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2020

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Notarial Services for Businesses and Individuals

Buhalterija: apskaitos ir mokesčių apžvalga Nr. 40, 2020-10-27

Company incorporation transactions, a transfer of shares and real estate, a pledge of property, a company’s capital increase, and other transactions of legal persons are subject to notarial certification. You might also have to go to a notary if you need to certify the authenticity of a document copy or signature, to attest a power of attorney, or to settle inheritance issues. We are talking with Marius STRAČKAITIS, the newly re-elected President of the Lithuanian Chamber of Notaries and the Notary of the 1st Notary Office of Klaipėda City, about the upcoming amendments to the Law on Notaries, the e-system eNotaras, new notary fees, and other issues concerning both business and private clients.
Not only police who protect people but also notaries who keep their secrets have high credibility with the public. Confidence in notaries is the highest one among other legal professions. What are the reasons for such confidence? What does the notary community in Lithuania look like: How many members does it have? Do their activities meet public expectations? What challenges will you, as the President of the Chamber of Notaries, have to deal with following your re-election in September?
The public confidence in notaries is based on the day-to-day work of our professionals. In principle, notaries are a non-conflicting profession. We are rather the justices of peace, keepers of the law in civil relations who always find a solution acceptable to all parties to the transaction and balance the interests of strong and weak parties thereof. Currently, there are 240 practicing notaries in Lithuania; some of our colleagues have recently taken a well-earned rest at the end of their term of office on grounds of age. Speaking about the notary community, we cannot miss out a thousand more people: employees of notary offices, assistants to notaries, whose diligence, legal knowledge, professional competence, and skills allow notaries assuring legality, drawing up transactions, and communicating with clients. I’d be about right if I said that most of the burden of work planning falls on the staff of our offices. Therefore, the re-election of me as well as the majority of members of the Presidium of the Lithuanian Chamber of Notaries for a new term is a strong sign of confidence for the entire notary community, including the notary staff. I make no secret of the fact that there are a lot of obligations and challenges, which, in addition, vary every year. The most recent and, probably, most important ones are political decisions regarding the future of the notary profession. This autumn, the Seimas is going to consider amendments to the Law on Notaries on legalisation of remote notarial acts. Other tasks in our activities are the continuous professional development of notaries. This is directly related to the quality of services and customer confidence.

Which transactions of legal persons do usually require notarisation: establishment of companies, registration of a mortgage, transfer of shares or real estate, or anything else?

All of the acts you have mentioned are common in a notary’s practice. Of course, notaries in big cities, where most banks and companies hold their headquarters and branches, have business clients much more often than our partners in small towns and districts. It is, therefore, natural that a regional notary is less likely than his or her colleague from a city to deal with a transfer of shares, an increase in the authorised capital of a company, or a pledge of property of a legal person.
State registers collect and allow revising data on legal persons without notary. For example, notarial certification is not mandatory for the transfer of less than 25% of corporate shares or where their value does not exceed 14.5 thousand Euro. Without notarial witness, it is also allowed to revise registers’ data on shareholders and directors of public and private limited liability companies.

Doesn’t it create an environment for abuse? And, in general, what is the likelihood of fraud in notarial acts?

I would like to think that our state, at the strategic level, in most cases provides a good understanding and assessment of potential risks of abuse or even crime. This is also attributable to the growing role of notaries in ensuring financial transparency over the past few years. For instance, at the initiative of the Head of State and by agreement between the Government and the Seimas, several years ago, there were amendments to the laws issued, providing for the mandatory participation of notaries in the transfer of stocks of more than 25% of shares worth more than 14.5 thousand Euro, as well as in other cases. However, there are still some ambiguities in by-laws. In publicity, we have repeatedly pointed out gaps that that pose a risk for abuse, for example, when making changes to the data of the registers on shareholders and directors of companies. The media has described a number of cases of company takeovers, whereby intruders connected to the registries, changed corporate data, and took control of companies and their accounts. Notarial control in such processes would effectively prevent similar abuses, and neither the cost nor the duration of the process itself would increase.

How many businesses and how many private clients are served by notaries? Which are more? What transactions with private clients prevail?

We have no statistics on what share of notary’s clients are individuals or legal persons, businesses or private clients – all are equally important. Selling a major plant might seem a more significant deed than attestation of an elderly person’s will, however, it is not and should not be that way. As with the most frequent acts by private clients, the economic research conducted by order of the Lithuanian Chamber of Notaries shows that this is about the certification of authenticity of an extract from a document copy or signature in a document, attestation of a will or a power of attorney, issuance of a certificate of inheritance rights to cash or real estate, and other acts.

Draft amendments to the Law on Notaries propose to provide notaries with the right to organise and hold auctions by means of information technology at which persons might sell, buy, and lease their property. Is this service available now?

This draft law has already been received in the Seimas. Currently, it is being discussed in the committees. The essence of the draft law is to enable a seller to sell his property through an auction under notary supervision. At the auction, a seller of property would have the opportunity to sell, let’s say, an apartment for the best price proposed. The notary would receive an agreed fee as an auction organiser. At the client’s request, the property sale transaction could be certified by the same notary office.

Is it planned to delegate some court functions to notaries? What are they?

