Under current law, all share transactions of a private limited company must be notarized in case the shares are not registered with the Central Securities Depository (CSD - only appr. 3% of all shares are registered). Therefore, most of the share transactions are notarized. This results in time-consuming and complex transactions especially for start-ups who have foreign investors. There is currently a lot of hassle with many documents to be provided to the notary. All that may change the investor's interest in investing in your company. The legislature has noticed the issue and a major change in the Estonian Commercial Code will come into force on August 1, 2020.
According to the changes to the law, if the share capital of a private limited company is at least EUR 10,000 and paid in full, the articles of association may waive the formal requirement for share transfer (notarized form). The articles of association may prescribe that the share transaction must be at least in a form that can be reproduced in writing (simple written agreement). This means that all time-consuming procedures with the notaries and notary fees are not needed in the future in case the company meets the above-mentioned requirements. This change should significantly boost transactions with the Estonian private limited company shares and attract foreign investors.
In addition to the above mentioned there are other changes made to the Commercial Code:
The same formal requirements will be set for pledging the share as for transferring the share. Until the new law will enter into force, all pledging on non-CSD shares had to be notarized, but according to the new law it does not have to be the case, if the articles of association stipulate so.
The minimum nominal value of a share shall be one cent instead of one euro. Thus, no further rounding is needed in the future, you can give a more accurate nominal value to the investors.
Option agreements and SHA do not need to be notarised anymore. Currently, all agreements involving an obligation to transfer a share (also included in the option agreements and SHA) must be notarized.
If you would like to take advantage of the new law, please contact us and we will help your business to meet the requirements.