Estonia Commercial Code - Management

Estonia Companies Act Estonia Companies Act Estonia Companies Act Estonia Companies Act

Chapter 20 MANAGEMENT  

§ 168. Competence of shareholders

 (1) The shareholders are competent to:
 1) amend the articles of association;
 2) to increase and reduce the share capital;
 3) elect and remove members of the supervisory board;
 4) elect and remove members of the management board, if the association does not have a supervisory board;
 5) approve the annual report and distribute profit;
 6) divide shares;
 7) elect an auditor;
 8) designate a special audit;
 9) if the private limited company does not have a supervisory board, appoint and remove procurators;
 10) decide on conclusion and terms and conditions of transactions with the members of the supervisory board or, if the association has no supervisory board, with the members of the management board, decide on the conduct of legal disputes with the members of the management board or supervisory board, and appointment of the representative of the private limited company in such transactions and disputes;
 11) decide on dissolution, merger, division or transformation of the private limited company;
 12) decide on other matters placed in the competence of the shareholders by law or the articles of association.

 (2) The shareholders may also adopt resolutions on matters within the competence of the management board or supervisory board. In such case, the shareholders shall be liable in the same manner as members of the management board or supervisory board.

§ 169. Number of votes of shareholder

 (1) The number of votes of a shareholder shall be proportional to the amount of the shareholder’s share.

 (2) Each one euro of a share shall grant one vote unless the articles of association prescribe otherwise.

§ 170. Meeting of shareholders

 (1) The shareholders shall adopt resolutions at a meeting or pursuant to the procedure provided for in § 173 of this Code. In the cases provided by law, the shareholders may only adopt resolutions at a meeting of shareholders.

 (2) A meeting of shareholders is competent to adopt resolutions if the represented votes represent over one-half of the shares unless the articles of association prescribe a greater representation requirement.

 (3) A shareholder may participate in a meeting personally or through a representative, the availability of whose right of representation shall be certified by a document in a format which can be reproduced in writing.

 (4) The costs of organising a meeting of shareholders shall be borne by the private limited company. If a meeting of shareholders is called at the demand of the shareholders or if shareholders themselves call a meeting, the shareholders who requested the calling of the meeting or called the meeting may be required to cover the costs of the general meeting by a resolution of the meeting of shareholders which receives at least two thirds of the votes represented at the general meeting.

 (5) The articles of association of a private limited company may prescribe that the shareholder may vote on the draft resolutions prepared in respect to the items on the agenda of a meeting of shareholders by submitting his or her vote to the private limited company prior to the meeting of shareholders by mail in writing. Subsections 2982 (2)–(4) of this Code are applied respectively.

§ 1701. Electronic voting

 (1) The articles of association of a private limited company may prescribe that the shareholders may vote on the draft resolutions prepared in respect to the items on the agenda of a meeting of shareholders using electronic means prior to the meeting or during the meeting if it is possible in a technically secure manner.

 (2) The shareholder who voted electronically shall be deemed to have taken part in the meeting and the votes represented by the shareholder's share shall be accounted as part of the quorum of the meeting unless otherwise provided by law. If only draft resolutions that were not disclosed before a meeting are voted on during the meeting, in respect to which the shareholder did not submit any votes, the shareholder shall not be deemed to have taken part in the meeting.

 (3) The articles of association prescribe the precise procedure of the organisation of the electronic voting. The articles of association may prescribe that the procedure of the electronic voting shall be determined by the management board. The procedure determined by the articles of association or the management board shall ensure the identification of the shareholders and the security and reliability of the electronic voting and be proportionate for the achievement of the above objectives.

 (4) Electronic voting shall take place in electronic format. The articles of association may prescribe the moment of time until which it is possible to vote electronically prior to the meeting or during the meeting.

 (5) The articles of association or a resolution of the management board or the supervisory board may prescribe that the meeting shall be transmitted in full or in part in real time via the Internet, using two-way communication or any other technically secure manner. Watching the transmission shall not be considered participation in the meeting for the purposes of this Code.

§ 171. Calling meeting of shareholders

 (1) A meeting of shareholders shall be called by the management board.

 (2) The management board shall call a meeting of shareholders if this is necessary in the interests of the private limited company, or if:
 1) the net assets (total assets minus total obligations shown under liabilities on a balance sheet) of the private limited company are less than one-half of the share capital or less than the amount of share capital specified in § 136 of this Code or other minimum amount of share capital provided by law, or
 2) this is demanded by the supervisory board or auditor; or
 3) this is demanded by shareholders whose shares represent at least one-tenth of the share capital.

