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Sanctions for Failure to Submit Annual Reports in Estonia

As of February 1, 2023, the Estonian Commercial Registry Act came into effect, introducing several changes and updates to the legislation that concern formal aspects of legal entities, reporting, and accountability. Previously, questions related to the commercial registry were regulated by the Commercial Code, which also underwent significant changes with the adoption of the Commercial Registry Act.

Sanctions for not submitting annual reports have been tightened

This article focuses on the provisions of the Commercial Registry Act that regulate changes regarding the failure to submit annual reports. The sanctions have become significantly stricter due to the common occurrence of failing to submit or submitting annual reports late within the Estonian business environment.

There are various reasons for not submitting annual reports. Some cases involve deliberate non-compliance to conceal the company's actual data, whether from other shareholders or business partners. There are also situations where the company has essentially been "abandoned" by its owners and management, meaning the company has practically ceased operations, but the shareholders do not wish to initiate the proper liquidation process. Such situations create a misleading image of the Estonian business landscape, which the legislature cannot accept, as it affects the reputation and credibility of our business environment.

Determining fines for failure to submit annual reports became simpler (Estonian Commercial Registry Act § 57)

Previously, the registrar had the right to impose a fine on a legal entity for not submitting an annual report by the deadline, if the legal entity had disregarded a warning notice. Under the new legal amendment, the registrar has the right to impose a fine on a legal entity for not submitting an annual report even without a warning notice.

When determining the amount of the fine, the registrar has significantly more discretion than before, and it depends on the following factors:
  • how many times the annual report has not been submitted by the deadline;
  • how much time has passed since the deadline for submitting the annual report;
  • other circumstances known to the registrar.
Fines can be imposed repeatedly until the annual report is submitted. In addition to the legal entity, fines can also be imposed personally on the members of the management board and the shareholders, as they have a legal obligation to submit the report.

Deletion from the registry due to failure to submit annual reports will occur within a shorter period (Estonian Commercial Registry Act § 61)

Under the new law, the registrar has the right to delete a legal entity from the registry if the deadline set by the registrar for submitting the report is not met, and at least three months have passed since the legal deadline for submitting the report.

While the Commercial Code previously allowed a minimum of six months for the preparation and submission of annual reports following a warning notice, the Commercial Registry Act requires the legal entity to submit the annual report within the deadline specified in the warning notice. The actual length of the new deadline will become evident as practice evolves.

Compared to the past, the registrar no longer needs to wait for six months to send out a warning notice to a legal entity for not submitting an annual report on time. This notice can now be issued immediately after the deadline has passed, which for many entrepreneurs is from July 1st onwards. Issuing a deletion warning does not preclude the imposition of fines simultaneously.

In Conclusion

In short, the legislature is committed to pressuring entrepreneurs to submit annual reports, in order to enhance the accuracy of data within the commercial registry. Accurate reporting has a significant impact on the health and credibility of the Estonian business environment. One function of the commercial registry is to provide entrepreneurs with information about existing and potential business partners, enabling better decision-making clarity and the establishment of business relationships. Therefore, it’s essential for the registry to contain all the necessary information about companies, including correct and timely submitted annual reports.

Our Recommendations:
  • Check the entrepreneur portal to ensure that your annual reports have been submitted. Sometimes, it's surprising to find that reports have been prepared but not submitted. Often, this is due to a missing signature from a shareholder, causing the report to remain unsubmitted, or all signatures are present, but the submission button was not pressed.
  • Do not rely on the assumption that the commercial registry may not get around to everyone at once and that your company might escape inspections and sanctions this time. Many activities within the commercial registry are automated, and their efficiency increases every day. We have noticed that the imposition of fines is already intensifying, and the registry is using its authority to impose fines more vigorously than before.
  • If you know that your annual reports are pending and unsubmitted, we recommend addressing the issue promptly. The longer you delay, the higher your potential costs and time expenditure will likely be. Wisecounter's consultants and accountants are always available to assist you with any accounting and tax-related questions. We can help you prepare and submit annual reports and organize your accounting if necessary.

Contact us

Contact us using the contact form on the website, call or send an e-mail. We will answer you as soon as possible.
  • Write us about your wishes or the problem you are looking for a solution to.
  • In most cases, our consultant will contact you to ask some clarifying questions or invite you to a meeting.
  • After receiving the necessary information, we will prepare a non-binding offer for you, which we will send by e-mail.

