--- title: What should you keep in mind when preparing a company's annual report? date: 2022-04-08T12:28:41Z modified: 2025-11-11T12:43:17Z permalink: "https://grow.ee/mida-peaks-silmas-pidama-ettevotte-majanduasaasta-aruannet-koostades/" type: post status: publish excerpt: The deadline for preparing the annual report is approaching. What is worth monitoring and how to prepare the report? wpid: 7360 featured_image: "https://grow.ee/wp-content/uploads/2022/04/ceb80267e51156842c53e93ea6f60e39.jpg" featured_image_alt: Capital raising_4 timestamp: 2025-11-11T12:43:17Z tags: - Accounting --- ![OSS and IOSS special procedures](https://grow.ee/wp-content/uploads/2022/01/glenn-carstens-peters-npxXWgQ33ZQ-unsplash-scaled.jpg) It is time for every company to submit a report to the Commercial Register six months after the end of the financial year, even if there has been no active business activity. Timely submission of the report is important for both the entrepreneur and the state. With the help of [Grow Finance](https://grow.ee/wp-content/uploads/wp-mfa-exports/page/ettevottest.md) accountants, we will review the most important points to keep in mind when submitting the report. ## **When must the annual report be submitted?** The report must be submitted to the Commercial Register within six months of the end of the financial year. Generally, the financial year lasts 12 months and for most Estonian companies it coincides with the calendar year. This means that most companies submit the annual report by June 30. However, if the financial year lasts, for example, from March to March, the report must be submitted by the end of September and so on. It is worth starting to prepare the report as early as possible - as soon as the financial data for the previous year are clear. At the latest, you should start preparing the report two months before the submission deadline. It is important to remember that the annual report must be submitted even if the company has not had any active activities. ## **What kind of report must be submitted and how detailed should it be written?** The Accounting Act divides companies into four groups based on their size. The minimum requirements for the report are also determined on this basis. However, a company can always choose a more comprehensive report format, especially if it has potential stakeholders who might be interested in it. #### **Microenterprise** A private limited company, **two** of whose indicators do not exceed the following limits: - total assets 450,000 euros, - annual income 900,000 euros, - average number of employees during the reporting year 10 people. The obligation is to submit **abridged balance sheet, income statement** and, depending on the activity, up to three annexes. Usually, such a report is very short and contains only minimal information. #### **Small enterprise** A company with **two** of its indicators not exceeding the following limits: - total assets of 7.5 million euros, - annual revenue of 15 million euros, - average number of employees during the reporting year of 50 people. The obligation is to submit an **abridged annual report**, which is prepared in accordance with the Estonian Financial Reporting Standard and includes: - a detailed balance sheet and income statement, - up to nine annexes, - an activity report. ##### **Medium-sized enterprise** A company with **two** of its indicators exceeding the following conditions: - total assets of 25 million euros, - sales revenue of 50 million euros, - average number of employees of 250 people. **Large enterprise** A company that is not a micro, small or medium-sized enterprise. The latter two must submit a **full report**, consisting of: - an activity report, - an accounting report (balance sheet, profit and loss account, [cash flow report](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/miks-on-rahavoogude-aruanne-ettevottele-kasulik.md), statement of changes in equity) and annexes. The annual financial report must be prepared in **Estonian** and **euro**, also indicating the level of precision used (e.g. in euros or thousands of euros). ## **Who can read the report and to whom is it addressed?** The annual report is a **public document** that can be downloaded from the Commercial Register by anyone who is interested. The report can be read by: - cooperation partners and customers, - banks, - competitors, - investors, - journalists, - state authorities. If the report is submitted on time and is meaningful, it gives a good signal to business partners that the company is reliable. ## **What accounting data is necessary for the report?** If the target group is clear and the decision is made on the level of detail with which the annual report will be prepared, then it is worth considering whether the necessary preparatory work for submitting the annual report has been done. The basis for preparing the annual report is all **transactions** that have taken place during the financial year and have been **recorded in the accounting**. It is important to check whether: - All transactions have been reflected in the accounting. - All underlying documents and checks have been entered. In addition, the **balance sheet and income statement accounts** should be reviewed and made sure that they are correct: - Do the assets stated in the balance sheet actually exist and have been inventoried? - Does the cash in the cash register correspond to the accounting data? - Are the depreciation rates for fixed assets sufficient? - Are long-term and short-term liabilities classified correctly? If you use the Estonian Financial Reporting Standard, you will find ideal guidelines for this work in the Accounting Board guidelines, which are available [here.](https://www.rahandusministeerium.ee/et/easb/aruandluskorraldus) The preparations described above are actually part of ongoing accounting and if it is kept in order on an ongoing basis, then no significant preparations need to be made before compiling the annual report. More detailed information on what must be included in the report can be found in [the law.](https://www.riigiteataja.ee/akt/116112010012?leiaKehtiv) If a company prepares a regular annual report, chapter three of the Accounting Act should be followed. However, if it is a consolidated report, chapter four must be followed. ## **What exactly needs to be done?