Category: General

December 1, 2020

How do trust if the document has an e-signature?

An electronic signature or e-signature is a broader concept than a digital signature.

There are various e ‐ signing service providers on the Internet (DocuSign, Signicat, etc.). However, there is some confusion about the legal meaning of the different signatures. An incorrect e-signature can lead to cumbersome disputes over the validity of the signature (eg who exactly gave the signature) or, in the worst case, even the invalidity of the transaction.

There are three different types of e-signatures:

1. Simple Electronic Signature = imprint of an electronically generated signature without any special technical gadgets; for example, an image of a signature copied to a PDF;

2. Advanced Electronic Signatures (AdES) = “electronic signature” with some technical gadgets. This usually means that it is possible to identify the time of signing and the integrity of the content of the document and associate it with a specific signatory. Technically, AdES is similar to QES, but there is no certified interface (see below), which may result in weaker signer identification.

3. Qualified Electronic Signatures (QES) or “qualified e-signature” = in Estonia the so-called digital signature. The signature has been verified by a qualified trust service provider. Is used all kinds of technical gadgets to ensure clarity of signing time, unchanging content, etc. In this way, the identity of the signatory is also clearly identifiable.

What is the legal meaning of different e-signatures?

The correct choice of signature is especially important if the law or the contract prescribes the form of the transaction. The form of the transaction can be, for example:

1. a written form, which means that the document must be signed by hand;

2. an electronic form, which means that the transaction is in a form that can be reproduced permanently, contains the names of the persons who made the transaction and is electronically signed. The electronic form is equivalent to a written form (unless a handwritten signature is required by law);

3. in a form that can be reproduced in writing, which means that the transaction is in a form that can be reproduced permanently and contains the names of the persons who made the transaction, but does not have to be signed.

In Estonia, digital signatures and qualified e-signatures are essentially synonymous. A qualified e-signature has the same legal effect as a handwritten signature. If the form required by law or agreement is a digital signature, it must be a QES signature. If a written form of a document is required by legislation or a contract, both handwritten signing of the document on paper and digital signing are generally suitable for signing.
The situation with AdES signatures is more complicated. The General Part of the Civil Code Act (TsÜS) stipulates that an electronic signature is also a digital signature. Consequently, “electronic signature” is a broader concept than a digital signature. If a document signed by AdES meets the requirements of the electronic form provided for in the CMS, it should also be considered equivalent to a written form. However, there is currently no clear practice.
Certainly, an AdES signature cannot be considered a digital signature, ie if it is in a law or contract required digital signature, only QES signature is suitable. While required
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written form or electronic form of a document could, according to the wording of the CPS, also (68) a compliant AdES signature may in fact be sufficient. It must be borne in mind that the AdES signature is likely to make it more difficult to verify the identity of the signatory. It should also be borne in mind that the legal meaning of the AdES signature is debatable. If the transaction must be concluded in writing, a qualified e-signature (eg digital signature) should be preferred if possible.

Finally, it remains to explore Simple Electronic Signature. A document with such an e-signature can only be considered as a written document in very exceptional cases. Mechanical imitation of a signature shall be considered equivalent to a handwritten signature only if its use is normal between the parties and the other party does not immediately require a handwritten signature. Mechanical imitation of a signature means, for example, a stamp imprint, a copy, a printed signature or the like. This is an exception and in practice the potential for dispute is high. With such a signature, it is very difficult, if not impossible, to prove who actually signed the document.

How to tell if it is a QES signature?

Often one service provider offers different e-signature options and no conclusions about the type of e-signature can be drawn from the service provider alone. The signature certificate must be found in the signed document and its contents examined. Documents can also be checked automatically at: https://webgate.ec.europa.eu/tl-browser/#/search/file/1.
In general, it is reasonable to follow the principle that if it is not clear that it is a QES signature, it is rather assumed that it is not a QES signature. Often sent documents in PDF format and clicking on the signature opens additional information about it (signature certificate). The certificate indicates the issuer (issued by). The name of the issuer can be used to check whether he is a qualified trust service provider in the European Union (see https://webgate.ec.europa.eu/tl-browser/#/) and whether the issuer holds a QES certificate.

What happens if the contract has different types of e-signatures?

If the law or the agreement does not prescribe a mandatory form for the transaction, the parties may also sign the document with any e-signatures, with one party giving the AdES signature and the other the QES signature. It should always be borne in mind that in the event of a dispute, there may be problems in proving the identity of the signatory. There may also be a dispute as to which version of the agreement the parties agreed to, and so on.

