NJORD Estonia: e-Estonia revolutionizes corporate management
Read the estonian version HERE.
The emergency situation has raised the issue of the effectiveness of processes in a number of areas, including company law. Namely, with the advent of the emergency situation, it became impossible for some companies to hold meetings. In addition, it was difficult to make notarial transactions, and for some companies raising capital, this could be even fatal.
The legislator quickly accommodated the entrepreneurs and adopted several amendments to the law, which, in line with the e-government, significantly facilitate the daily life of the companies. These amendments remain in force even after the end of the emergency situation.
Enabling notarial acts performed by the remote authentication
As a first very important change, the legislator allows notarial acts to be performed through remote authentication. This means that almost all notarial acts can be performed today without leaving home. The acts that cannot be done through remote authentication without leaving home are the certification of the conclusion of the marriage and the divorce, and entries of marriage and divorce. For example, transactions with the shares of a private limited company, real estate transactions, and issuing power of attorney are permitted. An Estonian identity card is required for remote authentication and it can be also the digital identity card, which means that the service is also available to e-residents. This is a fundamental change in the current procedure, where you had to go to a notary's office to authenticate the transaction. The new procedure also allows a person to stay abroad to perform notarial acts. There must only be a fast-enough internet connection for a video call, a camera and microphone on the computer and an Estonian identity card or digital identity card with PIN codes for entering the e-Notary portal and digital signing.
Digital shareholder meetings
Another important change is the equal possibility for all companies to hold meetings by electronic means. Such a change was very welcome given the modern possibilities for holding meetings. The amendment allows the meeting to be organized and the shareholder to participate in the meeting by two-way real-time communication or other similar electronic means. It is important that the shareholder must be able to exercise his or her rights at the meeting without being physically present, including taking part in the meeting, submitting proposals and objections, and voting. Among other things, the amendment equates participation in a meeting of the association by electronic means with physical participation. In other words, the meeting may also be "partially" electronic, as some shareholders are present at the meeting venue and some take part in the meeting by electronic means. As the possibility to hold electronic meetings arises directly from the law, it is not necessary for the companies to make the corresponding amendments to their articles of association. These amendments are not reflected in the Commercial Code, but in the General Part of the Civil Code Act, and also apply to the meetings of other company bodies, including meetings of the management board and supervisory board.
Abolition of the formal requirement for transactions with shares of a private limited company
The third very important change, which was originally supposed to enter into force only in August this year, is the abolition of the formal requirement for a share transfer transaction. Until now, all agreements between the shareholders, option agreements, and other transactions in which the transfer of a share has been agreed, even indirectly, must have been in a notarial form. The speedy entry into force of this change was mainly due to the fact that many companies are raising capital and therefore need to conclude transactions quickly, and given the global situation, the notarial requirement may become fatal when receiving some investments. At the same time, the possibility of remote authentication does not solve the situation, as remote authentication can only be used by persons holding an Estonian identity card (or digital identity card or e-residency). A foreign investor often does not have such a document.
In addition, this year the legislator will allow all legal entities to submit annual reports by a later deadline, i.e. 31 October 2020.