Sale of a share allowed without visiting a notary

On 1 August this year, an amendment to the Commercial Code entered into force, which allows in certain cases the sale of a share of a private limited company for example through an e-mail or a message sent on Facebook. So selling a share is now easier, cheaper and faster because of no longer having to notarise the transaction.

While previously the shares registered in Estonian Central Register of Securities could be sold without visiting a notary, now transactions without a notary can also be executed with shares not registered in the Central Register of Securities, since 1 August. However, this is only allowed if three criteria are met.

Share capital must be at least EUR 10,000
First, the share capital of the private limited company must be at least EUR 10,000. In addition, the share capital must be fully paid up. Therefore, if the share capital is EUR 2,500 or the private limited company is established without paying a contribution, the share must still be sold in the presence of a notary.

The articles of association must allow sale of a share without a notary visit
Second, the waiver of notarisation must be provided for in the articles of association. In the case of a private limited company already operating, this means amending the articles. While in other cases, amendments to the articles of association generally require at least two-thirds of the votes present at a general meeting of shareholders, the law provides for a more stringent requirement in order to alleviate the format requirement for the sale of a share.

Namely, pursuant to the Commercial Code, any decision to amend or approve the articles of association in such a way must be backed by all the shareholders of the private limited company. For example, if a private limited company has one hundred shareholders and one of them does not agree to amend the articles of association in such a way that the sale of a share without a notary becomes allowed then the law does not permit that amendment of the articles of association.

The sales contract for the share must allow for written reproduction
Third, the Commercial Code provides for a minimum format requirement for a sales contract. The disposition of a share must be carried out at least in a format reproducible in writing. For example, an e-mail message or an instant message/SMS message satisfies that requirement. However, it is recommended that the sales contract be formalised in writing, i.e. undersigned by both the buyer and the seller. At the request of the parties, the sale of a share may also take place at a visit to a notary. The sale of a share by a spoken agreement is not allowed.

If the aforementioned three of criteria are met, the use of a more lenient format requirement is also permitted for other transactions relating to shares, besides sales. For example, a shareholders’ agreement containing agreements on the sale of shares is now allowed to be concluded via e-mail. Also, you don’t have to go to a notary to pledge a share. In the future, a more lenient format requirement can also be used for participatory options.

Changes in shareholder data must be reported
In connection with the relaxation of the format requirement for the sale of a share, another amendment to the Commercial Code also entered into force on 1 August, according to which the management board of the private limited company must inform the Commercial Register without delay of any changes to the shareholder data. The management board does not have to notify the Commercial Register of changes if the same data are entered in the Commercial Register by other means, for example if the sale of the share is made at a notary or if the shares are registered in the Estonian Central Register of Securities. Consequently, the new obligation affects in particular those private limited companies, the shares of which are allowed to be sold without a visit to a notary.

In addition, an amendment to the Commercial Code entered into force, requiring a shareholder to immediately inform the management board of changes in shareholder data. In the past, the law did not explicitly state such an obligation of a shareholder.

If you have any further questions about the sale of shares, please contact the lawyers of the Chamber of Commerce at juristid@koda.ee.