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Company formation and management in Estonia

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Complex ownership structures with multiple shareholders

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Entrepreneurs' Paradise: e-Estonia

I am Richard J. Witismann. An Estonian entrepreneur and lawyer. And I live in paradise. Entrepreneurs’ paradise. It is called e-Estonia.

And I know what I am talking about. A few more years and I will be 50 years old. And almost 30 years of it I have been an entrepreneur in one way or the other. I have become a “mature” entrepreneur during this time. The temerity of youth and a mere wish to become rich have turned into a wish to offer creative solutions to the world for improving the life of people and to help realise the freedom to conduct business in all its forms of manifestation.

Today, my purpose is that there would be as few artificially established bureaucratic barriers (red tape) as possible which hinder creativity and freedom to conduct business. That the attitude towards entrepreneurs would change. That the societal shaming of entrepreneurs, who tried out bold ideas and went bankrupt because of it, would come to an end once and for all. That becoming an entrepreneur and being an entrepreneur would be fast, easy and affordable to everybody.    

I was born in Soviet Estonia. A country where everything belonged to the state, private ownership was forbidden and even a transaction of purchase and sale between individuals was a criminal offence. Currency exchange was also a criminal offence. I know a person who was held in Siberian prison camp for 25 years because of it.

And then came freedom. Estonia regained independence in 1990. The era of early capitalism began. Wild West – an eye for an eye, a tooth for a tooth. Everything had belonged to the state. And then, suddenly, came a moment when everything was available. You just had to be a man and grab what you could. Privatisation began. It was the greatest redistribution of wealth that Estonia had seen. The era of banditry and organised crime came to Estonia with it. The infamous nineties began.

The Estonian SSR was no more and there was also no Republic of Estonia yet. The right of the strongest prevailed. Since I was a man in my twenties and worked in the special services of the newly created Republic of Estonia as a close protection officer, the life offered me a unique opportunity entering the business world. The police were weak and gangs ruled. Entrepreneurs and business people needed protection. There was a possibility to pay as was custom in Russia – to gangs offering racketeering. The trouble with them was that you never knew whether you paid the right people and at what time you were told that they decided to increase the fee. It was a good time for establishing private security companies. I was one of the first people to establish a private security company in Estonia. At first, I established one company, and then a second one right after. The second security company turned out to be very successful. And then, according to the customs of that time, I was made “an offer I could not refuse”. I was forced to sell my company.

Starting a business was fun. We had been operating about a year. Our office was in a reconstructed toilet of one business building. We took the urinals off from the walls and put mirrors there instead. The rumours of us as the best security company in Estonia also spread to abroad. The Director General of G4S Belgium came to see if there was a promising company to purchase. They asked if they could see our financial reports. Of course, they could. I took our accounting documents from the safe of our office. The documents were one chequered notebook where I had drawn a table. The table had 3 columns – what came in, what went out and one column which I was especially proud of – balance. I presented our documents with pride. I remember the faces of our guests – so serious, no smile or smirk. They did not purchase our company then, however. :)

This was also a time where people tried to criminalise all business disputes. That means that if somebody owed someone, they tried to turn the debtor into a criminal. An application was filed with the police and not with civil court, as was custom in Western cultural space. This practice was generally successful in the beginning of the nineties. I believe that deep patterns have remained in the subconsciousness of the Estonian society from that period. According to these patterns, an unsuccessful entrepreneur is a priori a crook and a swindler.

Luckily, these times have passed. The gangsters tried to blend into the civil society and the new legal order and business culture coming from Europe started to influence the entire business environment in Estonia. Estonia become a civilised and free society that valued highly the freedom to conduct business.

Today, Estonia is the flagship of the freedom to conduct business. It is the year 2017 and the challenges that entrepreneurs face are significantly different from the nineties. It is an era of information technology, digital nomads and start-ups.

The main wish of today’s entrepreneurs is that they could establish a company and manage it from everywhere in the world without having to stand up from the computer – in a café or bedroom. Without having to run with some papers from one building to another and wait replies for these important papers for days or months. Without having to submit stacks of evidence in order to open a bank account or each time they want to transfer 1,000 euros. Without having to persuade banks that they do not launder money nor are terrorists. They just want to make a cool app for mobile phones. And receive money for that. And transfer that money freely to their business partners. That’s it.

The world has changed. The states, who have started to realise that the entrepreneurs are the ones that create the real value to be distributed (that is tax revenue), also try to change.  

And Estonia has especially changed. It is the first country that created the opportunity to give digital identity (e-Residency) for non-residents so that enterprising and creative people could use the digital infrastructure of Estonia for establishing and managing a company without having to stand up from the computer. Everywhere in the world. Even in the bedroom. It is unbelievable, but it is true. And this is just the beginning. The concept of e-Residency develops in days and together with it also entrepreneurs who create and offer more and more convenient ways to benefit from it.

So do we. We move step-by-step in the direction that everyone who wishes to establish and manage their company as an e-Resident can do so faster, easier and cheaper. Our new fully automatic ordering system which will be available on September, 2017 is a first step in that direction. I promise that there is more to come soon. And the life will be even easier, faster and cheaper.

NB! A lot has been written about e-Residency and the possibilities thereof. The state of Estonia also keeps an e-Residency blog where you can get much useful information.

By Richard J. Witismann on 28 June, 2017