed that the estate is insufficient for covering the claims of creditors and the successor does not agree to satisfy the claims out of the successor’s own property. Only a person with active legal capacity, such as an adult successor or legatee, or a lawyer, may be an executor of a will. A remuneration for the executor of a will may be set in the will or the succession contract. If a person intends to appoint someone as executor, it is worth discussing the matter with the candidate before the will or succession contract is prepared.

The will or succession contract should be drafted clearly enough to avoid difficulties in interpreting the will later. It is advisable to consult a lawyer and a notary about this.

General Part of the Economic Activities Code Act 

Notary Fees Act 

Succession Act 

Family Law Act  

State Fees Act 

General Part of the Civil Code Act 

Code of Civil Procedure 

Law of Obligations Act 

Commercial Code 

Commercial Register Act 

Estonian Bar Association 

Chamber of Notaries 

Ministry of Justice and Digital Affairs 

Courts 

Tax and Customs Board 

Consumer Protection and Technical Regulatory Authority 

Contact details of lawyers

Succession of a company 

Types of business 

Receiving a company by way of succession 

Where to find legal assistance 

Transactions with the property of a child or ward 

Insolvency and bankruptcy 

Contact details of notaries 

Transfer of shares 

Succession Web 

Will 

Division of property 

Overview of corporate taxes