The concept of enterprise transfer has been changed substantially by the Law on Obligations of Estonia which recently took effect.

The concept particularly affects mergers and acquisitions, being designed to protect creditors in asset deals. Without this concept, company creditors would be in a very weak position, especially where their deal involves all (or most) of a company’s assets (eg, an enterprise might continue to make money while creditors could have claims against an empty shell). The enterprise transfer rules now ensure that the liabilities of an enterprise are transferred to its purchaser, in addition to all assets and rights.

Before July 1 2002 the assets and rights of an enterprise had to be transferred in their entirety in order to trigger the transfer of its obligations as well.

As of July 1 2002 the words "in their entirety" are omitted from the law. Now the criterion for transferring obligations is merely whether an enterprise has been transferred. Consequently, the courts will review the facts and circumstances of each case and decide whether the rights and assets are transferred to the extent that the transaction constitutes an enterprise transfer. If so, all liabilities relating to the enterprise are also deemed to be transferred.

For further information on this topic please contact Hannes Vallikivi at Law Office Tark & Co by telephone (+372 611 0900) or by fax (+372 611 0911) or by email ([email protected]).