** The management board submits the approved annual report, together with the proposal for profit distribution or loss coverage, the distribution of sales revenue and the sworn auditor's report, if an audit is mandatory, to the Commercial Register within six months of the end of the financial year. The annual report can be submitted electronically in the [Company Register's Enterprise Portal](https://ariregister.rik.ee/est). The preparation and submission of the annual report includes six stages in summary: 1. preparation of the annual financial report; 2. preparation of the management report; 3. approval of the annual report; 4. audit; 5. preparation of the proposal for profit distribution for the financial year and making a decision on profit distribution or loss coverage; 6. submission of the annual report for approval. Depending on the size of the company, the fourth stage is sometimes not relevant - smaller companies do not need to hire an auditor. If a member of the management board is also the owner, there is no need to do anything additional in the third stage. ## **Why is it important to submit the annual report on time?** A report submitted on time shows the company's **reliability** to both partners and customers. For the state, it ensures **transparency of the economic environment**, helping to predict economic development and direct subsidies to where they are needed most. **The Tartu County Court Registry Department** monitors the submission of reports and compliance with the law. ## **What does the minimum equity requirement mean?** After submitting the annual report to the registry, many entrepreneurs receive a letter from the registry stating that the company's equity does not meet the requirements and asking them to take measures to resolve this situation. It is also pointed out that in the worst case, an application may be filed with the court for the compulsory winding up of the company. **Equity or net assets** is the total amount of assets on the balance sheet minus the total amount of liabilities and liabilities, i.e. the amount that remains after the company has paid all its obligations. Negative equity or negative net assets means that the company does not have the funds to meet all its obligations, that is, the obligations are greater than the assets. If this has happened, the Commercial Code ([ÄS](https://www.riigiteataja.ee/akt/104012021046?leiaKehtiv#para176) § 176) obliges the company's shareholders to decide how to restore the equity or terminate the company's operations (including filing for bankruptcy, transformation, division, merger). The law stipulates the minimum equity requirement. This depends on the size of the company's share capital. The company's share capital is the amount that is stipulated as share capital, e.g. in the company's articles of association and is registered in the commercial register. It is an asset that the owners have contributed to the company (in cash or in kind) or are liable to the extent of this with their own assets (a company established without contributions): - If the company has not yet contributed to the share capital, the minimum equity requirement is zero. - If the company's share capital is 2,500-5,000 euros, then the minimum equity requirement means that the equity must not be less than 2,500 euros. For example, if the share capital is 2,500, then the equity should not fall below 2,500 euros. If the share capital is 5,000 euros, then the equity can be a minimum of 2,500 euros. - For a company with a share capital of more than 5,000 euros, then the minimum equity requirement means that the equity must be at least half of the share capital. For example, if the share capital according to the company's articles of association and registered in the register is 10,000 euros, then the equity must be at least 5,000 euros - if the equity is 4,500 euros, then this is non-compliant equity that must be restored. However, non-compliant equity does not always mean that the company's operations are unsustainable or that the company is insolvent. For example, if a company has taken out a loan that is recorded as a debt obligation, or external capital, and not as an equity instrument, it is easy to have negative equity. The same happens if there is a lot of owner's loan outstanding under the liabilities. Often, the existence of non-compliant equity only becomes apparent when preparing the annual report. In fact, the company's management board is obliged to monitor the company's financial situation at all times. If the management board notices that equity has fallen below the permitted limit, a general meeting of shareholders must be convened to decide how to proceed, in accordance with the provisions of [ÄS](https://www.riigiteataja.ee/akt/104012021046?leiaKehtiv#para176) § 176. ## **Measures to increase equity** There are various measures to restore equity. The law explicitly mentions capital reduction and capital increase, but there are other measures as well. **1. Capital reduction** Capital reduction is a measure for companies with high share capital. For example, the share capital is 80 thousand, so the minimum equity requirement is 40 thousand euros. If the equity is negative, it is possible to reduce the share capital, which also reduces the equity limit. If the equity is to be restored by making payments to shareholders, the equity may not be restored, since the equity will also decrease when the payment is made. Therefore, it is reasonable to use the share capital reduction so that the excess capital is used to cover losses. To reduce the share capital, the shareholders adopt a resolution stating the amount by which the share capital will be reduced and to what extent the loss will be covered. When submitting the resolution to the register, an entry is made there. To protect creditors, this company may not pay dividends for the next two