 (3) If the management board does not call a meeting of shareholders within one month after receipt of a demand from the supervisory board, auditor or shareholders, the supervisory board, auditor or shareholders have the right to call the meeting themselves.

 (4) A list of the shareholders participating in a meeting of shareholders shall be compiled at the meeting of shareholders, which shall set out their names, the number of votes arising from their shares and the way of participation in the meeting, and also the names of the representatives of shareholders. If the shareholder has voted prior to the meeting electronically or by mail, the list shall also specify the voting date. The list shall be signed by the chairman of the meeting and the recording secretary, and any shareholder or the shareholder's representative who physically attended the meeting.

 (5) Minutes shall be taken of the meetings of shareholders. The provisions of subsections 304 (1)–(6), respectively, apply to the minutes of the meetings of shareholders.

 (6) If the votes specified in subsection 170 (2) of this Code are not represented at a meeting of shareholders and the meeting has no quorum due to the above, the management board shall call a new meeting without changing the agenda, which is competent to adopt resolutions regardless of the number of votes represented at the meeting. The above applies exclusively in case the notice for calling the new meeting has been sent to the shareholders no earlier than two days after the first meeting and no later than on the tenth day after the first meeting.

§ 1711. Agenda of meeting of shareholders

 (1) The agenda of a meeting of shareholders shall be determined by the management board unless the articles of association prescribe otherwise. If a meeting of shareholders is called by the shareholders, the supervisory board or an auditor, such persons shall also determine the agenda of the meeting.

 (2) Shareholders whose shares represent at least one-tenth of the share capital may demand the inclusion of additional issues on the agenda. The agenda shall not be changed prior to the meeting if the respective demand is submitted later than three days before holding the meeting of shareholders.

 (3) An issue which is initially not on the agenda of a meeting of shareholders may be included on the agenda with the consent of at least nine-tenths of the shareholders who participate in the meeting of shareholders if their shares represent at least two-thirds of the share capital. The votes represented by the shares of the shareholder participating in the way specified in subsection 1701 (1) of this Code shall not be accounted as part of the meeting quorum.

 (4) A meeting of shareholders may decide on calling the next meeting and settle submissions concerning operational issues related to the agenda or to the procedure for holding the meeting without including such matters in the agenda beforehand, and to discuss other matters at the meeting of the shareholders without adopting a resolution on such matters.

§ 1712. Draft of resolution

 (1) The person who calls the meeting shall prepare a draft of the resolution in respect to each item on the agenda unless the articles of association prescribe otherwise.

 (2) If a meeting of shareholders is called by the shareholders, the supervisory board or an auditor, such persons shall submit the prepared drafts of the resolutions to the management board prior to the notification about calling the meeting of shareholders. The drafts of the resolutions may be additionally included in the notice on calling the meeting.

 (3) If the shareholders demand the inclusion of additional issues on the agenda, they shall simultaneously with the demand on the modification of the agenda submit to the private limited company a draft of the resolution or substantiation regarding each additional issue.

 (4) The private limited company shall make the drafts of the resolutions and substantiations prepared by the management board and submitted by the shareholders, the supervisory board or an auditor available to the shareholders in the location determined by the private limited company or on the homepage of the private limited company. It shall be possible to examine the drafts of the resolutions at least as of the notification about a meeting until the day of holding the meeting of shareholders unless otherwise provided by law.

 (5) The private limited company shall make the drafts of the resolutions and substantiations specified in subsection (3) of this section available to the shareholders immediately after the submission thereof to the private limited company if these are submitted to the private limited company after the notification about the meeting of shareholders.

 (6) Failure to make the drafts of the resolutions specified in subsection (2) of this section available shall not constitute a material violation of the procedure of calling a meeting of shareholders.

§ 172. Notice calling meeting of shareholders

 (1) The management board shall send a notice of a meeting of shareholders to all shareholders The notice shall be sent to the address or e-mail address entered in the list of shareholders. If a private limited company is aware or should be aware that the address of a shareholder differs from the address entered in the list of shareholders, the notice shall also be sent to that address. The notice shall be sent in such manner that, under normal conditions of delivery, it would reach the addressee at least one week before the meeting takes place.

 (2) A notice shall indicate the time, place and agenda for the meeting of shareholders and the location or homepage address of the private limited company, where it is possible to examine the drafts of the resolutions and substantiations, and also other important circumstances related to the meeting. If the private limited company provides an opportunity to vote electronically or by mail, the information regarding the procedure and term for voting electronically or by mail shall be specified in the notice.

