Frequently asked questions
In which format must the share purchase agreement be concluded?
Ordinarily, in the case of a private limited liability company the law prescribes a mandatory notarised format for share purchase agreement. However, the law provides an alternative - in case the shares of the private limited liability company are registered in the Estonian register of securities the share purchase agreement may be concluded in simple written format through the register.
How to register the share of a private limited liability company in the register of securities?
In order to register the share of a private limited liability company in the register of securities the shareholder(s) must adopt a respective resolution (available in Avokaado). Thereafter the resolution should be submitted to the register of securities along with respective petition and shareholders’ list.
NB! In order to register the share each shareholder must own a securities account where the share will be transferred to.
Should a share be sold at notary’s office or through the register of securities?
In case of selling a share at the notary’s office the obligation of the notary is to explain to the participants all the rights and obligations accompanying the sale of share and to ensure that all participants understand fully all circumstances. However, performance of the sale at the notary’s office may be time and money consuming.
While carrying out the sale of the share through the register of securities and with the assistance of Avokaado there are several benefits: legal certainty, flexibility and saving on expenses.
How does the transfer of a registered share work?
The transfer of the share from the seller to the buyer takes place by providing a respective securities transfer instructions. The Seller provides its securities account administrator (usually the securities account administrator is the bank of the seller and the buyer) with the transaction instruction and specifies the sale being sold, the type and price of the transaction and the date of the transaction and the buyer provides its securities account administrator a corresponding transaction instruction for receipt of the share to the buyer’s securities account. The transactions instructions provided by the seller and buyer must correspond to each other, i.e. include the same information regarding the share, the transaction type, price and transaction/value date.
What is a delivery versus payment and free delivery (without payment)?
In case of delivery versus payment the purchase price of transferred automatically from the buyer to the seller in the course of the securities transfer. If the buyer's bank account does not hold enough money for effecting the transfer of purchase price, then also the transfer of securities (share) will not take place.
In case of free delivery (without payment) the share is transferred to the buyer as securities transfer and the purchase price is not automatically transferred to the seller. If the parties have agreed that the buyer must pay for the share, but the securities transfer takes place without payment, then the parties must perform the payment of the purchase price separately (e.g. with addition bank transfer or in cash).
Usually the securities transfer is performed as delivery versus payment which ensures the protection of the interests of both parties.