Estonia Commercial Code - Transformation

Chapter 33 TRANSFORMATION  

Division 1 General Provisions  

§ 478. Right to transformation

 (1) A company may be transformed into a company of a different class. Transformation of a commercial association and transformation into a commercial association shall not be permitted.

 (2) The partners or shareholders of a company being transformed shall become partners or shareholders of the new company.

§ 479. Transformation report

 (1) The management board or managing partners of a company being transformed shall prepare a written report (transformation report) which shall explain and justify legally and economically the transformation, including the share exchange ratio and amount of additional payments if additional payments are to be made. Difficulties relating to valuation shall be referred to separately in the report.

 (11) The draft of the transformation report constitutes a part of a transformation report.

 (12) A transformation report need not set out information, publication of which may result in significant damage to a company being transformed or a company belonging to the same group with such company. In such case, the reason for failure to submit the information shall be set out in the report.

 (2) A transformation report need not be prepared if a company being transformed has only one shareholder or if all the partners or shareholders of the company being transformed agree that a transformation report need not be prepared.

§ 480. Transformation resolution

 (1) Transformation shall be decided by the partners or shareholders of the company being transformed. A transformation resolution shall be in writing.

 (2) A partner or shareholder may demand a copy of the transformation resolution.

 (3) A transformation resolution shall set out:
 1) the class of company to be formed as a result of the transformation;
 2) the business name of the company;
 3) the share exchange ratio of the partners or shareholders of the company being transformed;
 4) the rights granted to the partners or shareholders of the company, including the holders of preferred shares and convertible bonds;
 5) the consequences of the transformation for the employees;
 6) if the company is transformed into a private limited company or public limited company, the amount of share capital;
 7) the date as of which the transactions of the company being transformed shall be deemed to be undertaken by the transformed company (transformation balance sheet date).

 (4) The names of partners or shareholders who oppose the transformation resolution shall be appended to the transformation resolution. Opposition to the transformation resolution shall be confirmed by each partner or shareholder by the signature of the partner or shareholder.

 (5) A transformation resolution shall approve the articles of association or partnership agreement of the new company. Upon transformation of the company into a private limited company or public limited company, the members of the management board and, if a supervisory board is to be formed, the members of the supervisory board shall be elected with the adoption of the resolution.

 (6) If the special rights of a shareholder in managing a company are damaged or restricted by transformation, the consent of such shareholder is necessary for passing the transformation resolution.

§ 481. Contestation of transformation resolution and compensation for damage

 (1) On the petition of a partner, shareholder, or a member of the management board or supervisory board, a court may declare invalid a transformation resolution which is in conflict with the law, the partnership agreement or the articles of association if the request is submitted within one month after the resolution is made.

 (2) A transformation resolution shall not be declared invalid on the basis that the share exchange ratio is fixed too low.

 (3) If the share exchange ratio is fixed too low, a partner or shareholder may demand a refund from the new company.

 (4) A fine for delay shall be paid on an unpaid refund in an amount provided by law as of entry of the transformation in the commercial register. The above does not preclude or restrict the right to file a claim for compensation of damages exceeding the amount of the fine for delay.

§ 482. Application of foundation provisions

  The foundation provisions for the class of company being formed upon transformation shall apply to a transformation unless the provisions of this chapter provide otherwise. The partners or shareholders of the company being transformed who vote in favour of the transformation resolution shall be deemed to be the founders.

§ 483. Protection of creditors

 (1) Immediately after a transformation has been entered in the commercial register, the company being transformed shall publish a transformation notice to the creditors of the company in the publication Ametlikud Teadaanded, informing them of the possibility to submit, within six months after the publication of the notice, their claims in order to receive a security.

 (2) The company must secure the claims of the creditors within six months after the publication of the notice specified in subsection (1) of this section, if the creditors have no possibility to demand satisfaction of the claims and they prove that the transformation may endanger the fulfilment of the claims.

 (3) The provisions of subsections (1) and (2) of this section do not apply if a private limited company or public limited company is transformed into a general partnership or limited partnership.