 (3) If, after dispatching the notice on calling a meeting of shareholders, the agenda of the meeting is changed, such changes to the agenda must be communicated prior to the meeting takes place pursuant to the same procedure and within the same term as prescribed for the dispatch of the notice on calling a meeting of shareholders.

 (4) If the share is jointly owned by several persons and the shareholders did not appoint a joint representative for exercising the rights arising from the share, the notice on calling a meeting of shareholders shall be considered sent to all the persons who jointly own the share also in case it has been sent exclusively to the shareholders who are entered as the shareholders in the list of shareholders. If the private limited company is aware or should be aware that not all persons who own the share are entered in the list of shareholders, the notice shall be sent to all the shareholders.

 (5) If in the case specified in subsection (4) of this section the notice has been sent to all the shareholders and only one of the persons who jointly own the share participates in the meeting, it shall be presumed that the attending shareholder is entitled to represent the other joint shareholders. The above does not apply if a resolution is adopted without calling a meeting.

§ 1721. Violation of procedure for calling of meeting of shareholders

  If the requirements of law or the articles of association are materially violated in calling a meeting of shareholders, the meeting of shareholders shall not have the right to adopt resolutions except if all shareholders participate in or are represented at the meeting. Resolutions adopted at such meeting are void unless the shareholders with respect to whom the procedure for calling the meeting was violated approve of the resolutions.

§ 173. Adoption of resolutions without calling meeting

 (1) Shareholders have the right to adopt resolutions without calling a meeting of shareholders.

 (2) The management board shall send a draft of the resolution specified in subsection (1) of this section in a format which can be reproduced in writing to all shareholders, specifying the term during which the shareholder must present the shareholder’s position on it in a format which can be reproduced in writing. If a shareholder does not give notice of whether the shareholder is in favour of or opposed to the resolution during this term, it shall be deemed that the shareholder votes against the resolution.

 (3) The management board shall prepare a record of voting concerning the voting results and shall promptly send it to the shareholders. A record of voting shall set out:
 1) the business name and registered office of the private limited company;
 2) the name of the recording secretary;
 3) the adopted resolution together with the voting results (including the shareholders who voted for the resolutions by name);
 4) at the request of a shareholder who maintains a dissenting opinion with regard to a resolution, the content of the shareholder’s dissenting opinion;
 5) other circumstances of importance with regard to the vote.

 (4) The positions of shareholders specified in subsection (2) of this section that were submitted in a format which can be reproduced in writing shall be an integral part of the record of voting.

 (41) If the resolution of the shareholders provides the basis for the election of a member of the management board, the record of voting shall be signed by the member of the management board, in whose respect an entry has been made in the commercial register, or a shareholder of the private limited company. The signature under the record of voting by a person specified in the previous sentence shall be notarised. The notarisation of the signature shall be substituted by the digital signing of the record of voting by the person specified in the first sentence of this subsection.

 (42) The provisions of subsection (41) of this section shall not be observed if the extension of the term of office of a member of the management board is decided. The provisions of subsection (41) of this section shall not be observed also in case the petition for the entry of a member of the management board in the register is signed by the member of the management board, in whose respect an entry has been made in the commercial register, or a shareholder of the private limited company.

 (5)

 (6) If a private limited company has a single shareholder or if, in addition to such shareholder, only the private limited company is a shareholder, resolutions may be adopted without observing the provisions of § 170, subsections 171 (4)–(6), § 172 and subsections (1)–(41) of this section. In such event, a resolution shall be prepared in writing and signed by the shareholders and such resolution shall set forth, among other, the names of the shareholders, the number of votes and the time of passing the resolution. If the resolution of the shareholders provides the basis for the election of a member of the management board, the signature of one shareholder shall be notarised. The notarisation of the signature shall be substituted by the digital signing of the resolution by the person specified in the previous sentence. Subsection (42) of this section shall be implemented to the election of a member of the management board respectively.

 (7) The provisions of subsection (6) of this section also applies in the case where there are more shareholders provided that they all agree to the resolution and sign it.

§ 174. Resolution of shareholders

 (1) A resolution of the shareholders shall be adopted if over one-half of the votes represented at the meeting of shareholders are in favour unless the law or the articles of association prescribe a greater majority requirement.

 (2) If a resolution is made pursuant to the procedure provided for in subsection 173 (2) of this Code, the resolution shall be adopted if over one-half of the votes of the shareholders are in favour unless the law or the articles of association prescribe a greater majority requirement.

