Transfers of shares:
Are there any peculiarities to be aware of?
An effective exercise of rights granted by sovereign laws depends on our knowledge of the rules regulating the field. A transfer of shares is not an exception. Therefore, at the very least familiarity with the basic principles regulating the transfer of shares in private limited liability companies (UAB in Lithuania, SIA in Latvia and OU in Estonia) in the Baltic states is of vital importance.
Shares. In Lithuania, shares in private limited liability companies can be divided into certified shares and noncertified shares. Noncertified shares are registered in a personal securities account opened on behalf of the owner of the shares in the private limited liability company, whereas the owner of the certified share is a person indicated in the share. There are only noncertified shares in private limited liability companies in Latvia and Estonia. Certified shares are transferred by making a relevant entry in the share or in the share certificate - i.e., an endorsement.
Depending on the country, the transfer of noncertified shares is recorded either by entries into the shareholders' register or on the personal securities accounts of the transferor and the transferee. Generally, the management board of the company is responsible for the proper recording of the share transfer in the shareholders' register. Only fully paid-up shares can be transferred.
Right of first refusal. Every shareholder in the private limited liability company should be aware of the so called right of first refusal. Such a right is embedded in the laws on companies of all three Baltic countries. This right prescribes that the shareholder of the private limited liability com-pany first has to offer shares he/she wants to sell to the other shareholders and only in case of their refusal to acquire those shares can he/she offer them to third persons. In Latvia, the right of first refusal can be limited by the articles of association. In Estonia, other shareholders of the company can execute this right only after the shareholder has concluded a contract of share sale with a third party.
The situation discussed above refers to the sale of shares. Different rules apply in cases when the shares are transferred by other means, such as donation, exchange and others. In Lithuania, these kind of transfers are not regulated at all. Thus, the shareholder is free to dispose the shares to third persons without any restrains, unless this is prohibited by articles of association or shareholders' agreement. In Latvia, donation, exchange and other kinds of transfer (except sale) have to be approved by a shareholders meeting.
Consent of the spouse. The other rather important and common feature for all the three Baltic states is that if shares are acquired after marriage the consent of the spouse is required in order to transfer the shares, unless the delineation of ownership is stipulated in the marriage contract. This is so because usually all property acquired during a marriage is deemed to be jointly owned by the husband and wife. The spouse's consent can be expressed either by signing the agreement on transfer of shares or by giving notarized authorization to act for the other spouse.
Form of transfer. In Lithuania and Latvia, an agreement on transfer of shares has to be executed in writing, whereas in Estonia notarization is required, unless the shares have been registered in the Estonian Central Register of Securities, in which case the share transfer agreement may be made in written form.
Liudas Ramanauskas is an associate at Sorainen Law Offices in Vilnius.