Attorney explains: increasing share capital for selling shares without a notary
The financial and legal journal RUP published a response by our office partner and attorney-at-law Kristjan Nõges to a reader's question. The content of the question revolved around amending the articles of association of a private limited company to avoid the notarial form requirement when alienating the company's shares. Namely, the Commercial Code § 149 subsection 4 establishes a general rule stipulating that the disposal transaction of a share must be notarially authenticated. An exception, however, is provided by the Commercial Code § 149 subsection 6, which allows, through the articles of association, for a waiver of the notarial form requirement when alienating shares, provided that the company's share capital is at least 10,000 euros, fully paid in, and the articles of association amendment or confirmation is approved by all shareholders of the company.
Reader's question #1
If an amendment is made to the articles of association to allow the sale of shares without a notary, in such a case, can a married person make the transaction without the consent of the spouse?
Answer by attorney-at-law Kristjan Nõges
If a share in a private limited company belongs to the common property of spouses, then the rights associated with the share must still be exercised jointly. Waiving the notarial form requirement for the disposal transaction of a share does not alter the mutual rights and obligations of the co-owners of the shared share. On the other hand, if the joint ownership of a share has not been notified to the company, then technically, one spouse could possibly misuse their rights to carry out the transaction.
Reader's question #2
If you were to start amending the articles of association, does it require a 100% approval rate? In such a case, does the share capital need to be 10,000 euros? Can the share capital be increased if there are 3 shareholders in favor, owning 80% of the shares, and 1 shareholder against with 20%?
Answer by attorney-at-law Kristjan Nõges
In the context provided, it is important to distinguish between increasing share capital and waiving the notarial form requirement for the disposal transaction of shares. Increasing share capital typically requires at least a 2/3 majority of votes from participating shareholders at a meeting. This means that, if the articles of association do not specify a higher voting majority requirement, the decision to increase share capital with the given majority of votes can be adopted.
On the other hand, amending the articles of association to waive the notarial form requirement for the disposal transaction of shares requires unanimous consent from all shareholders. Therefore, if the intention is to increase share capital specifically to subsequently waive the notarial form requirement for the disposal of shares, it is advisable not to proceed with the process until the shareholders have reached a consensus.