 (3) In the election of a person, the candidate who receives more votes than the others shall be deemed to be elected. Upon an equal division of votes, lots shall be drawn unless the articles of association prescribe otherwise.

 (4) If the minutes of a meeting of shareholders, the record of votes or a resolution of shareholders is submitted to the commercial register, such document shall include a complete list of shareholders which sets out the number of votes of each shareholder.

§ 175. Resolution on amendment of articles of association

 (1) A resolution on amendment of the articles of association shall be adopted if at least two-thirds of the votes of the shareholders who participate in the meeting or, in the case specified in subsection 174 (2) of this Code, at least two-thirds of the votes of the shareholders are in favour, unless the articles of association prescribe a greater majority requirement.

 (2) A resolution on amendment of the articles of association shall enter into force as of the making of a corresponding entry in the commercial register. The resolution of the shareholders on amendment of the articles of association, the minutes of the meeting of shareholders or the record of voting, and the new text of the articles of association shall be appended to the petition submitted to the commercial register.

§ 176. Decrease of assets

  If the net assets of a private limited company are less than one-half of the share capital, or less than the amount of share capital specified in § 136 of this Code or another minimum amount of share capital provided by law, the shareholders shall decide on:
 1) a reduction or increase of share capital on the condition that the net assets would thereby form at least one-half of the share capital and at least the share capital specified in § 136 of this Code or other minimum capital provided by law; or
 11) the implementation of other measures as a result of which the net assets of the private limited company would form at least one-half of the share capital specified in § 136 of this Code or other minimum capital provided by law;
 2) dissolution, merger, division or transformation of the private limited company; or
 3) submission of a bankruptcy petition.

§ 177. Restriction on right to vote

 (1) A shareholder shall not vote if release of the shareholder from obligations or liabilities, consent for the transfer of the shareholder's share, conclusion of a transaction between the shareholder and the private limited company, or conduct of a legal dispute with the shareholder or appointment of a representative of the private limited company in such legal dispute or transaction, or issues related to the monitoring or evaluation of the activities of a shareholder or representative thereof in the capacity of a member of the management board or supervisory board, is being decided. The votes of the shareholder shall not be taken into account in the determination of representation.

 (2) The provisions of subsection (1) of this section do not apply if a private limited company has only one shareholder or if, in addition to such shareholder, only the private limited company itself is a shareholder. In such case all transactions between the private limited company and the sole shareholder shall be formalised in writing or, a document signed by the shareholder which sets out the main terms and conditions of a transaction shall be promptly prepared.

 (3) Irrespective of the provisions specified in subsection (1) of this section, the shareholder may vote upon the shareholder's election as a member of the management board, extension of the term of office and removal.

§ 1771. Nullity of resolution of shareholders

 (1) A resolution of the shareholders is void if it violates a provision of law established for the protection of the creditors of the private limited company or due to other public interest, of if it is contrary to good morals, or if the procedure for calling the meeting of shareholders which made the resolution or making the resolution was materially violated. A resolution is also void in other cases provided by law.

 (2) Nullity of a resolution may be relied upon in court proceedings by filing an action or objection.

 (3) Nullity of a resolution cannot be relied upon if an entry has been made in the commercial register based on the resolution and two years have passed from the date making the entry.

 (4) Subsections 178 (5) and (6) correspondingly apply to a court proceeding for establishment of the nullity of a resolution.

§ 178. Contestation of resolution of shareholders

 (1) Based on an action filed against a private limited company, a court may revoke a resolution of shareholders which is in conflict with the law or the articles of association. The limitation period for the claim is three years after the date of adopting the resolution of the shareholders.

 (2) Revocation of a resolution cannot be demanded if the shareholders have approved the resolution by a new resolution and the action specified in subsection (1) of this section has not been filed against the new resolution within the term specified in the same subsection.

 (3) Revocation of a resolution of shareholders may be demanded by the management board or supervisory board if, by performing the resolution, an offence or misdemeanour would be committed or if performance of the resolution would clearly result in an obligation to compensate for damage, and by a shareholder who did not participate in passing the resolution. A shareholder who participated in the passing of a resolution may demand the revocation of the resolution only if the shareholder's objection to the resolution has been entered in the minutes. The shareholder participating in the meeting in the way specified in subsection 1701 (1) or subsection 170 (5) of this Code may demand revocation of a resolution also without entering the objection in the minutes.

 (4) If an action is filed, the court shall not hear the matter before the expiry of term specified in subsection (1) of this section. Different actions filed in order to revoke the same resolution shall be joined and heard in one proceeding.