What a Good Accountant Wishes Their Clients Knew

We asked our accountants what they would like their clients to know based on 15 years of experience. What would help accountants perform their job even better, which in turn would ensure clients receive the best service possible.
Here are the four key points:

1. Original Documents are the Foundation

For accountants, all of a client's original documents – invoices, receipts, contracts, expense reports, bank statements, and more – are as valuable as oxygen to a living being. Correct accounting cannot be done without them. Just as a living organism needs oxygen in a timely manner, improper documentation in accounting might necessitate corrections. Delayed or incorrect accounting can skew the picture of a company, making it challenging to make sound financial decisions.

2. Think about the Annual Report in November-December of the Same Year

The financial year typically ends in December for most companies. While there's time until the end of June of the following year to prepare the annual report, November-December is the right time to review the year's financial indicators, discuss tax matters, make necessary plans and adjustments. This proactive approach helps prevent undesirable situations. By June of the next year, making accurate changes to previous year's data becomes quite challenging.

3. Accounting is Based on a System

Accounting is a craft that is systematic, relying on formulas, rules, and today's digital technologies. Accountants work with the documents provided to them and don't usually apply creativity in this aspect. However, when the numbers from these documents are entered into the software, they form financial data that can offer valuable insights, which a good accountant is eager to provide, if the client desires.

4. Don't Hesitate to Ask Questions

Accountants appreciate clients who want to understand and ask questions about matters. This helps accountants be more efficient, provide services tailored to the client's needs, and offer relevant financial advice. The better our clients do, the brighter our shared future becomes.

Contact us

Contact us using the contact form on the website, call or send an e-mail. We will answer you as soon as possible.
  • Write us about your wishes or the problem you are looking for a solution to.
  • In most cases, our consultant will contact you to ask some clarifying questions or invite you to a meeting.
  • After receiving the necessary information, we will prepare a non-binding offer for you, which we will send by e-mail.

In 2022, Wisecounter Celebrated 15 Years in Business

In September 2022, Wisecounter marked 15 years since its establishment. Wisecounter was born out of the founders' desire to have an excellent overview of financial matters in their other businesses. The service was initially offered quietly to a selected group, but soon gained a solid customer base.
Unfortunately, Wisecounter's early years coincided with a period of economic crisis that initially slowed down the company's rapid growth. Despite the challenges, the core team remained intact, and with the help of new employees and loyal clients, the company navigated through the crisis and began seeking new growth opportunities.

Soon, our clients became more ambitious, and many started considering expanding their services to Finland. As a result, we were often approached for consultation on starting and managing businesses in Finland.

Establishing Operations in Finland

Thanks to our strong contacts in Finland, we began preparations to establish a Wisecounter unit in Finland at the end of 2015. With the help of remarkable individuals, we opened the doors of Wisecounter Oy in the spring of 2016. Our comprehensive knowledge of the essential regulations for Estonian entrepreneurs operating in Finland, along with a systematic approach, quickly attracted new long-term clients.

Customers' needs drove the provision of further services

During our operations, clients faced various legal questions that needed resolution. This led to the development of legal and financial consulting services as a crucial part of our offerings. We continue to provide these services to this day, as challenges persist, and our experience enables us to preemptively address many issues during consultations.

We also began organizing management training seminars to contribute to entrepreneurs' improved performance. Over 1000 entrepreneurs have participated in our seminars to date.

Establishing Units in Sweden and Latvia

Soon, clients faced similar questions regarding the Swedish market. Growing alongside our clients, we established operations in Sweden a year later, in 2017, and a couple of years after that, in 2019, in Latvia, where we also opened an office.

Since the establishment of our Swedish unit, there has been high interest in the supportive services we offer for starting businesses in Sweden. While Sweden remains an attractive export market for Estonian entrepreneurs, its legislation and the required documents and permits present a challenge for those accustomed to Estonia's liberal economic environment. However, we are here to simplify and streamline our clients' entry into export markets.

Our Fortune

Clients and Employees In summary, over the course of these 15 years, Wisecounter has experienced various periods—both easy and challenging. We've contributed to the establishment of several companies and provided impetus for their development, maintaining their financial affairs impeccably and proactively highlighting potential pitfalls and growth opportunities. Occasionally, we've assisted companies in winding down operations if things didn't go as planned, although such instances have been rare.

