Estonia: Estonian Legal Update, November/December 2005

Electronic Money Institutions Act Adopted

On 19 October 2005 the Estonian Parliament (Riigikogu) adopted the Electronic Money Institutions Act. This act regulates for the first time in the Estonian legal system issues pertaining to electronic money institutions, prescribing rules for issuing electronic money, the activities of electronic money institutions and supervision over such institutions. The act brings Estonian legislation fully into line with European Union law. According to the law electronic money is an electronic means of payment, which is stored in a limited amount (up to 300 EURO) on an electronic device, e.g. a smart card or the memory of a computer, and which is accepted by more than one undertaking (for example for paying bus tickets, parking fees, newspapers, etc.). The limiting rule helps distinguish electronic money from other means, for example a telephone card and banking operations conducted via the Internet. To date matters relating to electronic money were only regulated by the electronic payment provisions in the Law of Obligations Act. The Electronic Money Institutions Act extends certain provisions of the Credit Institutions Act to electronic money institutions. These include the requirement to obtain an activity licence, capital requirements and prudential norms and requirements concerning management board members. According to the new act an electronic money institution must be granted an activity licence by the Financial Supervision Authority that then exercises supervision over the activities of the institution. The share capital of an electronic money institution must be at least 1 000 000 Euros. The act also allows electronic money institutions to operate abroad through a branch or by providing cross-border services. Therefore this act ought to facilitate the provision of electronic money services in Estonia and in the Contracting States. The act shall enter into force on 1 January 2006. Undertakings engaged in issuing electronic money must bring their activities into compliance with the law and submit an application for the activity licence or exception by 1 March 2006 at the latest.

On 19 October 2005 the Riigikogu adopted the Act Amending the Securities Market Act, Investment Funds Act, Guarantee Fund Act and the Law of Property Act. This act made sweeping changes in the Securities Market Act, bringing it into compliance with EU law, especially with regard to the so-called Prospectus Directive and the Prospectus Regulation. The main objective of the changes was to create a legal basis in Estonia for the so-called single European securities prospectus or the European Passport. Several of the existing definitions have been cleared up and new terms, to date unknown in the Estonian legal system, have been added. Significant additions have been made to the provisions regulating the so-called qualified investor. The main changes, however, pertain to the requirements for the prospectus of a public offer of securities. The deadlines and methods of disclosing the prospectus are specified as well. The rules concerning registration of the prospectus with the Financial Supervision Authority, requirements for the notice of offer and language requirements are tightened. The provisions concerning share capital and prudential norms of investment undertakings have also been modified. Pursuant to the amended act a base prospectus can be prepared instead of a prospectus, if non-equity securities issued on the basis of an offering programme are offered or if a credit institution issues non-equity securities in a continuous or repeated manner. Such non-equity securities which meet specific legal requirements are known all over Europe as covered bonds or mortgage bonds. These new amendments are aimed at providing better opportunities to Estonian issuers for offering their securities in other Contracting States. Provided the issuers of those countries comply with the requirements of the directives, they may in their turn, resort to a simplified procedure of offering their securities in Estonia. The amendments also prescribe specific rights and duties to the Financial Supervision Authority for exercising supervision over the Estonian operations of foreign issuers. The amendments entered into force on 15 November 2005, except for certain provisions that become effective on 1 March 2006.

On 12 October 2005 the Riigikogu passed the Commercial Code Amendment Act. The purpose of the changes was to remove obstacles that had emerged in the course of implementing the Code and to lift excessively formal requirements pertaining to the activities of companiesThe operating principles of the management bodies of the most widely spread forms of companies have been made considerably simpler, especially the rules of participating in general meetings and the supervisory board meetings. Some unjustified formalities have been eliminated, e.g. the obligation to submit to the commercial register the sample signatures of management board members and procurators. The possibility of founding a public limited company by subscription of shares has been done away with, since it was not used in practice. The rules of merging, dividing and transformation have been simplified as well, hopefully accelerating considerably such processes. Other parts of the Commercial Code have been clarified in light of practice,. The regulation concerning the competence and liability of the company management bodies and members thereof has been improved considerably, the same is true for declaring decisions of bodies of a company null and void or invalid. The rules concerning increasing and decreasing share capital, as well as those relating to the transfer of shares, including pre-emptive rights, have been made more precise. Now companies may pay dividends more than once a year and they may make advance payments on account of their expected profit. These amendments should eliminate major problems that emerged in the process of implementing the Commercial Code and increase legal certainty. The amendments shall enter into force on 1 January 2006.

On 19 October 2005 the Riigikogu adopted the Act Amending the Financial Supervision Authority Act, Investment Funds Act, Credit Institutions Act, Securities Market Act and the State Fees Act. The law considerably reduces the rates for fees to be paid by subjects of financial supervision . At the same time a system of fees payable for a specific authorising or similar procedure at the Financial Supervision Authority is introduced. The amounts due are determined by proceeding from the principle that higher fees are payable for the grant of the so-called first-time activity licences and the fees for additional activity licences or for authorising or registering individual activities are lower. The amendments entered into force on 15 November 2005.

On 26 October 2005 the Riigikogu adopted the Land Reform Act Amendment Act. The amendment is an attempt to complete the land reform that has lasted for more than ten years in Estonia, by introducing new deadlines for carrying out several acts deriving from the Land Reform Act and establishing the consequences for failure to meet the deadlines. The aim is to avoid deliberate attempts to prolong the privatisation processes. Under the amendment, applications for privatising land adjacent to a structure acquired as movables can be submitted until 1 March 2006. Applications for privatising land necessary for servicing a structure can be submitted until 1 June 2006. A right of superficies is constituted for the land necessary for servicing a structure, if no application for privatising such land has been submitted by 2 June 2006. The amendments entered into force on 27 November 2005.

On 12 October 2005 the Riigikogu adopted the Act Amending the Notaries Acts. The object of the amendments is to reduce the costs related to transactions involving immovables. The amendment provides that an application or authorization authenticated by a notary may be signed digitally. digitally signed applications and authorizations are now equivalent The amendment also changes the basis for calculating notary fees. As a result, the notary fees payable for notarially certified preliminary agreements shall be cut by half as of next year. The amendments shall enter into force on 1 January 2006.

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