Denominating share capital in euros

In a matter of weeks, the euro will become the official legal tender in Estonia. This means that from January 1, 2011 undertakings will also be required to keep their accounts in euros.

It is therefore justified to consider whether to denominate the share capital in euros and whether to amend the Articles of Association in order to minimize the need to keep accounts in different denominations and to simplify accounting. At the same time private limited companies could also amend their Articles of Association to adequately reflect changes to the Commercial Code due to enter into force on January 1, 2011. Attorney at Law Heili Haabu of Luiga Mody Hääl Borenius law firm briefly reviews the rules for changing the denomination of share capital.

- For private limited companies (in Estonian, osaühing), share capital denominated in euros must be at least 2,500 euros and the nominal value of a share must be either one euro or a multiple of one euro;

- For public limited companies (in Estonian, aktsiaselts), share capital denominated in euros must be at least 25,000 euros and the nominal value of a share must be either 10 eurocents or a multiple of 10 eurocents;

- If division of the nominal value of the shares by the exchange rate for the euro transition does not result in multiple numbers that comply with these requirements, it will be necessary to either increase or decrease the share capital. For instance, in the case of a public limited company whose share capital is divided into shares with a nominal value of EEK 10, the nominal value of shares must be increased to at least 70 eurocents or reduced to 60 eurocents, in addition to a relevant increase or decrease of the share capital;

- If share capital is reduced more than the minimum for meeting legal requirements, it is necessary to inform creditors of the reduction and to conduct the standard procedure for share capital reduction. If share capital is reduced to the nearest possible amount, there is no need to notify creditors of the decrease;

- If share capital is increased, the shareholders must make a contribution to cover the increase in the nominal value of the shares;

- Instead of changing the nominal value of the shares, public limited companies may switch to shares without a nominal value, as part of denominating the share capital in euros. In this case, every share will represent an equal part of the share capital and the nominal value of the share will not be denominated. This enables change of share capital from kroons into euros without increasing or decreasing the share capital and maintains the exact proportion of current holdings of shareholders. In the case of shares without nominal value, it is necessary to indicate the amount of share capital (must not be a multiple) and the total number of shares in the articles of association;

- In the case of shares and stocks registered in the Estonian Central Depository of Securities (ECDS), it is necessary to apply to ECDS when denominating the share capital in euros. This can be done by using special forms available on the ECDS website;

- Notification of the Commercial Registry of the resolution of shareholders to amend the articles of association or to denominate the share capital in euros (including new articles of association and other required documentation) can be filed through the Company Registration Portal or by a public notary together with a notarially authenticated statement of the management board.