§ 484. [Omitted - RT I 1996, 40, 773 - entry into force 08.06.1996]

§ 485. Submission of petition to commercial register

 (1) The management board of or the partners entitled to represent a company being transformed shall submit a petition for entry of the transformation in the commercial register not earlier than one month after approval of the transformation resolution. The following shall be appended to the petition:
 1) the transformation resolution and the names of the partners or shareholders who oppose it;
 2) the minutes of the meeting of partners or shareholders if the transformation resolution is made at a meeting, or the record of voting of the partners or shareholders;
 3) the articles of association of the new company;
 4) the permission for transformation, if required;
 5) the transformation report or the agreements not to prepare one;
 6) the balance sheet taken as the basis for the transformation;
 7) information on and specimen signatures of the members of the management board of or the partners entitled to represent the new company;
 8) information on the members of the supervisory board of the new company if a supervisory board is to be formed;
 (9)
 10) if the shares of a company being transformed are entered in the Estonian Central Register of Securities or if the company is transformed into a public limited company, a confirmation by the registrar of the Estonian Central Register of Securities that the management board of the company being transformed or the partners entitled to represent the company have informed the registrar of the transformation;
 11) the interim balance sheet or the agreements not to prepare one.

 (2) A registrar may enter a transformation in the register only if the balance sheet taken as the basis for the transformation is prepared as at a date not earlier than eight months before submission of the petition to the commercial register. The balance sheet is prepared pursuant to the requirements established for the balance sheet that constitutes part of the annual report, and the approval of the final balance sheet and conducting the audit thereof is governed by the provisions concerning the approval of the annual report and conducting an audit. The balance sheet shall be prepared using the same accounting policies and presentation which were used in the preparation of the balance sheet that constitutes part of the last annual report. The balance sheet taken as the basis for a transformation shall be prepared as at the day before the transformation balance sheet.

 (3) If a company is transformed into a private limited company or public limited company, the members of the management board of or the partners entitled to represent the company shall confirm in the petition that the transformation resolution is not contested, or that a corresponding petition has been denied.

 (4) If a transformation brings about a change of registered office of the company and the company is transferred to another registry jurisdiction, the petition specified in subsection (1) of this section shall be submitted to the registrar of the commercial register of the registered office of the new company and to the registrar of the commercial register of the existing registered office of the company being transformed. A notation shall be added to the entry made in the commercial register of the existing registered office of the company being transformed which indicates that the transformation enters into force as of entry of the new company in the commercial register. The new company may be entered in the commercial register after the transformation is entered in the commercial register of the existing registered office of the company being transformed.

 (5) If an increase of share capital of the company is decided together with a transformation, documents certifying increase of the share capital shall also be submitted to the commercial register.

§ 486. Business name of new company

  The new company may continue activities under the business name of the company being transformed. The business name shall not use an appendage or abbreviation that refers to the class of company being transformed.

 (2) If a partner or shareholder of the company being transformed is a natural person who no longer participates in the new company, the new company may continue to use his or her name in the business name only with the written consent of him or her, or of his or her successors.

§ 487. Legal effect of entry and compensation for damage caused by transformation

 (1) A company shall be deemed to be transformed as of entry of the transformation in the commercial register.

 (2) The partners or shareholders of a company being transformed shall become partners or shareholders of the new company as of entry of the transformation in the commercial register, and their shares shall be exchanged for the shares of the new company. The rights of third persons with regard to exchanged shares shall remain valid with regard to the shares of the new company.

 (21) If the shares of a company being transformed are entered in the Estonian Central Register of Securities or if the company is transformed into a public limited company, the registrar of the commercial register shall immediately inform the registrar of the Estonian Central Register of Securities of the entry of the transformation in the register.

 (3) If a transformation brings about a change of registry jurisdiction of the company, the company shall be deemed to be transformed as of entry of the new company in the commercial register.

 (4) A transformation shall not be contested after its entry in the commercial register.

 (5) The members of the management board and supervisory board, or the managing partners of the company being transformed shall be solidarily liable to the company, the partners or shareholders, and the creditors of the company for any damage wrongfully caused by the transformation.

 (6) The limitation period for a claim specified in subsection (5) of this section shall be five years from entry of the transformation in the commercial register.

§ 488. Compensation upon transformation

  Upon transformation, a partner or shareholder of the company being transformed who opposes the transformation resolution may, within two months after entry of the transformation in the register, demand that the new company acquire the exchanged share or shares of the partner or shareholder for monetary compensation. The amount of monetary compensation shall be equal to the money which the partner or shareholder would have received from the distribution of remaining assets upon liquidation of the company if the company had been liquidated at the time the transformation resolution was made.

