When a UAB share sale agreement must be notarised, and when the notary asks for it anyway

A notary is needed in two cases. First, when 25 per cent or more of the shares of a private limited liability company (UAB) are being sold. Second, when the sale price of the shares is more than EUR 14,500. One of these conditions is enough — they are not cumulative. This is laid down in Article 1.74(1)(3) of the Civil Code (CK). In all other cases the agreement is concluded in simple written form: Article 47(10) of the Law on Companies (ABĮ) says that a share sale and purchase agreement for a UAB is in simple written form, except where the Civil Code prescribes the mandatory notarial form. In practice, people go to a notary more often than the law requires.

What exactly the law says

The threshold applies to sale and purchase agreements. This matters: this particular rule does not apply to share transfer transactions of any other kind, and the question of form is then decided separately.

In Article 1.74(1)(3) CK the amount is written not in figures but in words — fourteen thousand five hundred euros. It is not linked to inflation and is not recalculated. As a result, more and more transactions cross the threshold over time.

The same point also contains an exception. The notarial form is not mandatory where the personal securities accounts of the UAB’s shareholders have been entrusted for management to a legal person entitled to open and manage personal accounts for financial instruments. If the company has handed over its shareholder records to such an institution, the 25 per cent and EUR 14,500 thresholds no longer apply.

Why a notary often certifies even when the threshold is not exceeded

This comes up in our letters to clients all the time. When the whole or a large block of shares is being transferred, the parties go to a notary even when the law does not require it.

The reasons are practical, not legal. A notarised transaction is easier to prove in a dispute. A bank financing the purchase often asks for it itself. A buyer paying a significant sum wants the seller’s identity and right to sell to be checked by someone other than themselves.

The law imposes no such obligation. It is the parties’ choice, and it costs the notary’s fee and one visit.

Why the notary asks the company’s manager to attend

For clients this is the most unexpected part. The transaction is concluded by the seller and the buyer, yet the notary also asks for the company’s director, who is not a party to the transaction.

We have asked two independent notary offices about this. Both gave the same answer: the director’s participation in the transaction is required. The reason is that it is the manager who signs the extract from the securities account and the confirmation regarding restrictions on the shares. Without these documents the notary will not certify the transaction.

This is the practice of notary offices, not a rule written into law. But the practical result is the same: if the director is on holiday or abroad, the transaction is postponed. In our experience, more transactions are postponed because of this than because of any other detail.

The conclusion is simple. When the date of the transaction is being agreed, the director’s diary is coordinated together with the seller’s and the buyer’s diaries, not after them.

Why you are asked about marital status

One client asked why the notary office wanted a document on his marital status when he was buying shares, not a flat.

The answer lies in the content of the agreement. The agreement records whether the buyer acquires the shares as personal property or as joint common property. Article 3.88(1)(1) CK treats as the joint common property of spouses any assets acquired after the marriage in the name of both spouses or of one of them. Shares are assets, so the question about marriage is a question about whose they will be.

This matters not on the day of the transaction but later — when voting at the general meeting of shareholders, when selling the shares on, when dividing property.

The same letter also records that in exceptional cases the office allows the transaction to be certified without such a document. That is an exception to be agreed with the particular notary, not a rule you can plan around.

Can the price be lower than the nominal value

This question has come up in a transfer of shares in a company that had been loss-making for some time. The nominal value of the shares was one thing; the real value was considerably lower.

The notary office confirmed that the price may be lower than the nominal value. But it cannot be purely symbolic. The reason is Article 1.87(1) CK: if a transaction has been concluded to conceal another transaction, the rules of the transaction the parties actually had in mind apply. A symbolic price for a block of shares with real value may be read as a gift, and a gift is taxed differently and challenged differently.

The practical solution is not to cut the price to one euro but to justify it. Figures showing loss-making operations, debts, unperformed obligations — all of this explains why a price below the nominal value is a genuine price and not a cover.

What to prepare in advance

• The extract from the securities account and the manager’s confirmation regarding restrictions on the shares.
• The company’s articles of association — they may contain transfer rules of their own.
• Details of the buyer’s marital status.
• A clear answer on what percentage of the shares is being sold and at what price. These two figures determine whether a notary is needed at all.

How to start

Tell us what proportion of the shares is being sold and what price has been agreed. From these two figures we will tell you whether the agreement must be in notarial form, and send you a list of the documents the notary will ask for.

Tel. +370 5 212 1506, email info@linden.lt

More about this service: company law services.