 (5) A court judgment for revocation of a resolution of the shareholders applies to all shareholders and members of the management board and supervisory board regardless of whether or not they participated in the court proceeding.

 (6) In an entry has been made in the commercial register based on a revoked resolution, the court shall send a copy of the judgment to the registrar of the commercial register for amendment of the entry.

§ 179. Approval of reports

 (1) After the end of the financial year, the management board shall prepare the annual report pursuant to the procedure provided for in the Accounting Act.

 (2) The management board shall submit the annual report and the profit distribution proposal to the shareholders. The annual report shall be approved and executed pursuant to the provisions of § 25 of the Accounting Act. If the private limited company has an auditor, the sworn auditor's report shall be appended to the annual report. If the private limited company has a supervisory board, the report of the supervisory board shall be appended to the annual report.

 (3) Approval of the annual report shall be decided by the shareholders. A shareholder may request the private limited company the presence of the auditor who provided the sworn auditor's report at the decision on the approval of the annual report and provision of explanations concerning the sworn auditor's report by him or her. A corresponding written request shall be submitted at least five days prior to the meeting of the shareholders.

 (4) The management board shall submit the approved annual report together with the proposal for the distribution of profit or the covering of loss, the division of the sales revenue and the sworn auditor's report, if auditing is compulsory, to the commercial register within six months after the end of the financial year. Together with the submission of the annual report, the management board shall notify the commercial register in what way specified in § 176 of this Code the shareholders have decided to cover the loss. If compared to the time of the approval of the previous annual report the shareholders' data have changed, a new list of shareholders shall also be submitted together with the annual report as at the approval of the annual report. The list shall set forth the data specified in subsection 182 (1) whereas only the country of the residence or registered office of the shareholder shall be specified instead of the address of the shareholder.

 (41) [Repealed - RT I 2009, 54, 363 - entry into force 01.01.2010]

 (5) The information specified in subsection 332 (3) shall be indicated in the profit distribution proposal. The provisions of § 335 shall correspondingly apply to the resolution on profit distribution.

 (6) The division of the sales revenue shall contain information regarding the sales revenue for the accounting year in up to ten major areas of activity pursuant to the Classification of Economic Activities established on the basis of subsection 4 (6) of this Code. In case of the annual report of a consolidation group, the division of the sales revenue is submitted on the basis of the respective information in the unconsolidated income statement of the consolidating entity.

§ 180. Management board

 (1) The management board is a managing body of the private limited company which represents and manages the private limited company.

 (2) The management board may have one member (manager) or several members. A member of the management board need not be a shareholder. A member of the management board must be a natural person with active legal capacity.

 (3) A member of the supervisory board shall not be a member of the management board. The articles of association may prescribe other persons who shall not be members of the management board.

 (31) A person with respect to whom a court has, pursuant to §§ 49 or 491 of the Penal Code, imposed a prohibition on acting as a member of the management board or a prohibition to engage in enterprise, a person who is prohibited from operating within the same area of activity as the private limited company, or a person who is prohibited to act as a member of the management board on the basis of law or a court decision shall not be a member of the management board.

 (4) If the private limited company has a supervisory board, the management board shall, in managing, adhere to the lawful orders of the supervisory board. Transactions which are beyond the scope of everyday economic activities may only be concluded by the management board with the consent of the supervisory board. Such restriction shall not apply with regard to third persons.

 (5) The management board shall present an overview of the economic activities and economic situation of the private limited company to the supervisory board at least once every four months and shall immediately give notice of any material deterioration of the economic condition of the private limited company or any other material circumstances related to the economic activities of the private limited company. The management board shall also notify of any circumstances related to other private limited companies belonging to the same group as the private limited company, which may significantly affect the operation of the private limited company.

 (51) If a private limited company is insolvent and the insolvency, due to the company's economic situation, is not temporary, the management board shall promptly but not later than within twenty days after the date on which the insolvency became evident, submit the bankruptcy petition of the private limited company to a court. After insolvency has become insolvent, the members of the management board shall no longer make payments on behalf of the private limited company, except in the case where making the payments in the situation of insolvency conforms to the due diligence requirements. The members of the management board shall solidarily compensate to the private limited company any payments made by the private limited company after the insolvency of the company became evident which, under the circumstances in question, were not made with due diligence. The provisions of § 187 of this Act apply to the liability of the members of the management board.

