This means that most of the share transactions have to be notarized. For many foreign owners and investors, the notarization process makes the purchase of shares in Estonia time-consuming and complex with many documents with signatures and official stamps and translation to be provided to the notary and in many cases, a notarized power of attorney affixed with an Apostille is needed.

As many countries do not have such a formal approach to the purchase agreements of shares, it has been considered a hindrance in attracting foreign investors to Estonia.

The legislator has noticed the issue after lobby groups have put them under pressure and this year a major change in the Estonian Commercial Code came into force, making it easier to transfer shares in private limited companies.

Following the changes, in case the company’s share capital is at least EUR 10,000 and paid in full, the articles of association of the company may waive the formal requirement for share transfer (meaning no notarized form). The articles of association then can just prescribe that a share transaction must be in writing. Any decision to approve or amend the articles of association which waive or restore such formal requirements must be made by all shareholders. This means that all the time-consuming procedures with the notaries are not needed in the future for companies that meets the above-mentioned requirements. This change could significantly boost transactions with Estonian shares among non-Estonians.

In this connection with the above, the management board of the company is under an obligation to inform the Commercial Register immediately of any changes among its shareholders.

The same requirements will be set for pledging shares. This results in that if the articles of association state that share transactions may be done in a simple written form and the company meets all other legal requirements, pledging requires only a written format and the information obligation for the management board.

An additional change that could be important for start-up companies are that the minimum nominal value of one share can be set to one Eurocent, instead of one euro. This means that the nominal values of shares can be divided into very small parts suitable for companies with many shareholders.

The amendments to the law described above entered into force on 1 August 2020.