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What to Do if Shareholders or Partners Refuse to Approve the Annual Report?
What to Do if Shareholders or Partners Refuse to Approve the Annual Report?
Estonian businesses are well aware of their obligation to submit an annual report to the commercial register. Nevertheless, just days before the 2025 reporting deadline, a large number of companies have yet to file their report. Annika Vait, Partner and Attorney at Law at RASK, explains what steps can be taken if shareholders or partners do not approve the annual report.
According to the e-Business Register, less than half of the companies registered in Estonia have submitted their annual report so far. The reasons for non-submission vary – from accountants' and auditors' heavy workloads to a conscious disregard of the obligation. In the latter case, companies often hope that the state will strike the company from the register through expedited proceedings.
During the extensive register clean-up carried out in 2024–2025, the state struck over 35,000 companies from the commercial register. Fewer than 2,500 of these have been reinstated, which suggests that for many companies, being struck off by the state was a conscious and expected step.
However, leaving one's obligations to the state may not turn out to be the cheap solution some had hoped for. In 2024–2025, almost 50,000 fines were imposed for failure to submit the annual report on time. Fines may be issued to the company itself as well as to members of the management board, and in some cases even to shareholders.
One common problem in approving the report is disagreement among shareholders or partners. In such cases, the report prepared by the management board is not approved, leaving the board unable to fulfil its statutory obligation – since only an approved report may be submitted to the commercial register.
To address this situation, a legislative amendment came into force in 2023 allowing the management boards of certain types of companies to submit an unapproved annual report to the register, together with a corresponding notation. This option applies to private limited companies, public limited companies, non-profit associations, political parties, commercial associations, land improvement associations, and trade unions. It does not, however, extend to apartment associations or foundations, for example.
The new regulation thus gives management board members a clear framework for action in exceptional situations. At the same time, it should be kept in mind that the board still has an obligation to submit the report to the higher governing body for approval, and to convene a meeting for this purpose if necessary. If the report nevertheless remains unapproved, in most cases the board has the option of submitting it to the register in unapproved form, together with the corresponding notation. This makes it possible to avoid fines and the potential striking of the company from the register.
It is also important to note that submitting an unapproved report does not end the board's obligations. The explanatory memorandum to the legislative amendment emphasises that if the report is later approved, the board must resubmit it to the register as a repeat report. From a reliability and reputation standpoint, it is worth bearing in mind that the notation regarding the submission of an unapproved report remains visible alongside the report in the commercial register, including to third parties.
According to the e-Business Register, less than half of the companies registered in Estonia have submitted their annual report so far. The reasons for non-submission vary – from accountants' and auditors' heavy workloads to a conscious disregard of the obligation. In the latter case, companies often hope that the state will strike the company from the register through expedited proceedings.
Failure to meet obligations may result in a fine
During the extensive register clean-up carried out in 2024–2025, the state struck over 35,000 companies from the commercial register. Fewer than 2,500 of these have been reinstated, which suggests that for many companies, being struck off by the state was a conscious and expected step.
However, leaving one's obligations to the state may not turn out to be the cheap solution some had hoped for. In 2024–2025, almost 50,000 fines were imposed for failure to submit the annual report on time. Fines may be issued to the company itself as well as to members of the management board, and in some cases even to shareholders.
The report need not go unsubmitted due to disagreements among shareholders or partners
One common problem in approving the report is disagreement among shareholders or partners. In such cases, the report prepared by the management board is not approved, leaving the board unable to fulfil its statutory obligation – since only an approved report may be submitted to the commercial register.
To address this situation, a legislative amendment came into force in 2023 allowing the management boards of certain types of companies to submit an unapproved annual report to the register, together with a corresponding notation. This option applies to private limited companies, public limited companies, non-profit associations, political parties, commercial associations, land improvement associations, and trade unions. It does not, however, extend to apartment associations or foundations, for example.
The new regulation thus gives management board members a clear framework for action in exceptional situations. At the same time, it should be kept in mind that the board still has an obligation to submit the report to the higher governing body for approval, and to convene a meeting for this purpose if necessary. If the report nevertheless remains unapproved, in most cases the board has the option of submitting it to the register in unapproved form, together with the corresponding notation. This makes it possible to avoid fines and the potential striking of the company from the register.
It is also important to note that submitting an unapproved report does not end the board's obligations. The explanatory memorandum to the legislative amendment emphasises that if the report is later approved, the board must resubmit it to the register as a repeat report. From a reliability and reputation standpoint, it is worth bearing in mind that the notation regarding the submission of an unapproved report remains visible alongside the report in the commercial register, including to third parties.