Startup in Estonia: raising money for your OÜ

Many founders run a startup in Estonia through a private limited company, an OÜ. This guide explains how an OÜ raises money from investors under Estonian law: a priced round, a convertible loan or a SAFE, the special rights investors ask for, and how the money is booked and taxed. It also covers a flip under a foreign parent, raising money from the public, and the startup visa for founders from outside the EU.

In short

• An investor becomes a shareholder only when the Business Register enters the capital increase.
• A capital increase needs two thirds of the votes. Excluding the pre-emptive right of the existing shareholders needs three quarters, or a waiver by each shareholder.
• A convertible loan is an ordinary loan with conversion terms. Interest paid to a resident individual carries 22 percent withholding tax.
• A US SAFE works only after you adapt it to Estonian law. The existing shareholders must commit to vote for the conversion.
• Investor preferences go into the articles of association. Only the registered articles bind future shareholders.
• Money paid in before registration is not share capital yet. If the round fails, the company must pay it back.
• Founders who are not EU, EEA or Swiss citizens can use the startup visa and then a residence permit without the usual 65,000 euro investment.

How does an investor get new shares in an OÜ?

The shareholders resolve a share capital increase, the investor subscribes and pays, and the management board files the increase with the Business Register. The investor becomes a shareholder on the register entry (Commercial Code § 196(4)).

A typical priced round runs like this:

1. Documents. After a term sheet, the parties sign an investment agreement, a shareholders' agreement and new articles of association.
2. New articles first. You must amend the articles before the increase if the new capital falls outside the capital range of the articles, if the shares are issued above nominal value and the articles do not allow a share premium yet (§ 155(2)), or if the investor gets a new share class with special rights (§ 139(1) clause 5, § 154^1). The amendment needs two thirds of the votes (§ 175(1), § 192(2)).
3. The increase resolution. It needs at least two thirds of the votes, unless the articles require more (§ 192(1)). It states the number and nominal value of the new shares, who may subscribe and by when, the payment terms, the premium and the rights of the new shares (§ 192^1).
4. Pre-emptive right. The existing shareholders exclude it or waive it (see the next section).
5. Subscription and payment. The investor subscribes and pays the nominal value plus the premium to the company's account. If not all new shares are subscribed in time, the increase fails and the board must refund the payments (§ 193^1(1) and (2)). The resolution can let the board extend the subscription period or cancel the shares not subscribed, within 15 days after the period ends (§ 193^1(3)). Put that clause in the resolution of a round with several investors, so one late investor does not stop the round.
6. Filing. Once the shares are paid, the board files the application in the e-Business Register within six months of the resolution. It attaches the resolution, the minutes or voting record and the new articles, and a bank notice if the cash contribution exceeds 50,000 euros (§ 196(1) and (3)). The state fee is 25 euros (State Fees Act § 63(2)). No notary is needed. A round that amends the articles cannot use the fast track with standard articles, so the registrar decides within five working days (Commercial Register Act § 41(3), § 42(3)). The Centre of Registers publishes pre-filled templates for resolutions.
7. After closing. Declare the contribution on annex 7 of the TSD, code 7030 (TSD forms regulation). If the round creates a new beneficial owner, update the beneficial owner data within 30 days (Money Laundering Act § 77(5)).

For later tranches, the articles can authorise the board to increase the capital by up to half, for up to five years (§ 194^2).

Investors often want to pay only after registration, but the law requires payment before filing (§ 196(1)). The usual answer is payment after signing, with a long-stop date and a refund obligation if the increase is not registered.

How do the existing shareholders give up their pre-emptive right?

Either the shareholders exclude the pre-emptive right in the increase resolution by at least three quarters of the votes, or each shareholder waives it.

Each shareholder has a right to subscribe new shares in proportion to its holding, unless the increase resolution says otherwise (Commercial Code § 193(1)). A third party named in the resolution may subscribe only after that right is used up or excluded (§ 193(5)).