Thanks to our accumulated experience, we can be dependable partners for our clients in good times and bad. Those thriving receive advice on how to grow further or operate more profitably, while those facing difficulties benefit from our assistance in finding the best solutions to navigate through challenges.

These 15 years have also brought changes to Wisecounter's team. Trained professionals have left our ranks, but fortunately, they have been replaced by new talented individuals who passionately contribute daily. Today, we take pride in our diverse yet cohesive international team. 

Contact us

Contact us using the contact form on the website, call or send an e-mail. We will answer you as soon as possible.
  • Write us about your wishes or the problem you are looking for a solution to.
  • In most cases, our consultant will contact you to ask some clarifying questions or invite you to a meeting.
  • After receiving the necessary information, we will prepare a non-binding offer for you, which we will send by e-mail.

Consistent Effort is Required for Sustainable Business Growth

Many people discuss leadership and teamwork, but observations show that getting a single answer to the question of what leadership or teamwork is remains elusive. When people board an airplane for the first time, they don't immediately think of piloting it themselves. Fortunately or unfortunately, this isn't even possible without proper training. One thing is certain: all pilots make their first flight(s) with an instructor.
Engaging in entrepreneurship requires having enough money to make a capital contribution and register a company. No one demands a thorough understanding of entrepreneurship basics or the ability to count money. However, the success or failure of organizations largely depends on their leaders and members.

The Issue of Organizations Requires Study

Issues within organizations have been studied throughout history, both in Estonia and around the world. Significant results have been achieved in various institutions worldwide, where diagnostics and the effectiveness of decision implementation have been examined. In recent years, such studies haven't been conducted in Estonia. Since needs and opportunities in society change daily, a universal model has not been created at all regulatory levels. Consequently, problems remain relevant in society and organizations.

The Central Significance of Problem

Solving Addressing problems within organizations, discovering their root causes, articulating them, and finding appropriate solutions are of central importance. Unfortunately, arbitrary interpretations and settling for random solutions occur, which hampers efficiency. However, why this happens remains incomprehensible to most.

Various studies indicate that often, organizational members and leaders desire one outcome, but the result is something entirely different. One significant reason for this is that the focus is on the problems themselves, not their causes. The meaning, importance, and interrelation of outcomes, consequences, causes, goals, targets, means, resources, etc., are often not clearly understood by many leaders. Reasons vary. There's sometimes inadequate preparation, but often also unprofessional and misleading consultants.

Problems as a Catalyst for Development

Whether a detailed business plan has been prepared beforehand or risk assessment criteria have been accurately defined, mapping out problems remains perpetually relevant within any organization. During decision-making, a leader might even be aware of factors influencing decisions, yet subconsciously ignore them, making what's perceived as a simpler decision, the effects of which might become apparent later.

Key Questions Include:
  • How can we find out under what conditions an organization can function smoothly, evolve, and achieve desired goals?
  • What are the obstacles that might become decisive for further development?
I have been involved with this topic for many years. Simultaneously serving on the management boards of several companies and other organizations, I've had the chance to practically test the validity of my observations. I believe that there are several reasons for dealing extensively with problems within any organization and sharing these insights with others.

Firstly, every day in all companies, there are problematic situations affecting the company's operations.

Secondly, there are always hidden and public factors that shape both a company's success and employee satisfaction.

Thirdly, usually at the forefront of the action plan are those questions that seem essential to resolve immediately, and this list often changes quickly and never ends. Consequently, long-term issues are often postponed, and sometimes, they're never addressed at all.

In short, it's advisable to review the entire spectrum of issues a couple of times a year and prioritize them based on their actual importance. This way, those questions that aren't critical but still important can be tackled sooner or later, while those that aren't truly important can be completely set aside. This provides an opportunity to finally get rid of tedious long-term obligations and focus on what's truly essential.

However, this can be challenging amidst daily operations, so it's beneficial to collectively set aside time a couple of times a year to clearly articulate the important problems and priorities and agree on a specific action plan for their resolution.

Written by Maario Laas, Chairman of the Board, Wisecounter OÜ

Contact us

Contact us using the contact form on the website, call or send an e-mail. We will answer you as soon as possible.
  • Write us about your wishes or the problem you are looking for a solution to.
  • In most cases, our consultant will contact you to ask some clarifying questions or invite you to a meeting.
  • After receiving the necessary information, we will prepare a non-binding offer for you, which we will send by e-mail.