 (2) The provisions of clauses 162 (2) 11 and 283 (2) 2) of this Code shall not apply to acquisition of shares by a company on the bases specified in subsection (1) of this section.

 (3) The names of partners or shareholders who oppose the transformation resolution and who wish to exercise the rights specified in this section shall be appended to the transformation resolution. Opposition to the transformation resolution shall be confirmed by each partner or shareholder by the signature of the partner or shareholder.

 (4) If a company is transformed into a general partnership or limited partnership, the compensation specified in subsection (1) of this section may be demanded by a partner who departs from the company.

 (5) The new company shall pay a fine for delay on compensation in an amount provided by law as of entry of the transformation in the commercial register.

 (6) Upon a transformation, a partner or shareholder who opposes the transformation resolution and does not demand compensation may transfer a share or shares within two months after entry of the transformation in the commercial register regardless of the restrictions on disposal provided by law or prescribed by the articles of association.

§ 489. Protection of holders of preferred shares or convertible bonds

 (1) If a public limited company is transformed into another class of company, the holders of preferred shares or convertible bonds shall participate in the determination of representation and in voting on the same bases as the shareholders.

 (2) Holders of preferred shares or convertible bonds shall acquire shares of the new company on the same bases as shareholders of the public limited company being transformed. Holders of preferred shares or convertible bonds who oppose the transformation resolution may claim compensation pursuant to § 488 of this Code.

§ 490. [Repealed - RT I 2000, 57, 373 - entry into force 01.01.2001]

§ 491. Meaning of contribution

  For the purposes of this chapter, the contribution of a partner of a general partnership or limited partnership shall be deemed to be a share.

Division 2 Transformation of General Partnership or Limited Partnership into Private Limited Company or Public Limited Company  

§ 492. Transformation report

  A transformation report need not be prepared if all the partners of the general partnership or limited partnership being transformed are managing partners of the company.

§ 493. Transformation resolution

 (1) A transformation resolution shall be adopted if all the partners vote in favour.

 (2) The partnership agreement may prescribe that a transformation resolution shall be adopted if more than two-thirds of the votes of the partners are in favour.

§ 494. 

§ 495. Liability of partners

  If a general partnership or limited partnership is transformed into a private limited company or public limited company, a general partner shall be liable for the obligations of the company being transformed for which the due date for performance has arrived or will arrive within five years after entry of the transformation in the commercial register.

Division 3 Transformation of Private Limited Company or Public Limited Company into General Partnership or Limited Partnership  

§ 496. Preparation of general meeting of shareholders

 (1) At least two weeks before the general meeting to decide on transformation, the management board of the public limited company being transformed shall present the transformation report and the last annual report of the public limited company to the shareholders for examination at the registered office of the public limited company. A transformation report shall not be presented in the case specified in subsection 479 (2) of this Code.

 (2) Copies of the documents specified in subsection (1) of this section shall be promptly given to a shareholder on the demand of the shareholder.

 (3) If the last annual report of a public limited company is prepared in respect to financial year, which ended earlier than six months prior to making the transformation resolution, the balance sheet (interim balance sheet) compliant with the requirements established for the balance sheet that constitutes part of the annual report shall be prepared as at no earlier than the first day of the third month preceding the making of the transformation resolution. The interim balance sheet shall be prepared using the same accounting policies and presentation which were used in the preparation of the balance sheet that constitutes part of the last annual report. The interim balance sheet shall be submitted to shareholders for examination pursuant to the procedure specified in subsections (1) and (2) of this section. The interim balance sheet need not be prepared if all the shareholders agree thereto. Instead of the interim balance sheet, the half-yearly report disclosed pursuant to § 18411 of the Securities Market Act may be submitted to shareholders for examination.

§ 497. Organisation of general meeting

 (1) At the general meeting of shareholders, the management board of the public limited company being transformed shall explain the legal and economic consequences of the transformation, including the exchange of shares.

 (2) At the general meeting, the supervisory board shall present its opinion concerning the transformation.

 (3) At the general meeting, information concerning other material circumstances related to the transformation shall also be given to a shareholder on the demand of the shareholder.

§ 498. Transformation resolution

 (1) A resolution on transformation into a general partnership shall be adopted if all the shareholders vote in favour.

 (2) A resolution on transformation into a limited partnership shall be adopted if at least two-thirds of the votes represented at the meeting of shareholders are in favour unless the articles of association prescribe a greater majority requirement, and all the shareholders who are to become general partners of the limited partnership vote in favour of the resolution.