• Exclusion by resolution. At least three quarters of the votes, after a prior written explanation by the board of why the exclusion is necessary and how the issue price was set (§ 193(3)). A shareholder can ask the court to annul a resolution that breaks the law or the articles, within three months (§ 178(1)). So document the valuation and the explanation.
• Exclusion for certain shareholders only. Possible only where the articles provide for it, and adding that clause to the articles needs the consent of all shareholders (§ 193(4)).
• A written resolution signed by all shareholders. It removes the formalities of a meeting (§ 173(6) and (7)). It does not remove the board's explanation. So either attach a short board explanation, or have each shareholder expressly waive its own pre-emptive right in the resolution.

A waiver in the shareholders' agreement alone is not enough. The registrar examines the resolution and the minutes (§ 196(1)).

How does a convertible loan work, and how is its interest taxed?

A convertible loan is an ordinary loan contract with an agreed right or duty to convert the claim into shares later, usually at a discount or under a valuation cap (Law of Obligations Act § 396). The conversion is a normal capital increase in which the lender sets off its claim against the subscription price (Commercial Code § 194^1).

The contract. Write the trigger (a qualified round, an exit, a maturity date), the conversion price, what happens at maturity, and a commitment of the founders to vote for the increase and waive pre-emption. Estonian law also has a formal exchange bond with a conditional capital increase (§ 167^2, § 195^1), but its conditions make it rare for startups.

The conversion. The set-off is allowed only if it does not harm the company or its creditors (§ 194^1). The board values the claim like a contribution in kind, at its usual value (§ 143(1) and (2)), and board members are liable for a wrong valuation (§ 143(4)). An auditor must check the valuation only if the share capital or the nominal value of the new share is at least 25,000 euros (§ 143(3)).

Tax. Interest at a market rate is an ordinary expense of the OÜ. Interest paid to a resident individual is taxable income, and the OÜ withholds 22 percent and declares it on annex 1 of the TSD by the 10th of the next month (Income Tax Act § 4(1), § 17(1), § 41 clause 4, § 54(2); EMTA tax rates). Interest paid to a non-resident is taxed only in a narrow real estate fund case (§ 29(7)). If a related lender gets interest above the market rate, the excess is taxed at 22/78 under the transfer pricing rule, unless income tax was already withheld from it, as for interest paid to a resident individual (§ 50(4) and (5)). Interest converted into shares is still paid interest, so the withholding applies.

Booking. A convertible loan that the company may have to repay in cash is a liability. Only an instrument that will always convert into shares is equity (Accounting Standards Board guideline 3, points 49 to 51). If the instrument has both parts, for example a loan the lender may choose to convert, the company splits it: the fair value of a similar loan without conversion is a liability, and the rest is equity (point 51). On conversion, the loan moves to share capital (the nominal value) and share premium (the rest). The converted amount is a contribution to equity, code 7030 of TSD annex 7.

A loan is a liability. Losses can push the net assets below half of the share capital before the conversion happens (Commercial Code § 176).

Can you use a US-style SAFE with an Estonian OÜ?

Yes, as a contract, but not in its US form. Only the shareholders can increase the share capital (Commercial Code § 168(1), § 192), or the board within an authorised capital in the articles (§ 194^2). A SAFE signed by the board alone promises a result the company cannot deliver.

Three changes make it work:

1. The shareholders commit. The existing shareholders sign the SAFE or a side letter, and undertake to vote for the increase and to waive pre-emption.
2. Preferred shares need the articles. A new class and its rights must be in the articles (§ 139(1) clause 5, § 148(3), § 154^1).
3. The money is a claim until conversion. If the SAFE may be settled in cash, for example on an exit before conversion, it is a liability in the balance sheet (guideline 3, points 49 and 50).

Write "no interest" into the SAFE. A loan given in economic or professional activity bears interest by law unless the contract excludes it (Law of Obligations Act § 397(1) and (2)). On conversion, the claim is set off against the subscription price (Commercial Code § 194^1). If the company repays more than was invested, the excess can be interest with withholding, or a gain of the investor (Income Tax Act § 15(1), § 17(1), § 41). The wording of the contract decides, so check with the Tax and Customs Board before you pay.

