Legislation in Estonia discriminates against United States (US) companies by prohibiting them from directly acquiring shares in public limited companies registered in Estonia.

Namely, all shares of joint-stock companies registered in Estonia are registered in the Estonian Central Register of Securities (EVK) and the condition for receiving shares is keeping a securities account with an account manager, i.e. H. a local commercial bank. The prerequisite for opening a securities account is also the opening of an associated bank account. Apart from negotiations related to the transaction, etc., the first step an investor must take to purchase shares is to open a securities account and bank account with a local commercial bank. The latter also applies to the acquisition of a share in a limited liability company registered with the EVK.

However, opening a securities account and bank account can prove unexpectedly complicated, if not impossible. Namely, local banks have adopted a practice whereby companies registered in the US will not open securities accounts at all, except in certain extreme exceptional cases. There are a number of reasons for this, for example banks have been given particularly strict requirements for providing financial services to people outside the EU. The requirements mentioned result primarily from the Money Laundering and Terrorist Financing Act, the relevant regulations of the Minister of Finance, as well as from the guidelines of the financial supervisory authority and EU guidelines. Accordingly, restrictions also result from US legislation which prohibits the provision of a number of services to US persons by companies incorporated outside the US that do not have a license to operate from US financial regulators. Providing services without an activity license may involve some risks. Ultimately, of course, it boils down to the question of the banks' own risk policies. As a private entity, a bank is free to choose its customers and the reasons for refusing to open an account can vary. In view of the demands on the banks, it is understandable that the banks are rather cautious in this regard.

The situation described above has resulted in banks generally not opening securities accounts for US incorporated companies. In this context, we do not mean professional investment companies, but investors who want to do business in Estonia. Moreover, an investor who intends to acquire stocks in Estonia is hardly willing to open a securities account and a bank account in Estonia in his/her name, resulting in the investor spending a lot of time and money on completing the paperwork and providing the bank wastes documents and to bear follow-up costs in connection with account management.

The requirements for the bank result primarily from the specificity of the financial service and are not aimed at justifying restrictions on share ownership, which, however, is an inevitable result. Therefore, an artificial situation has been created in which investors from the US are forced to either invest in Estonia through a subsidiary located in another European country, or to first acquire a limited liability company in Estonia whose only business is to issue shares keep. Since the registration of shares in a limited liability company in Estonia with the EVK is voluntary, there is no need to open a securities account. In this case, transactions are processed before a notary, whose activity is also subject to the provisions of the Money Laundering and Terrorist Financing Act, but in their case does not exclude the conclusion of such transactions. Accordingly, this constitutes somewhat unreasonable discrimination between the acquisition of stocks in public versus stocks in limited liability companies, which is hardly the aim of current legislation.

Finally, it should be noted that this problem is certainly not limited to investments from the US. Other investments from outside the EU may face similar problems, but investments from the US are the most common among them, leading to these problems recurring.