Selling a share in an OÜ

Do I need a notary to sell a share?

As a rule, yes. The disposal transaction transferring a share must be notarised (ÄS § 149 lg 4) [1]. Within two days of certifying the agreement, the notary sends the registrar of the commercial register a notice of the transfer (ÄS § 149 lg 4) [1].

There is an exception if the company's share capital is at least 10 000 euros and fully paid up: the articles may then waive the notarial form and provide that the disposal transaction is made at least in a form that can be reproduced in writing (ÄS § 149 lg 6) [1]. All shareholders must vote in favour of approving or amending the articles in this way (ÄS § 149 lg 6) [1].

When does the buyer become a shareholder?

As a rule, the transfer of a share is deemed to have taken place from the moment it is entered in the list of shareholders in the commercial register (ÄS § 149 lg 4¹) [1].

If the company has waived the notarial form, the transfer is deemed to have taken place and the shareholder to have changed once the company has been notified of the transfer and the transfer of the share has been proven (ÄS § 150 lg 1) [2]. Transactions between the transferor and the company concerning the shareholder relationship made before the company was notified of the transfer are valid against the acquirer (ÄS § 150 lg 2) [2].

Do the other shareholders have a right of pre-emption?

Unless the articles provide a different procedure for transferring a share, the following rules apply (ÄS § 149 lg 2) [1]:

• a share may be freely transferred to another shareholder;
• if a share is transferred to a third party, the other shareholders have a right of pre-emption within one month of the transfer agreement being presented;
• the articles may provide that the right of pre-emption also applies when a share is transferred to another shareholder.

Where a right of pre-emption exists, the shareholder who transferred the share presents the transfer agreement to the management board, which notifies the other shareholders without delay that the agreement has been concluded (ÄS § 149 lg 2) [1]. In other respects the provisions of the Law of Obligations Act (võlaõigusseadus, VÕS) on the right of pre-emption apply (ÄS § 149 lg 2) [1]. Under them, when the right of pre-emption is exercised, a sales contract is deemed concluded between the holder of the right and the seller on the same terms the seller agreed with the buyer (VÕS § 244 lg 1) [3]. Exercising the right of pre-emption does not invalidate the sales contract concluded with the buyer or the obligations arising from it (VÕS § 244 lg 1) [3]. The right is exercised by a declaration to the seller (VÕS § 244 lg 4) [3], and that declaration must be in the same form as the sales contract (VÕS § 244 lg 5) [3]. An agreement between the seller and the buyer that the sales contract is valid only if the right of pre-emption is not exercised is void as regards the holder of the right (VÕS § 245 p 1) [4].

What restrictions can the articles impose?

The articles may provide that a share may be transferred only if an additional condition is met, which may in particular be the consent of the other shareholders, the management board, the supervisory board or another person (ÄS § 149 lg 3) [1]. In that case ÄS § 149 lg 2 does not apply to the company (ÄS § 149 lg 3) [1]. In addition:

• a transaction made without that condition is void (ÄS § 149 lg 3) [1];
• for good reason, a shareholder may demand that consent be given (ÄS § 149 lg 3) [1];
• amending the articles to introduce such a restriction requires the consent of all shareholders, unless the articles provide otherwise (ÄS § 149 lg 3) [1].

If the share is freely transferable, ÄS § 149 lg 2 and 3 do not apply to the company (ÄS § 149 lg 3¹) [1].

How does the list of shareholders change?

The list of shareholders is kept in the commercial register, and the shareholders' data are entered on the company's registry card (ÄS § 182 lg 1) [5]. A shareholder must notify the management board without delay of any change in the shareholders' data (ÄS § 182 lg 1¹) [5]. The management board must notify the commercial register of the change without delay, unless a notary sends the notice of the change (ÄS § 182 lg 1²) [5].

If a person acquires a share by a transaction relying on the data entered in the commercial register, those data are deemed correct as regards that person, unless an objection to their correctness has been entered in the register or the acquirer knew or should have known that the data were incorrect (ÄS § 182 lg 1⁵) [5].

If the company has waived the notarial form, ÄS § 182 does not apply to it (ÄS § 182¹ lg 1) [6]. The list of shareholders is then kept by the management board (ÄS § 182¹ lg 2) [6], which changes the list without delay on receiving the notice of transfer (ÄS § 150 lg 3) [2] and notifies the commercial register of the change without delay (ÄS § 182¹ lg 3) [6]. In that case the list data in the commercial register's public file do not have the effect described above of being deemed correct as regards an acquirer (ÄS § 182¹ lg 4) [6].