Pro-rata, information and "most favoured nation" rights in a SAFE bind only its parties. They do not bind a later investor unless the articles or the shareholders' agreement repeat them.

Can investors get a liquidation preference, anti-dilution or extra votes?

Yes. The articles can give special rights to a share class or to a shareholder, in particular in voting, in profit distribution and in the distribution of assets on liquidation (Commercial Code § 154^1(1)). The articles must name each class and its special rights (§ 139(1) clause 5). A special right can be changed only with the consent of all its holders, unless the articles say otherwise (§ 154^1(2)).

• Liquidation preference. The liquidation surplus is split by nominal value unless the articles say otherwise (§ 216(1)). The registered wording applies as written. Say clearly whether the preference is non-participating or participating, and what happens when the surplus does not cover the preferred amount. A trade sale is a sale of shares, not a liquidation, so put the same waterfall in the shareholders' agreement too, with a drag-along.
• Dividend preference. Allowed (§ 157(2)), but still within the net assets test (§ 157(3)).
• Votes and vetoes. Votes can differ from nominal value if the articles say so (§ 169). The articles can require a higher majority for listed matters (§ 174(1), § 175(1)).
• Anti-dilution. A share has a fixed nominal value, and a bonus issue must be pro rata (§ 195(3)). So a down-round adjustment means issuing extra shares to the investor for cash. Write it as an undertaking in the shareholders' agreement to vote for that issue and waive pre-emption.
• Transfer restrictions. A right of first refusal and consent requirements (§ 149(2) and (3)). New consent requirements need the consent of all shareholders unless the articles say otherwise.

A preferential dividend is taxed like any dividend, at 22/78 (Income Tax Act § 50(1)). See the dividends guide.

What should a founder check in the round documents?

Check that the three documents say the same thing, that what must bind future shareholders is in the articles, and that your personal obligations are proportionate.

The investment agreement. Check the price, the tranches, the conditions and a long-stop date. Check the refund: on a failed subscription the board must refund at once (Commercial Code § 193^1(2)), and money paid for an increase that is never registered goes back as unjust enrichment (Law of Obligations Act § 1028(1)). Write an express refund clause anyway. Look hard at warranties given by the founders personally: caps, time limits and a disclosure letter.

The shareholders' agreement. It binds only its parties (Law of Obligations Act § 8(2)). Check board seats and vetoes, transfer terms (right of first refusal, tag-along, drag-along), founder vesting and leaver prices, non-compete, anti-dilution and the option pool, and any contractual penalty (§ 158).

The new articles. They bind the company and every future shareholder, and they are public. Check the share classes and special rights (Commercial Code § 139(1) clause 5, § 154^1), the capital range and authorised capital (§ 194^2), the share premium clause (§ 155(2)) and the transfer restrictions (§ 149). The notarial form of a share transfer can be waived only with a share capital of at least 10,000 euros, fully paid, and the consent of all shareholders (§ 149(6)).

If you hold your shares through a holding OÜ, the holding's board signs. A deal with its own board member, such as a founder guarantee, may need the holding's shareholders' decision (§ 168(1) clause 10).

Read the Estonian text of the articles. It is the registered one.

How do you book investor money before the shares are registered?

The money is not share capital yet. The capital is increased, and the rights from the new shares arise, only on the register entry (Commercial Code § 196(4)). Until then, the investor has no vote and no dividend right.

In the books. Show the money as "unregistered share capital" in equity if the application was filed with the register by the balance sheet date. If it was not filed, show it as a liability (Accounting Standards Board guideline 2; Accounting Act § 17(1)). On the entry, move the nominal value to share capital and the rest to share premium. The direct costs of the issue reduce share premium, or retained earnings if there is no share premium, not profit. The costs of a failed issue are an expense (guideline 3, point 58).

