March 1, 2020
An easier and cheaper way to sell a part of a private company?
The buyer and the seller usually go to a notary to sell the share of the private limited company, conclude a sales contract with the notary, and in addition to the purchase price, a notary fee is also paid, which may depend on the price. However, such a way of selling is not the only way to dispose of a share; the law also provides for a simpler and cheaper alternative.
Registration of a share in the ECSD
The shareholder can register the share of the private limited company in the Estonian Central Register of Securities (similarly to the shares of a public limited company, which are automatically registered), after which it is sufficient to sell securities to sell and buy orders to their banks. Although it is sufficient to make securities orders for the disposal of a part, it is advisable to draw up a simple written sales contract specifying the essential terms of the sale.
The registration of the share of a private limited company in the ECSD requires the adoption of the respective resolution of the shareholders / sole shareholder and subsequent submission of the decision together with the respective application and the list of shareholders to the ECSD.
Securities account required
In order to register a share, each shareholder of the private limited company must have a securities account in which his share is transferred. Securities account can be opened at any bank operating in Estonia e. an account manager. In order to open an account, the bank must fill in the necessary documents, the bank employee shall enter the account opening information in the ECSD and archive the basic documents for opening the account. If the shareholder already has a securities account, then obviously it will not be necessary to open a new company for registration in the ECSD and the registration in the ECSD can also be done digitally.
Sale of part of a securities transaction
The transfer of the part from the seller to the buyer shall be effected by giving the relevant securities transaction orders. The seller gives his securities account manager a transaction order, specifying the part to be sold, the type and price of the transaction, and the date of the transaction, and the buyer also gives his securities account manager an order to accept the transaction.
The easier and cheaper way to sell a part of a private limited company – register part in the ECSD. The transaction orders submitted by the seller and the buyer must be in accordance with each other, i. contain the same information as regards the part, the form of the transaction, the price and the date.
There are two types of securities transactions – unpaid transactions and transactions against payment. In the case of a transaction for payment, the money is automatically transferred from the buyer to the seller during the transfer of securities. If the buyer’s bank account does not have enough cash at the time of the transaction, there will be no transfer of securities. In the case of an unpaid transaction, there will be no automatic cash settlement from the buyer to the seller during the securities transfer. If the parties to the transaction have agreed to pay for the securities but make the transfer in the form of payment without payment, they must pay the purchase price as mutually agreed (for example, bank transfer or cash). Traditionally, a transaction is executed against a payment that guarantees the protection of the interests of both parties.
Advantages of selling part through ECRS
Some of the benefits of conducting a sale through the ECSD are legal certainty, flexibility, and cost and time savings. The purchaser of securities registered in the ECSD (eg shares or units) has at least as much legal protection as the purchase of a registered immovable on the basis of an entry in the land register.
As there is no need to go to a notary to transfer the share registered in the ECSD, there is no obligation to pay a notary fee, which, depending on the purchase price, can be a significant saving. At the same time, the transfer of the share registered in the ECSD is not without costs. The share registration fee is 30 EUR + VAT in the ordinary procedure and 100 EUR + VAT in the urgent procedure, the minimum fee for the security is 12 EUR + VAT. In addition, bank charges may apply and a transaction fee will be payable to the bank when selling and transferring securities. In case of sale of a lower value part, the transfer of the share in the ECSD may not be a saving, but in case of sale of a higher value part, the saving may be significant.