 (6) If the management board has more than two members, the members of the management board shall elect a chairman of the management board from among themselves, who shall organise the activities of the management board. If the private limited company has a supervisory board, the articles of association of the private limited company may prescribe that the chairman of the management board shall be appointed by the supervisory board.

 (7)

 (8) The specific work procedure of the management board may be prescribed by the articles of association or by a resolution of the shareholders, management board or supervisory board.

§ 1801. Remuneration of members of management board

 (1) The amount of remuneration payable to a member of the management board and the procedure for payment shall be determined by a resolution of the shareholders or, in the case there is a supervisory board, by a resolution of the supervisory board.

 (2) Upon establishing the procedure for remuneration of the members of the management board and the amount of fees and other benefits, and concluding contracts with the members of the management board, the shareholders or the supervisory board shall ensure that the total amount of the payments made by the private limited company to the members of the management board are in reasonable proportion to the duties of the members of the management board and the economic situation of the private limited company.

 (3) If the economic situation of a private limited company significantly deteriorates and further payment to a member of the management board of the fees established for or agreed upon with the member, or further allowing of other benefits to the member would be extremely unfair to the private limited company, the private limited company may demand the decrease of the fees or benefits.

 (4) The decrease specified in subsection (3) of this section does not affect other terms and conditions of contracts concluded with the member of the management board. If decrease of fees or other benefits is demanded, the member of the management board may exercise the right to extraordinary cancellation of a contract concluded with him or her upon one month's advance notice of cancellation.

 (5) Upon declaration of bankruptcy of a private limited company and termination of the contract of a member of the management board, the member of the management board has the right to demand, in the course of the bankruptcy proceeding, compensation of the damage caused by the termination of the contract within one year after the date of termination of the contract.

§ 181. Right of representation of management board

 (1) Every member of the management board may represent the private limited company in all transactions unless the articles of association prescribe that some or all of the members of the management board shall represent the private limited company jointly. Joint representation shall apply with regard to third persons only if it is entered in the commercial register.

 (11) The differences concerning the right of representation of the members of the management board of a private limited company with articles of association used for expedited procedure shall be prescribed by the petition for entry of the company in the register and later, in the resolution of the shareholders. The provisions on § 175 of this Code apply to the approval and entry into force of the resolution of the shareholders.

 (2) Upon concluding transactions on behalf of a private limited company, the members of the management board are required to adhere, with respect to the private limited company, the restrictions prescribed by the articles of association or established by the shareholders, the supervisory board or the management board. A restriction on the right of representation does not apply with regard to third persons.

 (3) A transaction concluded between a private limited company and a member of the management board is void if the shareholders or the supervisory board do not agree to the transaction. The above does not apply to transactions concluded in the course of the everyday economic activities of the private limited company or according to the market price of a service.

 (4) A member of the management board has no right to represent the private limited company in the performance of transactions for which, pursuant to law, the shareholders or the supervisory board must separately decide on the appointment of representatives.

§ 182. List of shareholders

 (1) The management board shall keep a list of shareholders which shall set out the names, addresses, personal identification codes or registry codes and the nominal value of their shares. Section 62 of this Code applies to the addresses and personal identification codes or registry codes.

 (2) The shareholders, members of the management board and supervisory board, competent state agencies and other persons with a legitimate interest have the right to examine the list of shareholders.

 (3) If so decided by the shareholders, shares may be entered in the Estonian Central Register of Securities. In such case, the list of shareholders shall be maintained by the registrar of the Estonian Central Register of Securities. The management board of a private limited company shall ensure timely submission of correct information provided by law to the person maintaining the list of the shareholders.

 (4) Upon entry of shares in the Estonian Central Register of Securities, the management board of the private limited company shall promptly submit a notice from the registrar of the Estonian Central Register of Securities concerning registration of the shares to the registrar of the commercial register.

§ 183. Accounting

  The management board shall organise the accounting of the private limited company.

§ 184. Election and removal of members of management board

 (1) The members of the management board shall be elected and removed by the shareholders. If the private limited company has a supervisory board, the members of the management board shall be elected and removed by the supervisory board. The resolution of the supervisory board and minutes of the meeting or, if no supervisory board exists, the resolution of the meeting of shareholders and the minutes of the meeting or record of voting shall be appended to a petition for entry of the termination of the authority of a member of the management board, or for entry of a new member of the management board in the register. In order to elect a member of the management board, his or her consent is required.

 (11) If a private limited company has a supervisory board, the chairman of the supervisory board or a person authorised by the chairman shall sign a petition for deletion of a member of the management board from the register or entry of a new member of the management board in the register.

