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Closing of share transfer transactions simplified

05.05.2006

Since January 1 2006 the closing of transactions regarding the transfer of shares of public limited liability companies has become easier due to an amendment to the Commercial Code.

Commonly, at the closing of a share sale transaction in Estonia the old supervisory board is withdrawn and a new (ie, the buyer's) supervisory board elected by the seller. The Commercial Code provides that when changing the supervisory board of a public limited company, the minutes of the shareholders' meeting adopting this resolution must be notarized. In practice, the notarization requirement complicated the timing of closings - as well as agreeing on a closing date as the parties also had to arrange a notary appointment for that date which, given the heavy workload of Estonian notaries, could be difficult. As a result, closings were carried out in two stages: sellers first held the shareholders' meeting in a notary's office, and then met the buyer in a bank office, where instructions were given to the administrators of the parties' securities and current accounts for the transfer of share titles against payment of the purchase price. However, the notarization requirement does not apply in cases where the public limited company has only one shareholder. Therefore, in sales by a sole shareholder there was no barrier to closing in a bank office.

The latest amendment to the Commercial Code has abolished the requirements of notarization and of holding a formal shareholders' meeting as long as all the shareholders consent to the resolutions to be adopted (eg, changing the supervisory board). Given that the parties agree to change the supervisory board in the share sales agreement, obtaining the consent of all shareholders to do so should not be a problem, and the supervisory board can be changed in a bank office by signing a shareholders' resolution in a simple, written format prior to the giving of transfer instructions for the shares and purchase price.

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