If the round fails. If not all shares are subscribed in time, the board must refund at once, and the board members are jointly liable for the refund (Commercial Code § 193^1(1) and (2)). If the application is not filed within six months, or the registrar refuses it, the money goes back as unjust enrichment (Law of Obligations Act § 1027, § 1028(1)). Do not spend subscription money as free equity while the round has open conditions.

Tax. Declare contributions to equity on TSD annex 7, code 7030, in the month you receive them (TSD forms regulation). The running total of contributions can later be returned without corporate income tax (Income Tax Act § 50(2); EMTA: payments from equity).

What happens when you flip the OÜ under a foreign parent company?

In a flip, the shareholders transfer their OÜ shares to a new foreign parent in exchange for its shares. The OÜ stays an Estonian taxpayer. For a founder who is an Estonian resident individual, the form of the flip decides the tax.

Corporate steps. Each transfer of OÜ shares needs a notary, unless the articles waived that form (Commercial Code § 149(4) and (6)). Rights of first refusal and consent clauses must be waived (§ 149(2) and (3)). The OÜ updates its beneficial owners within 30 days (Money Laundering Act § 77(5)).

The founder's tax.

• Contribution in kind. If you contribute the OÜ shares to the share capital of the parent, acquiring the parent shares is not taxed (Income Tax Act § 15(4) clause 10). The parent shares take over the acquisition cost of the OÜ shares (§ 38(5^1)). The gain is taxed when you sell the parent shares.
• Sale or share swap. A flip done as a sale or swap contract is taxed now, at 22 percent, on the market value of the parent shares minus the cost of the OÜ shares (§ 15(1), § 37(1)), even with no cash received.
• Non-resident founders are taxed in Estonia on the exchange only if, at the time or in the two years before, more than half of the OÜ's assets were Estonian real estate and the founder held at least 10 percent (§ 29(4) clause 5).

So the foreign documents should record a contribution to the parent's capital. Confirm the treatment with the Tax and Customs Board before you sign.

The company afterwards. Dividends from the OÜ to the parent carry the 22/78 corporate income tax at payment (§ 50(1)), with no withholding tax on top. An EU parent is also protected by the Parent-Subsidiary Directive, Article 5. Deals with the parent, such as an IP transfer or a loan, must be at market value, or the difference is taxed (§ 50(4)). A loan from the OÜ to its parent can be taxed as a hidden distribution (§ 50^2). Moving the IP to the parent below its value is a typical mistake.

A cross-border merger or conversion of the OÜ itself works only with a company of another EEA state (Commercial Code § 433^1(1), § 491^1(1)), so not with a US corporation.

When is raising money from the public regulated?

A private round with a few identified investors is not a public offer. A public offer of securities needs a prospectus unless an exemption applies (Prospectus Regulation, Article 3(1)).

• The prospectus exemption. From 05.06.2026, offers below 12 million euros per issuer over 12 months are exempt, if the offer is not passported to other states. A member state may apply 5 million euros instead (Listing Act, amending Article 3(2) and 3(2a)). Estonia applies the 12 million euro threshold. Finantsinspektsioon states that up to 1 million euros over 12 months neither a prospectus nor an information document is generally needed, and that from 1 to 12 million euros the information document must be considered (Finantsinspektsioon: prospectuses and information documents).
• The Estonian information document. For an exempt public offer, Estonia may require an information document under the Securities Market Act § 15(6). Check the current regulation and confirm your case with Finantsinspektsioon, the financial supervisor, before you launch.
• OÜ shares. No security may be issued for an OÜ share (Commercial Code § 148(6)), and a transfer normally needs a notary (§ 149(4)).
• Crowdfunding. A crowdfunding platform needs a licence under the ECSP Regulation. The regulation covers offers up to 5 million euros per project owner over 12 months (Article 1(2)(c)). It accepts shares of a private limited company whose transfer is not effectively blocked (Article 2(1)(n)). The project owner prepares a key investment information sheet (Article 23).