 (12) If a member of the management board is elected at a meeting of shareholders, the recording secretary or the chairman of the meeting shall be the member of the management board, in whose respect an entry has been made in the commercial register, or a shareholder of the private limited company. The signature under the minutes of the meeting by a person specified in the previous sentence shall be notarised. The notarisation of the signature shall be substituted by the digital signing of the minutes by the person specified in the first sentence of this subsection.

 (13) The provisions of subsection (12) of this section shall not be observed if the minutes of the meeting of shareholders are notarised or if the extension of the term of office of a member of the management board is decided. The provisions of subsection (12) of this section shall not be observed also in case the petition for the entry of a member of the management board in the register is signed by the member of the management board, in whose respect an entry has been made in the commercial register, or a shareholder of the private limited company.

 (2) A member of the management board shall be elected for an unspecified term unless the articles of association prescribe a term. Extension of the term of office of a member of the management board shall not be decided earlier than one year before the planned date of expiry of the term of office, and not for a period longer than the maximum term of office prescribed by the articles of association. A resolution for extension of the term of office of a member of the management board entered in the commercial register shall be immediately sent to the registrar of the commercial register.

 (3) A member of the management board may be removed upon a resolution of the shareholders regardless of the reason. Rights and obligations arising from a contract concluded with a member of the management board shall terminate pursuant to the contract. The provisions of the Law of Obligations Act concerning cancellation of authorisation agreement apply to cancellation of the contract of a member of the management board. If the private limited company has a supervisory board, the supervisory board may also remove a member of the management board.

 (4) [Repealed - RT I 1998, 59, 941 - entry into force 10.07.1998]

 (5) If the private limited company does not have a supervisory board, shareholders whose shares represent at least one-tenth of the share capital may, with good reason, request the removal of a member of the management board by a court.

 (6) With good reason, a court may appoint a new member to replace a removed member of the management board on the petition of the supervisory board, a shareholder or other interested person. A member of the management board appointed by a court has the right, at the expense of the private limited company, to be compensated for his or her costs to a reasonable extent and to receive a reasonable fee, the amount of which shall be established, in the case of dispute, by a court ruling. The authority of the court-appointed member of the management board shall continue until appointment of a new member of the management board by the shareholders or the supervisory board.

 (7) A member of the management board may resign from the management board regardless of the reason by giving the notice thereof to the body that appointed him or her. Rights and obligations arising from a contract concluded with a member of the management board shall terminate pursuant to the contract. The provisions of the Law of Obligations Act concerning cancellation of authorisation agreement apply to cancellation of the contract of a member of the management board.

 (8) If an entry made in the commercial register concerning a member of the management board becomes incorrect due to the removal, resignation or expiry of the term of office of the member of the management board, the provisions of § 61 of this Code apply.

§ 185. Prohibition on competition

 (1) Without the consent of the shareholders or, if a supervisory board exists, without the consent of the supervisory board, a member of the management board shall not:
 1) be a sole proprietor in the area of activity of the private limited company;
 2) be a partner of a general partnership or a general partner of a limited partnership which operates in the same area of activity as the private limited company;
 3) be a member of a managing body of a company which operates in the same area of activity as the private limited company, except if the companies belong to one group.

 (2) If the activities of a member of the management board are in conflict with the provisions of subsection (1) of this section, the private limited company may demand that the member of the management board terminate the prohibited activity, transfer the income received from the prohibited activity to the private limited company and compensate for damage to the extent exceeding the claimed income.

 (3) The limitation period for a claim to terminate a prohibited activity and to transfer the income received from the prohibited activity shall be three months from the date the private limited company becomes aware of the violation of the prohibition on competition but not longer than three years after the violation of the prohibition on competition. The general limitation period shall apply to a claim for compensation of damage.

§ 186. Preservation of business secrets

 (1) The members of the management board shall preserve the business secrets of the private limited company.

 (2) The private limited company shall not claim compensation for any damage caused by violation of the obligation specified in subsection (1) of this section if the members of the management board acted in accordance with a lawful resolution of the meeting of shareholders or of the supervisory board.

§ 187. Liability of members of management board

 (1) A member of the management board shall perform his or her duties with due diligence.

 (2) Members of the management board who cause damage to the private limited company by violation of their obligations shall be solidarily liable for compensation for the damage caused. A member of the management board is released from liability if he or she proves that he or she has performed his or her obligations with due diligence.

 (3) The limitation period for assertion of a claim against a member of the management board is five years unless the articles of association of the private limited company or an agreement with the member of the management board prescribes another limitation period.