What the law says

• „Osa võõrandamise käsutustehing peab olema notariaalselt tõestatud.“ [1] (translation: the disposal transaction transferring a share must be notarised; ÄS § 149 lg 4) – the share is handed over before a notary unless the articles have waived this requirement where the law allows it.
• „Osa võõrandamise korral kolmandale isikule on teistel osanikel ostueesõigus ühe kuu jooksul võõrandamislepingu esitamisest.“ [1] (translation: if a share is transferred to a third party, the other shareholders have a right of pre-emption within one month of the transfer agreement being presented; ÄS § 149 lg 2).
• „Käesoleva lõike esimeses lauses sätestatud tingimuseta tehtud tehing on tühine.“ [1] (translation: a transaction made without the condition set out in the first sentence of this subsection is void; ÄS § 149 lg 3) – if the articles require, for example, the other shareholders' consent, a transfer without it is invalid.
• „Osa võõrandamine loetakse toimunuks alates kande tegemisest äriregistrisse osanike nimekirja.“ [1] (translation: the transfer of a share is deemed to have taken place from the entry in the list of shareholders in the commercial register; ÄS § 149 lg 4¹) – unless the notarial form has been waived, the buyer becomes a shareholder with the register entry.
• „Osanik on kohustatud osanike andmetes toimunud muudatusest viivitamata teatama juhatusele.“ [5] (translation: a shareholder must notify the management board without delay of a change in the shareholders' data; ÄS § 182 lg 1¹).

What to do

1. Read the articles of association: do they provide for a right of pre-emption, consent or another additional condition, is the share freely transferable, and has the notarial form been waived (ÄS § 149 lg 2, 3, 3¹ and 6) [1].
2. If the share belongs to the spouses' joint property and they manage it jointly, transactions with it can be made only jointly or with the other spouse's consent (PKS § 29 lg 1) [7].
3. If the articles require consent, obtain it before the transaction: a transaction without it is void (ÄS § 149 lg 3) [1].
4. If the other shareholders have a right of pre-emption, present the transfer agreement to the management board, which notifies them; the right can be exercised within one month of the agreement being presented (ÄS § 149 lg 2) [1].
5. Have the disposal transaction notarised (ÄS § 149 lg 4) [1]. If the articles have waived the notarial form, make the transaction in the form the articles require, notify the company of the transfer and prove the transfer of the share (ÄS § 149 lg 6; ÄS § 150 lg 1) [1] [2].
6. Unless the notarial form has been waived, check that the buyer has been entered in the list of shareholders in the commercial register: only then is the transfer deemed to have taken place (ÄS § 149 lg 4¹) [1].

Frequently asked questions

Can I sell only part of my share?

Yes. A share may be divided if the shareholder wishes to transfer part of it; dividing a share requires a resolution of the shareholders unless the articles provide otherwise (ÄS § 152 lg 1) [8]. ÄS § 149 applies to the partial transfer of a share (ÄS § 152 lg 2) [8].

Is there a right of pre-emption when selling to another shareholder?

By law a shareholder may freely transfer a share to another shareholder unless the articles provide a different procedure (ÄS § 149 lg 2) [1]. The articles may, however, provide that the right of pre-emption also applies when a share is transferred to another shareholder (ÄS § 149 lg 2) [1].

Does my spouse have to consent?

If the share belongs to the spouses' joint property and they manage it jointly, they may make transactions with it only jointly or with the other spouse's consent (PKS § 29 lg 1) [7]. If one spouse disposes of a right that belongs to the joint property, the other spouse's consent is presumed (PKS § 29 lg 1) [7].

Can a pledged share be sold?

When a pledged share is transferred, the pledge remains attached to the share, unless the acquirer proves that the registrar of the commercial register had not been notified of the pledge by the time of the transfer and that the acquirer did not know and should not have known of it (ÄS § 151 lg 5) [9].

What happens if a share was sold without the consent the articles require?

A transaction made without the additional condition required by the articles is void (ÄS § 149 lg 3) [1]. If consent is refused, a shareholder may, for good reason, demand that it be given (ÄS § 149 lg 3) [1].