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ISBN 9985-9146-1-9

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Problems in Harmonisation of Acts Regulating Commercial Register Entries

In Juridica International II, which was published a year ago, I discussed pre-conditions for harmonisation of Estonian company law. *1 By today, life has moved on, and Estonian Acts are screened in order to determine their general compliance with the EU requirements. As regards company law, it is apparent that harmonisation problems are not particularly acute. At the same time, it has become clear that even in company law, certain problems are waiting for a solution.

One of the most important principles expressed in the first Company Law Directive, *2 is the publicity of the commercial register. In this respect, Estonia does have a commercial register, which is public and in full compliance with the EU requirements. On the other hand, there is a substantial difference with regard to the validity of entries in the commercial register.

In accordance with Article 3(5) of the first Directive, entries in commercial register shall acquire legal relevance as from their publication in the Official Gazette of the country concerned. Regardless of the fact that the Estonian Commercial Register is generally based on the corresponding German principles (the referred principle of the first Directive has also been transposed thereunder), this question is regulated differently. That was caused, in particular, by concerns that the publication of entries will be delayed during the implementation of commercial registers from 1 September 1995; it is also known that this principle has not always been applicable even in other countries. *3 In § 34(1) of the Commercial Code, the existing Estonian law states that an entry in the commercial register shall enter into force upon signature by the person who has executed the decision on entry and the person who is competent to decide on the entry (under the law, such persons are either the judge and registry secretary or assistant judge). In accordance with § 29(1) of the Commercial Code, *4 commercial register entries are subject to publication but this has only an informative meaning. This constitutes an apparent conflict, as in the Estonian law the publication of an entry is associated with no legal consequences. This situation could be most easily settled by making amendments to § 34(1) of the Commercial Code and by giving the publication of an entry legal relevance and leave the procedure for publication of entries unamended in other respects, but apparently this is not the only possible solution. It must be noted that Chapter 9 of the Commercial Code (at present, that Chapter is principally unimplemented yet) regulates computerised commercial registers. This area is not regulated very thoroughly but the principles of utmost importance are, however, provided in the law, leaving the details to be settled by a directive of the Minister of Justice. These questions are regulated by the rules of procedure of the Court register department, *5 confirmed by Directive of 19 June 1998 of the Minister of Justice.

Presently, computerised register-keeping is of an auxiliary nature. In principle, all entries in the commercial register also exist in computerised form, as register cards maintained on paper are printed out from the computer, but the computerised data have no legal relevance. However, as the whole database exists, it would be rather easy, in technical terms, to switch over to a procedure whereunder an entry would acquire legal relevance as from the moment of its entry in the computer network. This presumes the complementation of the law by certain additional technical provisions. When we visualise a situation where computerised entries have legal relevance and are freely accessible, it would seem that the objective stated in the first Directive – an entry can be applicable to third persons after its publication – is achieved. Certainly, it can be disputed whether the publication of certain data on a computer network makes such data sufficiently available but, taking into account the relatively good level of technical supply in Estonia (the number of workplaces with access to the Internet per capita is big even in the context of Europe *6 ), it could be stated that leaving the publication of relevant data on paper without legal relevance would result in a violation of the interests of persons wishing to receive information from the commercial register. In discussing the publication of entries, the actual situation must be taken into account, in addition to principles. When we compare finding specific data on a computer network and on paper, the first would certainly be preferable in purely technical terms. When somebody is interested in specific entries in the commercial register, he now makes an inquiry to the commercial register, as a rule, rather than starts searching from the announcements on publication of commercial register entries, as the first option is significantly faster. The use of computer networks will certainly bring about a reduction in inquiries to direct registers. As regards the first Directive, it has to be taken into account that it was adopted in 1968, when no one could rely on the existence of a world-wide computer network. Apparently, even the EU should admit that the actual situation has changed during the last 30 years and give to the first Directive an up-to-date meaning in this respect, regarding the publication on paper as equal to computerised publication. There is still one problem: whether computerised publication can be regarded as equal to publication in the Official Gazette but this question can probably be solved by providing computerised entries with special meaning under an appropriate Act. Given the harmonisation objective expressed in the first Directive – to ensure the protection of third persons – this should also be ensured under the procedure for publication of the above-referred entries in commercial register.

Another substantial problem regarding the harmonisation of company law should be seen in § 29 of the applicable Commercial Code, which regulates the publication of entries. Thereunder, entry or deletion of a trader in or from the register, as well as entries concerning dissolutions, transformations, mergers, divisions and changes in the amount of stock or share capital or business name must be subject to publication. Article 3 of the first Directive, on the other hand, provides for the publication of any entries in the register. This problem can be solved easily when making data available on a computer network is treated as the publication of such data because then, all entries would be available in their full volume. That may rather result in problems with such entries that are not completely published under the law and the complete publication of which is not required by the EU, either. This includes, for example, entries concerning general partners in a partnerships, in which case only the number of general partners and the amounts of their contributions are subject to publication. As the EU does not provide any requirements with regard to provisions on limited partnerships, that provision need not be amended in the course of harmonisation. However, even this question is rather of a technical nature.

Another specific problem in the applicable law are matters relating to extracts from the commercial register and from the documentation kept therein. Firstly, account must be taken of Article 2 of the first Directive, whereunder the price of such copies may not exceed the administrative expenses. However, the Directive does not provide a more detailed definition of these expenses. The problem lies in the fact that in Estonia, different stamp duties are required for extracts and copies from documentation kept in the two registers maintained in court register departments – the commercial register and the register of non-profit associations and foundations. Given the similar nature of the procedures for keeping the both registers, that can not be considered correct. There have been attempts to justify this situation by stating that the register of non-profit associations and foundations must be more inexpensive, taking into account the nature of such legal persons. In this point, we reach two options: either the price of extracts and copies from the register of non-profit associations and foundations is below their actual cost or the cost of making excerpts and copies from the commercial register exceeds the administrative expenses. Apparently, this problem needs a simple economic analysis. Attention must also be paid to the fact that statutory stamp duties are not high at present (up to 25 kroons, i.e. ca 1.7 USD per page of documentation) but the question is rather of a principal character.

Another question relating to the publicity of the register is the fee for use of the computerised register. Presently, the establishment of the amount of this fee is left within the competence of the Minister of Justice (§ 70 of the Commercial Code) but this procedure must probably be amended during the transition to the computerised register, by establishing the amount of the fee by law.