Legal

The minimum nominal value of a share in private limited company shall become one cent

Brigitta Jõgi Brigitta Jõgi

According to the currently valid Commercial Code, the minimum nominal value of a share in private limited company is one euro and each one euro of a share shall grant the shareholder one vote.

From the 1st of July 2020 the law changes like this, that the minimum nominal value of a share is one cent instead of one euro, with the result that every cent of the share capital shall grant the shareholder one vote.[1]

It means, that in case the share capital of private limited company is 2,501 euros and it shall be divided equally between four shareholders, the new value of each share shall be 625.25 euros. According to the applicable law, there should be conducted e.g. reduction of the share capital to 2,500 euros and the new value of each share shall be 625 euros.

Due to the above, it can be stated that with the amendment, bigger flexibility is provided in determining the value of the share.

According to the explanatory memorandum of the bill, the amendment is necessary in particular to the private limited companies, who wish to give share options to its employees or management board members or involve them in the form of capital convertible bonds or convertible loans. The minimum nominal value of the share allows to issue to the share acquirer precise share and does not have to round it up or down to an integer, as the applicable law requires.[2]

Attention shall be drawn, that the amendment considers only private limited companies. The minimum value of a share of a public limited company shall remain ten cents.

 

[1] Bill on Amendments to the Commercial Code (share transfer). Available here.

[2] Explanatory memorandum to the Bill on Amendments to the Commercial Code. Available here.

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