Finantsinspektsioon treats loans raised from many people on uniform terms (the same interest, maturity and repayment schedule) as possibly a security similar to a bond (Finantsinspektsioon: is an instrument a security). Use a licensed platform for loans from a crowd.

Who can get the Estonian startup visa?

A founder who is not an EU, EEA or Swiss citizen, and who comes to create or develop a startup in Estonia. For the Aliens Act, a startup is a young business unit of a company registered in Estonia, with an innovative, repeatable business model of high global growth potential (Aliens Act § 62^4(2)). A ministerial regulation sets how that is assessed (§ 101(3) clause 5, § 224(1^3)). In practice, the Startup Committee assesses the startup first. It decides within 10 working days, expects a company no older than 10 years, and issues a code that you use in the visa or permit application (Startup Estonia: startup visa).

The visa. A short-stay or long-stay visa for startup activity is possible when the stay is connected with creating or developing a startup in Estonia (§ 62^4(1)). So you can get it before the company exists. A long-stay (D) visa is valid up to 12 months, with up to 365 days of stay (§ 60(2) and (3)). For startup activity, the stay can be extended, as long as stays on long-stay visas total no more than 548 days in 730 (§ 60(6), § 67(4^2)). Spouse and children can get visas too (§ 62^4(3) and (4)). The state fee for a long-stay visa is 120 euros (State Fees Act § 276(3)).

The residence permit. A temporary residence permit for entrepreneurship needs a holding in a company registered in Estonia and sufficient funds (Aliens Act § 192(1)). For a startup, the 65,000 euro investment and the business plan do not apply (§ 192(2^1) clause 2, § 192(6^1)). The permit is granted for up to five years (§ 119(1)). The state fee is 350 euros, or 380 euros at a foreign representation (State Fees Act § 273(3)). A startup can employ third-country staff without the usual permission and salary threshold (Aliens Act § 181(1) clause 12).

Extension. At extension, the company is assessed again as a startup (§ 224(1^3)). If it no longer qualifies, the investment condition applies, or instead turnover of at least 200,000 euros a year or the social tax test (§ 192(2^1) clause 2, § 194(1) and (2)). A permit can be revoked if it is not used for its purpose (§ 135). Keep evidence of real activity in Estonia.

EU, EEA and Swiss citizens need no visa and no permit (Aliens Act § 1(2), § 2(1)). If they move to Estonia, they register their residence within three months of entry (Citizen of the European Union Act § 7).

E-residency is a digital identity only. It gives no right to stay in Estonia. See the e-residency guide and the guide on founder residency.

Should a holding fund a new venture with a loan or with equity?

Equity is usually cleaner. It keeps a future sale inside the holding's tax deferral and keeps debt off the venture's balance sheet.

A subsidiary funded with equity. The holding contributes capital, declared on TSD annex 7, code 7030. Contributions can later be returned without corporate income tax up to their total (Income Tax Act § 50(2)). In company law, share premium can only cover losses or fund a bonus issue (Commercial Code § 155(2)), and share capital comes back only through a capital reduction with notice to creditors (§ 197 to § 200). Contributions to other reserves are more flexible: write in the articles that they can be paid back by a shareholders' resolution, within the net assets test (§ 157(3)). If the venture is sold, the holding receives the price with no immediate tax, and pays 22/78 only when it distributes the money (Income Tax Act § 50(1)). See corporate income tax on distributions.

A company you own personally, with a loan from your holding. The holding and the venture are related persons, so the interest must be at market level, or the difference is taxed (Income Tax Act § 8(1) clause 5, § 50(4)). A forgiven loan is a gift by the holding, taxed at 22/78 (§ 49(1)). The loan and its interest load the venture's balance sheet, so an early loss-maker quickly falls below half of its share capital (Commercial Code § 176). A later sale of your shares is taxed at 22 percent on the gain (Income Tax Act § 15(1)).

A loan can later be converted into equity by a set-off (Commercial Code § 194^1), which also repairs negative equity.

General information, not advice for your situation. The law as in force on 30.09.2026.