 (3) If a resolution on transformation of a private limited company into a limited partnership is made pursuant to subsection 173 (2) of this Code, the resolution shall be adopted if at least two-thirds of the votes of the shareholders are in favour unless the articles of association prescribe a greater majority requirement, and all the shareholders who are to become general partners of the limited partnership vote in favour of the resolution.

 (4) If a public limited company has several classes of shares, the transformation resolution shall be adopted if, in addition to the provisions of subsection (2) of this section, at least two-thirds of the holders of each class of shares vote in favour of the resolution unless the articles of association prescribe a greater majority requirement.

§ 499. 

Division 4 Transformation of Private Limited Company into Public Limited Company  

§ 500. Transformation resolution

 (1) A resolution on transformation of a private limited company into a public limited company shall be adopted if at least two-thirds of the votes represented at the meeting of shareholders are in favour, and the articles of association do not prescribe a greater majority requirement.

 (2) If a transformation resolution is made pursuant to the procedure provided for in subsection 173 (2) of this Code, the resolution shall be adopted if at least two-thirds of the votes of the shareholders are in favour, and the articles of association do not prescribe a greater majority requirement.

 (3) The nominal values of shares of the public limited company may be determined differently from those of shares of the private limited company being transformed, and also the introduction of shares without nominal value may be decided upon. The nominal value or book value of shares shall comply with the requirements of § 223 of this Code. The shares of the private limited company being transformed may be divided without observing the restrictions on transfer provided by law and the articles of association and without taking account of the minimum permitted nominal value of a share.

 (4) The shares of a private limited company being transformed shall be registered with the Estonian Central Register of Securities before submission of the application specified in § 485 of this Code to the commercial register.

§ 501. 

Division 5 Transformation of Public Limited Company into Private Limited Company  

§ 502. Preparation of general meeting of shareholders

 (1) At least one month before the general meeting to decide on transformation, the management board of the public limited company being transformed shall present the transformation report and the last annual report of the public limited company to the shareholders for examination at the registered office of the public limited company. A transformation report shall not be presented in the case specified in subsection 479 (2) of this Code.

 (2) Copies of the documents specified in subsection (1) of this section shall be promptly given to a shareholder on the demand of the shareholder.

 (3) If the last annual report of a public limited company is prepared in respect to financial year, which ended earlier than six months prior to making the transformation resolution, the balance sheet (interim balance sheet) compliant with the requirements established for the balance sheet that constitutes part of the annual report shall be prepared as at no earlier than the first day of the third month preceding the making of the transformation resolution. The interim balance sheet shall be prepared using the same accounting policies and presentation which were used in the preparation of the balance sheet that constitutes part of the last annual report. The interim balance sheet shall be submitted to shareholders for examination pursuant to the procedure specified in subsections (1) and (2) of this section. The interim balance sheet need not be prepared if all the shareholders agree thereto. Instead of the interim balance sheet, the half-yearly report disclosed pursuant to § 18411 of the Securities Market Act may be submitted to shareholders for examination.

§ 503. Organisation of general meeting

 (1) At the general meeting of shareholders, the management board of the public limited company being transformed shall explain the legal and economic consequences of the transformation, including the exchange of shares.

 (2) At the general meeting, the supervisory board shall present its opinion concerning the transformation.

 (3) At the general meeting, information concerning other material circumstances related to the transformation shall also be given to a shareholder on the demand of the shareholder.

§ 504. Transformation resolution

 (1) A resolution on transformation of a public limited company into a private limited company shall be adopted if at least two-thirds of the votes represented at the general meeting are in favour, and the articles of association do not prescribe a greater majority requirement.

 (2) If a public limited company has several classes of shares, the transformation resolution shall be adopted if, in addition to the provisions of subsection (1) of this section, at least two-thirds of the holders of each class of shares vote in favour of the resolution unless the articles of association prescribe a greater majority requirement. If a resolution is made pursuant to the procedure provided for in subsection 297 (2), at least two-thirds of the votes represented of each class of shares at the general meeting must vote in favour of the resolution unless the articles of association prescribe a greater majority requirement.

 (3) The nominal values of shares of the private limited company may be determined differently from the nominal value or book value of shares of the public limited company being transformed. The nominal values of shares of the private limited company shall comply with the requirements of § 148 of this Code.

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