Guide to Establishing a Non-Profit Association in Estonia
Introduction
A non-profit association (mittetulundusühing, MTÜ) in Estonia is a voluntary organization formed by individuals or legal entities for purposes other than profit generation. While a non-profit association may engage in economic activities, all generated income must be used to fulfil the objectives outlined in its articles of association. The legal framework governing non-profit associations is the Non-Profit Associations Act.
Governance Structure
The highest decision-making body of a non-profit association is the general meeting of its members. The daily management and representation of the association are carried out by the management board, which is elected at the general meeting.
Members of the management board must fulfil their legal obligations with the level of diligence expected of a responsible board member.
Founders and Membership
A non-profit association must have at least two founding members, who may be either natural persons or legal entities. Both Estonian and foreign nationals can establish and be members of a non-profit association.
However, foreign entities cannot register a branch as a non-profit association in Estonia and must establish a new legal entity for their operations. Alternatively, a foreign legal entity may operate in Estonia on a cross-border basis without forming a separate entity.
Steps to Establish a Non-Profit Association
Pre-Establishment Considerations
Before initiating the registration process, the following steps must be completed:
- A founding meeting must be held with all members.
- A memorandum of association and articles of association must be prepared.
- Consultation with a County Development Centre consultant is recommended for document review, a service provided free of charge.
Required Documents
To formally establish a non-profit association, the following documents must be prepared:
Memorandum of Association:
- The official name of the non-profit association, including a suffix such as "union," "society," "association," or "club." If no suitable suffix exists, "mittetulundusühing" must be included in the name.
- The contact address of the association.
- The association's objective.
- The names, addresses, and identification details of the founders.
- The rights and obligations of members.
- The names and identification details of the members of the management board.
Articles of Association:
The articles of association must include the following:
- The official name and registered office location of the association.
- The association's objective.
- Membership conditions, including procedures for joining, leaving, and exclusion.
- Rights and obligations of members.
- If applicable, details regarding departments within the association and their functions.
- Rules for convening a general meeting and adopting resolutions.
- The structure and number of management board members.
- Asset distribution procedures in case of dissolution (to qualify for income tax incentives, assets must be allocated to a public-benefit entity).
Associations seeking income tax benefits must clearly state their public-interest and charitable objectives in their articles of association. Further guidance is available on the Estonian Tax and Customs Board website.
Registering in the Business Register
Once the memorandum of association and articles of association are finalized, the association must be registered in the Estonian Business Register. Registration can be completed in two ways:
- Electronically via the e-Business Register (recommended for founders who can provide digital signatures):
- Complete and submit the petition for entry online.
- Upload the articles of association and memorandum of association.
- Obtain digital signatures from all co-founders and management board members.
- Pay the state registration fee via bank transfer within the e-Business Register system.
- Submit the petition for review.
- Via a notary (required if digital signatures cannot be provided by all members):
- Signatures must be notarized for authentication.
- The notary submits the notarized petition electronically through the notarial system.
Registration Fees
- The state fee for registering a non-profit association via the e-Business Register is EUR 30.
- Registration through a notary incurs a EUR 30 state fee, plus additional notarial charges.
Registration Processing Time
The Business Register processes non-profit association registrations within five business days. If any deficiencies are identified, the registrar will notify the founders and set a deadline for rectifications.
Conclusion
Setting up a non-profit association in Estonia is a structured and legally regulated process. By ensuring compliance with legal requirements and preparing the necessary documents, individuals and organizations can efficiently establish their non-profit entity and begin operations.
For further guidance, consulting a legal professional or the Estonian Tax and Customs Board is advised.