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Legal Persons in Estonian Law

Estonian law related to legal persons has been significantly reformed over the past few years. Under Soviet law, the role of legal persons was subject to very strong ideological influence since in practice, only the state could form legal persons, excepting co-operative and social organisations, which private persons could also found. The transition from the foundations of Soviet law to contemporary standards did not occur suddenly, but through several stages of development. Associated with the transition to market-economy relations, the Enterprise Act was passed in November 1989, which also permitted private persons to establish legal persons for engaging in economic activities. Since at that time it was essential to begin economic reform, correct legal behaviour was sacrificed in many respects. One such example was in the law related to legal persons. Instead of regulating a given issue by statute, a series of government regulations were passed which provided the legal basis for legal persons. These regulations fulfilled their purpose in providing the grounds for economic reform, but left much to be desired in the way of an acceptable legal standard and system. The other significant law of note from the same period is the law concerning citizens’ associations, which primarily provided the basis for political organisations, but also allowed for the foundation of non-political non-profit associations.

One goal of the development of new civil legislation was the establishment of a system of legal persons. Presently, nearly all of the necessary laws have been passed and in a few years the whole system should be operating on new grounds. At the same time, the implementation of laws regulating the various legal persons has several problems. For example, the enforcement of new contract laws is relatively easy in that the date of entry into force must be specified, as well as the relations that have arisen to date to which the new law applies and to which the old law applies. But in the implementation of laws concerning legal persons, the laws must be applied to the existing relations so that the relations continue but with a new quality.

The general bases for legal persons are presently specified by the General Principles of the Civil Code Act which entered into force on 1 September 1994. At the same time, there are several specific Acts concerning legal persons: commercial undertakings are regulated by the Commercial Code (entered into force 1 September 1995) and co-operatives by the Co-operatives Act (entered into force 9 October 1993). Also separate are the Foundations Act and the Non-profit Associations Act, which both entered into force 1October 1996. Thus, the General Principles of the Civil Code Act provides the most general bases for legal persons, leaving the details to be regulated by specific Acts.

The corresponding European Union guidelines were considered when developing the principles concerning legal persons in Estonia. These guidelines are expressed primarily in the company law directives, which concern public limited companies and private limited companies. In Estonia, some of these principles have been extended to other legal persons as well, in order to ensure the integrity of the system. Examples of these principles are the designation of a person who may represent a legal person in issues of protection of third persons, the termination of a legal person and the existence of registers providing access to information.

The current law in Estonia divides legal persons into two types: legal persons in private law and legal persons in public law. The basis for the division is interest in that a legal person in private law is founded in the private interest and a legal person in public law is founded in the public interest. As the principle of numerus clausus is valid with respect to both types of legal person, such differentiation is significant primarily for legislators since a legal person cannot be classified among legal persons in private law or public law on private initiative. With respect to legal persons in private law, the law classifies which legal persons are associations and which are foundations, and furthermore divides associations into commercial undertakings (general partnership, limited partnership, private limited company, public limited company) and non-profit associations. In Estonia, unlike in many other countries, co-operatives may belong under either type of associations, since both commercial co-operatives and non-profit co-operatives are recognised.

Legal persons in public law are established by several Acts. For instance, Eesti Raadio (Estonian Radio), Estonian Television and universities are legal persons in public law.

An important issue with respect to legal persons in private law is the prescription by law of a register in which the corresponding legal persons are entered. The Enterprise Act formerly prescribed establishment of an enterprise register where all legal persons were entered. Unfortunately, the choices made in those days were not the most successful as the register was created under the Statistical Office and was thereby statistical in its content. Pursuant to laws recently passed in Estonia (Commercial Code, Non-profit Associations Act and Foundations Act), new registers have been established in Estonia: the commercial register for commercial undertakings and the non-profit associations and foundations register for non-profit associations and foundations. The given registers are maintained by the county and city courts and their principles of operation are similar. The procedures have been harmonised in order to simplify the work of the register and, above all, for the clients of the register. In order to make an entry, a corresponding application must be submitted for which the signatures must be notarised. A register has fifteen days to review an entry application, during which the satisfaction of an application may only be denied on formal grounds. A register entry is made on the basis of a court order. Registers are public as everyone has the right to examine the entries and applications. Estonia has not fully implemented the European principle of publishing all commercial register entries however, but the more significant entries must be published. The difference in this publication principle arises from the fact that pursuant to Estonian law, register entries enter into force upon signature, and not upon publication, the latter having only informative significance.