years. **2. Capital increase** Capital increases when a cash or non-cash contribution is made to the company. It is useful to use a share premium here – shareholders make contributions to equity capital so that a small part of the money (e.g. one euro) goes to share capital and a larger part to share premium. Because the more assets are transferred to share capital, the higher the equity limit will also increase. For example, if equity capital is 1,000, share capital is 2,500, then by making a cash contribution of 1 euro to share capital and 2,000 to share premium, the share capital will be 2,501 euros. In this way, the equity limit practically does not increase and the equity capital increases by 2,001 euros, being 3,001 euros, and the equity capital has been restored. If necessary later, the share premium can be used to increase share capital. Secondly, a non-cash contribution can be used to increase capital. Most often, it is used to register various equipment or assets in the company that the company needs for its work and which were previously owned by, for example, the owner. For this, a deed of transfer of assets is drawn up, the value of the assets is assessed by the management board and an application is made to the register. For example, loans granted to the company by the owner can be used as a non-cash contribution. **3. There are other options** **First** is the revaluation of existing assets. This can be done if the company has assets to be revalued. For example, if real estate prices have risen, the revaluation of real estate on the company's balance sheet may provide an opportunity to revalue the assets. **Second** Donations and gifts also help to increase capital, which increase equity through the profit line of the reporting period, i.e. increase the result of the income statement. **Third** is the waiver of your claim. For example, you have given a loan to the company and now you decide to waive your claim. This reduces the liabilities on the company's balance sheet and increases income. **Fourth** is the formation of a voluntary reserve. This has an impact on equity, as it is one of the equity lines, but does not affect the size of the share capital. To create it, it is important to discuss the creation of a voluntary reserve in the company's articles of association in more detail, and this is precisely to protect creditors. Shareholders make a contribution to the voluntary reserve or a shareholder loan is written from the liability to the voluntary reserve line. To increase equity, subordinated loans can be recorded there as one line. A subordinated loan means that when satisfying claims, the claims of creditors are satisfied first, then the claim of the subordinated lender, and last of all, those of the company's shareholders. To do this, the loan agreement must first be changed to subordinate this loan to the claims of all creditors, i.e., a subordinated loan must be created. Then, it can be transferred from liabilities to equity in the balance sheet. It is important to know that all contributions to equity (e.g. share capital, share premium, voluntary reserve, recognition as a subordinated loan) and also payments from equity must be declared in Appendix 7 of the TSD. Here is one example: if a company's liabilities include a liability, e.g. an owner's loan, then it can be used to restore negative equity in several different ways: - convert it into a contribution to equity capital, share capital and share premium - create a voluntary reserve and reflect it there - change the loan agreement in such a way as to subordinate this loan to all creditors' claims, i.e. create a subordinated loan - abandon the loan, thereby reducing the company's liability and increasing income, which increases the profit for the reporting year, which ultimately is reflected in the balance sheet and increases equity. ## Fines will be imposed on those who delay submitting the report Companies that do not submit their annual report on time may receive a **financial fine**. In case of delays, in addition to the company, **members of the management board personally** may also be fined. If the fine does not bring results, the company may be subject to **deletion without warning**. In practice, however, it is customary to give an additional deadline beforehand, but failure to respond to it may lead to **compulsory termination**. Article source: [Ministry of Finance](https://fin.ee/). ## Check out the annual report packages [ PACKAGES ](https://grow.ee/wp-content/uploads/wp-mfa-exports/page/pakkumine-aastaaruande-koostameisks.md) [ ![](https://grow.ee/wp-content/uploads/2026/07/Praktika-Blogi_Mathias-300x169.jpg) ](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/mathias-valtsovi-raamatupidamispraktika-grow-financeis.md) ##### [Mathias Valtsovi's accounting internship at Grow Finance](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/mathias-valtsovi-raamatupidamispraktika-grow-financeis.md) July 21, 2026 Experience story Grow from the internship: How did the internship become a solid step in your career as an accountant? [ ![](https://grow.ee/wp-content/uploads/2026/06/Kuhu-riiki-ma-sotsiaalmaksu-tasun-300x167.png) ](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/mis-vahe-on-sellel-kuhu-riiki-ma-oma-sotsiaalmaksu-tasun.md) ##### [Does it matter in which country I pay my social tax?](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/mis-vahe-on-sellel-kuhu-riiki-ma-oma-sotsiaalmaksu-tasun.md) June 26, 2026 Your social tax determines your health insurance and pension – does it go to the right country? [ ![Working abroad](https://grow.ee/wp-content/uploads/2026/05/Tootamine-valismaal-300x163.png) ](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/millega-peab-tooandja-arvestama-kui-tootaja-tahab-teise-riiki-kaugtood-tegema.md) ##### [Working from abroad: what does the employer need to know?](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/millega-peab-tooandja-arvestama-kui-tootaja-tahab-teise-riiki-kaugtood-tegema.md) May 21, 2026 Working from abroad brings with it tax and legal issues that the employer needs to be aware of.