If a mandatory form is provided for the transaction, all signatures must at least comply with this mandatory form. It is important to remember that the mandatory form may also result from an agreement between the parties. For example, if the parties have agreed that the document must have at least an AdES e-signature, there should be no direct problem with using a “stronger” QES signature.

Law applicable to the contract

In the case of international agreements, it is worth paying attention to which country’s law applies to the agreement. The legal meaning explained above is relevant primarily in the Estonian legal space. Within the European Union, it can be assured that a qualified e-signature must have the same legal effect as a handwritten signature. In general, however, it is worth paying attention to the regulation of e-signatures in force in each country, as it can be very different.

It is recommended to thoroughly examine each e-signature and make sure what kind of e-signature it is in a particular case. In the case of certificates, their validity and scope must be verified. In case of doubt, it is worth asking the other party for further explanations about the type of signature and the process of issuing it.

October 1, 2020

e-notary initiative allows e-residents to buy and sell company shares remotely

Estonian Government launches e-notary portal and remote verification trial to allow e-residents to do business more conveniently.

E-residents are able to use their digi-IDs to perform an array of business services for their companies online from anywhere in the world. However, up until now there were still some activities, which required e-residents to travel to Estonia and utilise the services of a notary registered there. These included:

Buying and selling company shares
Authenticating powers of attorney
Pledging company shares

But now, in a trial initiative by the Estonian Government, these business activities can be performed without the need to travel to the country.

The policy aim behind this initiative is to minimise the barrier for e-residents and foreign businesspeople to invest in the Estonian startup ecosystem by making it more convenient to do business remotely.

An e-resident will still require the services of a notary registered in Estonia but will no longer have to visit the country.

Instead, they can prove their identity at a number of Estonian Embassies using a remote verification service that employs the Veriff biometric facial recognition system. So far, the Embassies include Helsinki, Brussels, Stockholm, London, and Riga with other locations to be tested in the future.

‘But why can’t I do it on my computer in the comfort of my own home?’, we hear you asking!

Well the requirement to attend an Estonian Embassy is both for reasons of security and also to physically verify that you are undertaking a transaction of your own free will. Perhaps in the future, this requirement will be dispensed with in lieu of safe and secure methods of remote verification using your personal device.

Launch of new e-notary self service portal

The trial comes along with the launch of a new e-notary self service portal provided by the Estonian Government for use by both Estonians and e-residents: www.notar.ee.

The portal allows users to:

Choose a notary and make an appointment, whether in Estonia or for remote verification
Choose an Embassy and make an appointment for remote verification
Initiate transactions that require a notarial act and enter transaction details
Examine contracts issued by the notary before the transaction
View all notarial transactions and invoices

Currently, e-residents can use the portal to make virtual appointments with notaries to undertake the following activities (with more activities to be added in the future):

Buying or selling shares in their Estonian company
Authenticating powers of attorney
Pledging shares in their Estonian company

How do I use the e-notary remote verification service?

To take advantage of this new service, log into the e-notary self-service portal at www.notar.ee using your e-Residency digi-ID.

In the self-service portal, navigate to the remote verification page. Here you can choose the appropriate embassy location, select a notary from the list of registered Estonian notaries, and select your desired time for an appointment. The system will only offer times that are suitable for both the notary and the Embassy so it would be prudent to have some idea of this before logging in. We therefore recommend communicating with your chosen notary beforehand to settle on available times so that this process will be more efficient.You can also exchange all documents and data necessary to carry out the activity with the notary by viewing ongoing transactions in the portal.

https://medium.com/e-residency-blog/new-e-notary-initiative-allows-e-residents-to-buy-and-sell-company-shares-remotely-5791fbe976c5

September 1, 2020

Shareholders of an Estonian company can sell their shares remotely

Of course in certain conditions 🙂

In the Estonian e-residency program most of the things you need to do to manage your company can be done online.

However, some very specific legal procedures still required a physical visit to Estonia. One of them was changing the distribution of the shares of your company.

31.07.2020 On 1 August, an amendment to the Commercial Code will enter into force, which will enable private limited companies to transfer shares more easily in the future.

What are the conditions?

