Add a new shareholder for your Estonian company remotely
Recently we've published an article regarding share capital in Estonia and today we would like to focus on the specific question related to the share capital topic — the ways of adding a new shareholder for your company.
Not so long ago, Wired named Estonia "the most advanced digital society in the world" where 99% of all government services are performing fully online and almost every citizen of the country has an ID card. The other 1% of the services require your physical presence. But an Estonian government is constantly reducing the list of offline services or at least simplifying these procedures (that was actually to the point during the pandemic).
Until recently, you and your partners had to visit a notary office physically to transfer your company's shares. Fortunately, Estonian authorities converted this process online and widened the number of ways of adding a new shareholder for your company. In this article, we would like to take a closer look at the ways of adding a new shareholder and transfer shares.
What Does It Mean to 'Add a New Shareholder'?
Now we'll plunge a little into the legal theory. Each PLC (known as OÜ in Estonia) has one or several shareholders — subjects (people or companies) that hold at least one share of a company's equity and have some rights and duties in regard to a company. At some point in time, a company might need to change its owners or attract new capital. Adding new shareholders might be a challenge but there are a bunch of different ways to implement this!
The modification in the distribution of shares works like this. For example, you as a founder of a company own 60% of the company's shares, and your partner owns the remaining 40%. During the process of adding a third shareholder, the percentage between each shareholder changes: imagine now you own 40% of the share capital, one co-owner owns 30%, and the third one — 30%. The distribution of shares initially was 60/40 and modified to 40/30/30.
Working Ways to Add a New Shareholder
Via at least €10 000 share capital
Since 1 August 2020 Estonian authorities have made it possible to transfer shares online and add new shareholders to the list without a notary agreement. To do this, a company must have a fully paid share capital of at least €10 000. Distribution of the shares and the changes in ownership are made at the responsibility of the parties involved. Note that this option might require some changes in the company's articles of association that must be done only by the full consent of all shareholders.
The manager of the Startup Estonia program, Maarika Truu described these changes as important and long-awaited that will significantly reduce bureaucracy in attracting foreign investments. Actually, this option is highly beneficial for Estonian scaleups that are looking for investment — it significantly simplifies the process of adding new shareholders (that may be investors as well).
Notarial agreement using power of attorney
This is the old-school way for transferring shares but it's working! To make this happen, founders and new shareholders should take a few steps. And here is where we can help you!
You and your partners should prepare the powers of attorney, you all should notarize, apostille, and send them to us. Note that these operations can be done from your and partners' home countries, which highly simplifies the process. After that our specialist will go to the notary here in Estonia and sign the share transfer agreement on your behalf. It's quite hassling and not as digital as other options but this one lets you avoid visiting Estonia to save your time and money.
The Easiest and Most Popular Way of Adding a Shareholder — Via Increasing Share Capital
This option consists of adding a new shareholder online by issuing new shares and increasing the sum of the company's share capital. In other cases, you just usually transfer the existing shares to a new co-owner without any change in share capital.
If your company's capital is €2500 (100%), you are the only owner and want to add a new shareholder with the proportion of 20%, you can add to the existing share capital new share with a nominal value of €625 (new share capital is €3125, your share remains €2500). Thus, your initial shareholding doesn't change, only its proportion.
Note that the decision is made by all shareholders and you choose the exact proportion of shares between each co-owner by full consent. Right now, the process can be done in a fully digital way for those that have e-Residency or one of the Baltic Digital IDs. The good news is that new shareholders are not required to have a Digital ID, but bear in mind that the initial shareholders must have their cards. Another benefit of this way is fully digital registration — no need to attend a notary or other third parties.
How the process looks like
Let's focus on the process of adding a new shareholder for your Estonian company via increasing share capital. Notice that this option requires your company's resolution and the draft changes to the Articles of Association. But no worries — our specialists will help you with all these documents with ease.
Firstly, you must open a business bank account in the name of your company and transfer at least €2500 on this account with a mark 'share capital contribution'. After that ask for a stamped and signed statement from the bank, and translate it to Estonian if needed.
Secondly, a new shareholder should transfer the amount that will be added to the share capital (for instance, €625 from our example above), ask for a stamped and signed statement from the bank again, that's how we'll see the change in your share capital. Don't forget to translate it to Estonian. All these steps (transfer, increase, bank statement, and translation) might be done simultaneously.
Here is where Enty can help you. Our specialists will prepare the resolution of the Shareholders' Meeting with information about changes in the company's share capital and send you docs for your digital sign. We'll create new Articles of Association, submit all prepared papers to the registry where you're supposed to pay a share capital contribution. In this authority, all documents will be thoroughly observed and in case of success, the change in the Articles of Association will be satisfied.
And that's it! As you may see, we're able to save you a vast deal of time and energy. Focus on what matters most while we'll take care of all the boring stuff.
Alternative Ways of Adding a New Shareholder
Actually, there are other ways to add new shareholders but they are not as used today due to several complexities. For example, there is a traditional way to make this happen: you with all other shareholders can come personally to the Estonian notary and arrange a meeting. It's especially challenging for foreigners. Imagine that even several years ago, before governmental digitalization of its services, it was one of the main ways to add a new shareholder for an Estonian company. But it's still working well, although it is an issue during the pandemic.
The other alternative way is the addition of the shareholder using NASDAQ CSD (securities account opened in an Estonian bank). It is also hassling and time-consuming — no need to explore it minutely.
How Enty Can Handle This
Even though Estonia is highly developed in digital services, there are many details and complexities to consider. For example, using some options you'll have to thoroughly prepare your documents in Estonian.
To avoid legal mistakes and save yourself from loss of time and money, we advise you to make these legal operations only under the cover of specialists. Remember that Enty will easily add a shareholder for your company in the most convenient way. Your personal manager will lead you through the obstacles and give you all the needed instructions about each step.
Don't hesitate to contact us anytime and explore our other tools and services.
