Estonian law & tax

The Estonian Commercial Code (äriseadustik) governs both the private limited company (osaühing, OÜ) and the public limited company (aktsiaselts, AS). Most steward-owned companies in Estonia will be OÜs, so we start there.

Shares with different rights

For steward ownership, the company needs at least two kinds of shares:

• Voting shares for stewards — votes at the general meeting, but no or only symbolic rights to dividends and to proceeds on liquidation.
• Profit shares for founders, investors or a foundation — rights to dividends (often capped) and possibly priority on liquidation, but no votes.

Estonian law allows the articles of association of an OÜ to provide for shares with different rights, and an AS to issue different classes of shares, including preference shares. The precise limits — for example how far voting rights can be removed, and any caps on non-voting shares in an AS — need to be confirmed by a lawyer for the specific structure.

Restricting transfers

Steward ownership requires that voting shares cannot be sold to outsiders or inherited as an asset. In an OÜ, the articles can restrict transfers — for example by requiring consent, giving other shareholders a pre-emption right (ostueesõigus), or allowing transfers only to persons who meet criteria (active in the company, chosen as a steward). Transfers of OÜ shares require notarial form or an equivalent qualified procedure.

Rules for what happens when a steward leaves or dies belong in the articles too: typically, the voting share must be transferred to a successor steward or bought back by the company at nominal value.

Entrenchment — locking the two rules

Under Estonian company law, amendments to the articles of association generally require a qualified majority of the general meeting (at least two thirds of votes), and the articles may set a higher threshold. That alone is not enough: stewards holding all the votes could still change the rules.

The usual solution is a golden share (also called a veto share): one share held by an independent guardian, whose consent the articles require for:

• any change to the clauses that implement the two rules;
• a sale of the company or of substantially all its business;
• a merger, division or conversion that would bypass them;
• the issue of new share classes that would alter the balance.

The guardian has no other rights and does not take part in running the company.

Steward succession

The articles should say who may become a steward and how they are chosen: by the existing stewards, by a supervisory board, or on the guardian’s confirmation. They should also cover the case where no suitable steward is found.

Buy-backs and payouts

Paying out a founder or an investor over time often uses a buy-back of profit shares by the company, or dividends on them up to a cap. Company law limits distributions to what the company’s net assets allow, and the tax treatment differs by route — see Tax.

The sihtasutus

A foundation (sihtasutus, SA) under the Estonian Foundations Act (sihtasutuste seadus) is a legal person with no members and no owners. It is set up to manage and use assets for the purposes stated in its articles. It has a management board and a supervisory board, and its assets may not be distributed to its founders or board members beyond reasonable remuneration.

That makes it the natural Estonian vehicle for two roles in steward ownership.

Role 1: guardian

The SA holds a golden share in one or more companies. Its articles state a single purpose: to protect steward ownership in the companies it guards, by using its consent right only to block a sale or a change to the two rules.

A guardian SA should have:

• a supervisory board that is independent of the company it guards;
• a clear, narrow purpose in its articles;
• modest funding — typically a small annual fee from each guarded company — to cover its costs.

One SA can guard many companies. Baltic Stewards SA is itself a foundation and is working with lawyers on whether and how it could offer this role.

Role 2: owner

The SA holds all or most of the votes in the company, as in the Danish and German foundation-owned companies. Profits paid to the foundation are used for reinvestment or for its purpose, which may be charitable.

This is a larger step. The foundation’s board effectively controls the company, so its composition and competence matter a great deal.

The non-profit association (MTÜ)

A non-profit association (mittetulundusühing, MTÜ) has members and may not distribute profit to them. It can, in principle, also act as guardian. Because members can change its course, a foundation is usually the more stable choice for guarding a long-term lock.

Profits are taxed on distribution

Under the Estonian Income Tax Act (tulumaksuseadus), a resident company pays corporate income tax when it distributes profits — as dividends, hidden profit distributions or certain other payments — rather than when it earns them. Retained and reinvested profits are not taxed at company level.

In 2025 the standard rate was 22%, calculated as 22/78 of the net distribution. Rates have changed several times in recent years; always check the current rate with the Tax and Customs Board (EMTA) before planning.

For steward-owned companies, which reinvest most of their profits by design, this is a good fit: profits that stay in the company to strengthen it are not taxed until they are paid out.

Step by step

Step	Typical treatment (to be confirmed for your case)
Company reinvests profits	No corporate income tax while retained
Dividends on profit shares to individuals	Corporate income tax on distribution; check current rules on any additional personal tax
Dividends to a guardian or owner foundation	Treatment depends on the shareholding and the foundation’s status — get advice
Buy-back of a departing owner’s shares	May be treated partly as a distribution — get advice
Founder transfers voting shares to stewards at nominal value	Possible gain or gift implications — get advice
Inheritance or gift of profit shares	Estonia has no inheritance or gift tax as such; income tax rules on later disposal still apply

Why this matters for policy

Because profits are taxed when they leave the company, steward ownership does not reduce the tax base: the same tax is due whenever profits are distributed, to whomever. What it changes is who can decide to distribute them, and that nobody can cash out the company itself.

These examples are simplified starting points for a conversation with your lawyer — not templates to copy.

A. Founder-led OÜ with a guardian

A founder wants to stay in charge, make the company unsellable, and keep a fair claim on its value.

Structure A — golden share in an OÜ

Founder as steward

Holds

Voting shares

Gets

Salary for work; no dividends on voting shares

Founder as owner

Holds

Profit shares, no votes

Gets

Dividends up to an agreed cap, then shares lapse

Guardian SA

Holds

Golden share

Gets

Consent right over sale and changes to the two rules

Operating company (OÜ)

Documents: new articles of association; resolution converting existing shares; agreement with the guardian; notarial and register filings.

B. Succession to the management team

An owner retiring without a family successor passes control to three managers, and is paid out over eight years.

Structure B — succession

Three managers as stewards

Holds

Voting shares

Gets

Salaries and profit-sharing

Retiring owner

Holds

Profit shares, no votes

Gets

Dividends or buy-back until the agreed price is paid

Patient investor (optional)

Holds

Profit shares or loan

Gets

Capped return, repaid from profits

Guardian SA

Holds

Golden share

Gets

Veto on sale and rule changes

Operating company (OÜ)

Documents: as A, plus a payout agreement with the owner, investor terms, and a steward succession clause.

C. Foundation-owned group

A larger family company with several subsidiaries; the family wants it kept together permanently.

Structure C — foundation ownership

Owner foundation (SA)

Holds

Majority or all votes

Gets

Dividends for reinvestment or its purpose

Family members

Holds

Profit shares, no votes

Gets

Capped dividends

Holding company (AS) and subsidiaries

Documents: foundation articles; new holding articles; share transfers; tax ruling request if appropriate.

The same three building blocks — shares with different rights, a lock in the articles, and a guardian that cannot be sold — are needed in every country. How they are built differs.

Latvia

The usual company form is the limited liability company (sabiedrība ar ierobežotu atbildību, SIA). Latvia has foundations (nodibinājums) that could act as guardian. Latvia also taxes corporate profits on distribution, similar to Estonia.

Lithuania

The usual company form is the private limited company (uždaroji akcinė bendrovė, UAB). Possible guardian vehicles include charity and support foundations and public institutions (viešoji įstaiga, VšĮ). Lithuania taxes corporate profits when they are earned.

Help us write these chapters

We are looking for practising lawyers in Riga and Vilnius to review and extend these notes. Get in touch.