The highest managing body of a private limited company is the meeting of shareholders. At the meeting, the shareholders may adopt resolutions necessary for the management and operation of the private limited company, as well as other decisions concerning day-to-day matters, and may issue instructions to the management board. By a resolution of the shareholders, it is possible, for example, to amend the articles of association, make payments to the share capital, register shares, increase or decrease the share capital, make changes to the management board, and approve the annual report.
The example of a resolution of shareholders and resolution of sole shareholder may be used both when the resolution is adopted without calling meeting and when the resolution is adopted at a meeting.
How can a resolution of shareholders be adopted?
Shareholders may adopt a resolution in three different ways: at a meeting of shareholders (Estonian Commercial Code §§ 170–172¹), without calling meeting by organising a written vote (Estonian Commercial Code § 173 articles 1–4), or as a unanimous written resolution without complying with additional formalities (Estonian Commercial Code § 173 articles 7 and 7). Accordingly, a resolution of shareholders may be adopted either at a meeting of shareholders or without calling meeting.
Pursuant to § 170 article 1 of the Estonian Commercial Code, one of the methods for adopting a resolution of shareholders is a meeting. As a general rule, the management board has the right to convene the meeting. In addition, it is possible to adopt a resolution without convening a meeting pursuant to § 173 article 1 of the Estonian Commercial Code.
Where a resolution is adopted without convening a meeting, the management board submits the draft resolution to all shareholders in a format which can be reproduced in writing (e.g., by e-mail), specifying a deadline by which the shareholder must submit their position in a format which can be reproduced in writing. If a shareholder fails to notify within the specified deadline whether they are in favor of or against the resolution, the shareholder shall be deemed to have voted against the resolution.
If the resolution is adopted without calling meeting as a unanimous written resolution, the requirements set out in § 173 articles 6 and 7 of the Estonian Commercial Code must be complied with.
When is a resolution adopted?
If a resolution is adopted at a meeting of shareholders, the resolution is adopted if more than one half of the votes represented at the meeting of shareholders are cast in favor, unless a greater majority requirement is provided by law or the articles of association. Accordingly, a resolution of shareholders is adopted at the meeting of shareholders once voting has taken place and the required number of votes has been cast in favor.
A resolution adopted without calling meeting is adopted if more than one half of all shareholders’ votes are cast in favor, unless a greater majority requirement is provided by law or the articles of association. However, if the resolution concerns an amendment of the articles of association, the resolution is adopted if at least two-thirds (2/3) of the votes of the shareholders participating in the meeting are cast in favor or, if no meeting is called, at least two-thirds (2/3) of all shareholders’ votes are cast in favor, unless the articles of association provide for a higher majority requirement.
In the case of a unanimous written resolution, the resolution is adopted once it complies with all the requirements set out in § 173 article 6 of the Estonian Commercial Code.
What if the private limited company has only one shareholder?
If a private limited company has only one shareholder, that shareholder is simultaneously the highest governing body of the company. The sole shareholder may adopt resolutions necessary for the management and operation of the private limited company and, where necessary, also adopt decisions concerning day-to-day matters and issue instructions to the management board. Accordingly, the sole shareholder may adopt resolutions such as amending the articles of association, making contributions to the share capital, registering shares, increasing or decreasing the share capital, making changes to the management board, and approving the annual report.
If the private limited company has only one shareholder, or if in addition to that shareholder the only other shareholder is the private limited company itself, a resolution may be adopted without calling meeting as a unanimous written resolution. In such case, reference must be made in the resolution to § 173 article 6 of the Estonian Commercial Code, which permits the adoption of a resolution without complying with certain provisions laid down by law. Under this provision, certain requirements concerning calling meeting do not need to be followed, and it is therefore possible to adopt the resolution without calling meeting. However, specific formal requirements must still be complied with.
A resolution may also be adopted at a meeting of shareholders, in which case no reference to § 173 article 6 is required in the resolution.
What are the formal requirements for a resolution of shareholders?
No specific formal requirements are prescribed for a resolution of shareholders adopted at a meeting of shareholders. However, it is recommended that the resolution be recorded in writing in order to avoid potential evidentiary issues.
If a resolution of shareholders is adopted as a unanimous written resolution without complying with other formalities, reference must be made to § 173 articles 6 and 7 of the Estonian Commercial Code, which also establish certain formal requirements. Reference to § 173 article 6 is necessary because it permits the adoption of a resolution of shareholders by deviating from certain statutory requirements, that is, by adopting the resolution without calling meeting. In such case, the resolution must be drawn up in writing and signed by the shareholders. It must include, among other things, the names of the shareholders, the number of votes, and the time of adoption of the resolution. If the resolution of shareholders serves as the basis for the election of a member of the Management Board, the signature of one shareholder must be certified by a notary. Certification of the signature by a notary is replaced by digital signing of the resolution by the person referred to in the previous sentence.
Reference to § 173 article 7 is necessary because it allows such a resolution adopted without calling meeting to be made even where there is more than one shareholder. In such case, all shareholders must agree to the resolution and sign it.
If the resolution is adopted by a sole shareholder as a unanimous written resolution, reference need only be made to § 173 article 6 of the Estonian Commercial Code.
When is a resolution of shareholders void?
In certain cases, a resolution of shareholders may be void. A resolution of a body of a legal person is deemed void, for example, if it is contrary to good morals or if the law expressly provides that the resolution is void because of a particular violation. A resolution is also void if the procedure prescribed for its adoption has been materially violated, that is, if the procedure for calling meeting of shareholders or for adopting the resolution has not been followed. In addition, a resolution may be void if it violates a statutory provision established for the protection of the creditors of the legal person or due to another public interest.