 (4) A claim for payment of compensation to a private limited company for damage specified in subsection (2) of this section may also be submitted by a creditor of the private limited company if the assets of the private limited company are not sufficient to satisfy the claims of the creditor. In the case of declaration of bankruptcy of a private limited company, only a trustee in bankruptcy may file a claim on behalf of the private limited company.

 (5) A creditor or trustee in bankruptcy has the right to file the claim specified in subsection (4) of this section also if the private limited company has waived the claim against a member of the management board or has entered into a contract of compromise with such member or, upon agreement with the member of the management board, has limited the claim or filing thereof in another manner or reduced the limitation period.

 (6) [Repealed - RT I 2005, 68, 525 - entry into force 01.01.2006]

§ 188. Liability of shareholders

 (1) A shareholder shall be liable for any damage wrongfully caused to the private limited company, another shareholder or a third person, in the capacity of shareholder.

 (2) A shareholder shall not be liable for any damage caused if the shareholder did not participate in the adoption of the resolution which was the basis for the cause of damage or if the shareholder voted against the resolution. In the case provided for in subsection 173 (2) of this Code, a shareholder who does not give notice of whether the shareholder is in favour of or opposed to a resolution shall be deemed to vote against the resolution.

§ 189. Supervisory board

 (1) A private limited company shall have a supervisory board if prescribed by the articles of association of the private limited company.

 (2) The provisions of this Code concerning the supervisory board of a public limited company shall correspondingly apply to the competence and activity of the supervisory board unless otherwise provided by law.

 (3) The election and removal of members of the supervisory board shall be governed by the provisions concerning the election of the supervisory board of a public limited company, excluding the provisions of subsection 304 (7) of this Code. The minutes and record of voting prepared in respect to a resolution concerning the election of a member of the supervisory board shall be governed by the provisions regarding the minutes and record of voting prepared in respect to the election of a member of the management board of a private limited company.

§ 190. Auditor

 (1) The obligation of auditing the annual accounts of a private limited company shall be stipulated in the Authorised Public Accountants Act or the articles of association of the private limited company.

 (2) The provisions of §§ 328–3291 of this Code shall apply to the competence and activity of the auditor.

§ 191. Special audit

 (1) Shareholders whose shares represent at least one-tenth of the share capital may demand a resolution on conduct of a special audit on matters regarding the management or financial situation of the private limited company, and the appointment of an auditor for the special audit by a resolution of the shareholders.

 (2) If the shareholders do not decide on conduct of a special audit, shareholders whose shares represent at least one tenth of the share capital may request that a special audit be conducted and that an auditor for the special audit be appointed by a court. The court shall decide on conduct of a special audit only with good reason. If possible, the court shall also hear the members of the management board and supervisory board of the private limited company before deciding on the conduct of a special audit.

 (21) The shareholders whose shares represent at least one tenth of the share capital may also demand, pursuant to the procedure provided by subsection (2) of this section, the substitution of the auditor for the special audit appointed by the shareholders if the person appointed by the shareholders clearly lacks the expertise or experience necessary for the conduct of the special audit or if doubts exist concerning his or her impartiality. The court shall also hear the auditor for the special audit appointed by the shareholders.

 (3) Auditors, sworn advocates or companies of advocates may be the auditors for a special audit. If the auditors for a special audit are appointed by the shareholders, the shareholders shall also approve the procedure for their remuneration. The procedure for and amount of remuneration for court-appointed auditors for a special audit shall be specified by the court.

 (4) The members of the management board and supervisory board shall enable the auditors for the special audit to examine all documents necessary for conduct of the special audit and shall provide necessary information. The auditors for the special audit also have the above right with respect to companies belonging to the same group as the private limited company being audited. The auditors for the special audit shall preserve the business secrets of the private limited company. In the case of refusal to allow documents to be examined or information to be given, an auditor for the special audit may submit, within two weeks after the refusal, or within four weeks after submission of a request to such effect if no response to such request has been received, a petition to a court by way of proceedings on petition in order to obligate the members of the management board or supervisory board to allow documents to be examined or information to be given.

 (5) The auditors for the special audit shall prepare a report concerning the results of the special audit, which they shall present to a meeting of shareholders.

 (6) The provisions concerning the liability of auditors for mandatory auditing apply to the liability of auditors for special audit. The provisions of the Bar Association Act apply to the liability of sworn advocates and companies of advocates conducting special audits.

Estonia Companies Act Estonia Companies Act Estonia Companies Act

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