The Riigikogu on Tuesday passed a bill to amend the Commercial Code, the Notarization Act and the Notary Fees Act that will make notarial authentication of the transfer of shares in a private limited company voluntary - a move seen to facilitate the making of investments in Estonian startups.
The manager of the Startup Estonia program, Maarika Truu, described the amendment as important and long-awaited, as it will significantly reduce bureaucracy in attracting foreign investments and have a positive and broad-based effect on the Estonian economy in general.
"The change is essential. Under the Commercial Code valid to date, all shareholders of the company and the new investor or their representative had to meet at the office of a notary in Estonia simultaneously. Existing legislation was almost 15 years old and clearly outdated. Both the coalition and the opposition were unanimous on that," Truu said.
Truu said the formal requirements applicable to the transfer of shares to date were too strict, causing a lot of unnecessary bureaucracy and complexity.
"The previously valid regulation did not facilitate the growth of local companies and inclusion of foreign investors," she said.
Raido Lember, director of the Estonian Investment Agency at Enterprise Estonia (EAS), said that every month Estonia is failing to receive tens of millions of euros in potential foreign investments.
"We can see in our work every day that the interest of foreign investors toward young Estonian technology companies has clearly grown in recent years, and the need to adapt legislation and reduce bureaucracy have grown correspondingly," he explained.
The legislation amending the Commercial Code and associated acts facilitates the transfer of shares in a private limited company and lifts unnecessary restrictions and requirements concerning form, the Riigikogu press service said.
The amendment establishes one cent instead of the current one euro as the minimum value of a share, which enables to more flexibly determine the sizes of shares in a private limited company.
In addition, the amendment enables private limited companies whose paid-in capital meets the established minimum requirement to set out in the articles of association, with the consent of all shareholders, the possibility for disposition for the transfer and pledging of shares to be conducted in a free form capable of producing a written record.
Under currently valid law, both a transaction constituting an obligation to transfer a share in a private limited company and a disposition must be notarized. The latter provision does not apply to the transfer of shares entered in the Estonian register of securities.
Editor: Helen Wright