The legislation change gives shareholders great flexibility to redistribute the share capital easier and faster, and thus creates better opportunities to invest in Estonian companies. The minimum formal requirement provided by law is a written form specifying the share distribution, alongside these conditions:

In order to make a corresponding amendment to the articles of association, the share capital of a private limited company must be at least 10,000 euros and fully paid.

A notation shall also be entered on the registry card of the private limited company to indicate that the company removes the requirement of notarized approval of share disposal, sale or redistribution of shares. This indication helps to better safeguard the interests of the parties in the transaction, and this information may be important to potential acquirers before the transaction is made and influence their decision.

Such an amendment to the articles of association of an existing private limited company requires the consent of all shareholders. Therefore, the change cannot be made by a majority decision but must be the choice of all shareholders.

So in summary:

The company must have declared a share capital of 10,000€ and they should have been paid.
The company must alter the entry in the registry of the company to indicate the fact that shares can be redistributed online.

Other aspects to consider

Allowing a fully online redistribution of shares also increases the responsibility of the shareholders themselves and the management board. The Management Board will have the obligation to notify the Commercial Register immediately if there are changes in the shareholders’ distribution not performed through a notary. In addition, the shareholders are obliged to immediately notify the management board of any changes in the shareholders’ data of these changes, so the management board can notify the Commercial Registry.

The smallest nominal value of a share has also changed. What’s that? The minimum fragmentation that a share can be subject to. Previously, shares where divided up to one euro. That meant that if you had a share capital of 2500 euros, those were generally 2500 shares of one euro. You could not own 1250,50 € in shares, it was either 1250 or 1251 euros (50% or 50,04% of shares respectively).

With the new legislation, the minimum denomination of share is one cent of an euro. So now if you have 2500 euros in share capital, you may have 250,000 shares of 0,01€ of value each. The lower nominal value of a share is very convenient for potential acquirers, because the company can issue an exact share percentage that does not have to be rounded up or down to the nearest whole number.

Conclusion

If the above conditions are met, it will be possible to sell the shares or part of the private limited company on the park bench, in a café or on a computer using digital signatures.

August 1, 2020

Effectiveness of the e-Residency program

National Audit Office of Estonia report anno domini 2020.

Do the revenues of the e-Residency program exceed the expenses, and are the participants in the program law-abiding?

What did we audit?

In the audit, the National Audit Office assessed whether the e-Residency program encourages the e-Resident companies to bring income to Estonia:

control systems ensure that the participants in the e-Residency program are law-abiding;
sufficient platforms for business and services have been created for e-Residents, and
whether the major risks involved in the implementation of the e- Residency program have been mitigated.

Why is this important to taxpayers?

During the first five years of the e-Residency program (2014–2019), Estonia has granted e-Residency digital ID cards to more than 63,000 foreigners from 174 countries. Digital ID allows e-Residents to use the public e-services of both Estonia and other EU countries and create an Estonian company. It is important that the e-Residents using the e-services and pursuing commercial activities be law-abiding and that they bring income to Estonia. It is also essential that the risks involved in the implementation of the program are mitigated.

In the first five years, 15.7 million euros have been spent on the e- Residency program.

What did we find and conclude from the results of the audit?

According to the National Audit Office, the revenues of the e- Residency program have started to exceed the expenses by the end of the first five years of operation. However, control systems are deficient because foreigners with a valid criminal penalty and business ban can participate in the program.

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May 1, 2020

Whether and what rights the registered place of residence gives?

There is a widespread belief that registration of a residence gives rights to an apartment or house registered as a residence.

However, this is not the case, and simply registering as a residence does not give the right to use the dwelling. In order to use the dwelling, a tenancy agreement must be concluded with the owner and the owner of the property has the right to decide who is registered to live in the apartment or house he owns.

The registration of the place of residence thus has no effect on the property and it is necessary to consult a notary to acquire the property. A property owner is a person who, as the owner, is entered in the land register and only the owner of the property has extensive rights over the property.

However, the registration of a place of residence in the population register has significance for the electoral region, in the distribution of taxes between the state and the local government, and gives the local government the right to receive social services from the city or rural municipality of the registered place of residence. For example, benefits such as a ranch allowance or a funeral allowance and a pensioner living alone are paid on the basis of a registered place of residence, and, for example, residents of Tallinn are entitled to free public transport in the city.

In addition, the correctness of the registered place of residence is also important for the state to enable the planning of social services and infrastructure.

Although registration of residence does not confer rights in private relationships, such as the relationship between a landlord and a tenant, registration gives different rights in relation to the state and local governments.