Thanks for touching on some of the things I was expecting to read in the article.
> you need to have half of your capital available always
What does this mean, in a bank account?
> you need to have half of your capital available always
What does this mean, in a bank account?
Think of it as a warning flag to potential lenders. The default assumption in society is that limited liability corporations have enough assets that it’s safe to sell them something on credit, i.e. invoicing rather than cash. Forcing companies to register the fact that their equity is negative provides an easy way for vendors to look up this warning flag.
I’m not directly familiar with Estonian law, but I’ve run a couple of Finnish companies. If the law is similar, it’s not that the government registry would be actively filing for bankruptcy if you have negative equity, but it does create potential liability for board members if the company goes bankrupt and the board failed to register negative equity when the information was available to them.
That way the company is only required to own at least 2500 eur in assets, which should not be a problem for any serious business.
You can have 2.5k€ share capital and 97.5k€ free capital. This is usually a better arrangement than having it all in the share capital which is "bound" equity. (Bound is probably not the right English word for this — I only know the terminology in Finnish.)
The logic is identical to for example founding a company in the UK: https://www.gov.uk/limited-company-formation/shareholders
You pick a "name value" and number of shares when founding, for example £1 x 500 shares. This is the "share capital", and official maximum liability of the founders for the company's debts. It also defines the smallest unit of ownership that can be assigned to a person. But of course the actual starting investment, assets, and the market value of the shares can be much higher.
Estonia doesn't use the concept of "number of shares out of total shares", but instead "euros of ownership out of total share capital". For a typical small business you would set it to 2500 EUR and can split ownership at 1/2500 granularity.
In practice the difference between 10% and 50% is only 1000 euros though, assuming your company is registered with the minimum required share capital of 2500 €.
I can start a company and declare a really expensive couch as it's assets in the balance and it would be ok.