The currently initiated draft amendments to the law provide that a notary can be entrusted with the right to enforce a divorce where there is no dispute between divorcing spouses or there are no minor children. If the draft law is approved, notaries will carry out this function, like any other ones. Extrajudicial divorces have been legalised in some other countries of the European Union: Estonia, Latvia, Slovenia, Greece, Spain, Portugal, Italy, France, and Romania. The procedure has proved its value by reducing the workload of courts. In Estonia and Latvia, the option of notarial divorce was legalised several years ago. Clients state that, if there are no disputes or issues that are subject to resolution in court, the deed of divorce in a notary office is more acceptable as it is confidential and prompt. The results of a representative opinion poll conducted by “Vilmorus” in January 2020, as commissioned by the Lithuanian Chamber of Notaries, show that 62 percent of the Lithuanian population support the proposal that a notary might dissolve a marriage where there are no disputes between the divorcing parties and there are no minor children. A negative assessment of the proposal comes from 14% of respondents. Similar support rates have basically remained unchanged over the past few years.

What acts can a notary perform remotely and when should such acts be performed in a notary office?

The current Law on Notaries provides for the performance of notarial acts in a notary office. The exception is where a notary is called to a sick person at home or in a hospital or where in special cases notarial acts, such as any major transfer of shares, can be performed outside the notary’s office in a solemn ceremony. After the Government of Lithuania declared an emergency situation and quarantine in connection with the COVID-19 pandemic, the activities of notaries were limited to telephone consultations for several days, though, later renewed with some restrictions: only pre-registered clients were accepted, deeds were drafted through communication with and counselling of a client remotely; the use of protective means was mandatory in the office. Once the quarantine was abolished, most of the restrictions were recalled, yet, we got used to protective means: masks, gloves, disinfectants. In other words, all notarial acts are performed in the usual manner. Again, as I said, amendments to the Law on Notaries on the legalisation of remote notarial actions have been received in the Seimas and are now being discussed.

The eNotaras project has been under consideration for almost decade now. Is the eNotaras system functioning? What are the goals of it?

You are speaking about one of the key priorities of the Chamber of Notaries. The eNotaras system, the design and development of which took almost eight years, has progressed to the implementation stage. The system had been developed solely at the expense of the Lithuanian Chamber of Notaries, not a cent was taken out of taxpayers’ pockets. Currently, the first stage is underway, at which all notaries and notary offices have been integrated into a user-friendly system for planning and organizing work. The outdated notary book is refused of – since now, notarial acts are to be recorded in the e-book. It generates invoices, too. At the integration website, notaries submit inquiries and receive information from state registers. A notary client may create an account on the external web portal eNotaras and enter the system through the Government Gateway to contact the desired notary office, order the desired services, and maintain further communication in preparation for the notarial act in electronic form. The account stores information about the client’s notarial deeds and his or her visits to the notary. It also offers an option to apply for moving an inheritance case to the desired notary office. If the Seimas approves the amendments on legalisation of notarial acts, the eNotaras system will become the framework for remote communication between the client and the notary. In the eNotaras system, by means of advanced biometric identification technology, clients will contact a notary who will help the client to prepare for the notarial act and perform the notarial act itself using a secure video communication channel.

How is the fee for the performance of notarial acts set? Hasn’t the price of inheritance case administration or other notary services increased recently?

The amount of fee for notary services is set by order of the Minister of Justice in agreement with the Minister of Finance. The new fee rates for notary services entered into force on 1 June this year. The fee rates are set in accordance with six criteria stipulated by the Law on Notaries: the cost of a certified transaction or other notarial act; the nature of the notarial act performed or service provided; assurance of the economic independence of a notary; risk in professional activities and civil liability of a notary; cross-subsidisation; and costs. Cross-subsidisation is of particular importance. The State obliges its residents to apply to a notary in most cases; therefore, socially significant services, such as the attestation of a will, should be available to everyone. This means that part of the cost of attestation of such deeds is offset by larger deeds. It is important to bear in mind that not all money paid at a notary office goes to the notary: the client pays not just a fee for a certified transaction, but remuneration for data from state registers, transfer and registration of data, too. This money is transferred by a notary to the State Enterprise Centre of Registers. Quite often, the amount of fee for revisions of registers, transfer and registration of data, i.e., remuneration to the Centre of Registers is several times higher than a notary fee. These amounts mainly increased after 1 October, upon coming of new fee rates of the Centre of Registers into force. The drastic increase in prices has affected all clients, in particular, those with inheritance cases. The service fees of the Centre of Registers have risen 3-5 times and may reach several hundred Euro.

As notary services are increasingly moving into the virtual space, won’t notaries be short of work?

The virtual space is just a tool, a means for notaries to do their job, to ensure more convenience for a client, especially, in unforeseen circumstances, such as quarantine due to a pandemic. The essence of the upcoming transformations lies not in the re-location of all notarial actions to the virtual space. They enable to perform notarial actions remotely in electronic form, when a client cannot come to a notary’s office. The liability of notaries for remote transactions will increase rather than decrease. Apart from the obligation to identify a client’s true will and to assure the legality of transaction, there arises an obligation to identify the client. First, a person will be identified by biometric means using a special application that will match the image of the person in the communication channel with the image in the document. Next, the person’s identity must be authenticated by a notary. Should a notary have at least the slightest suspicion of possible identity fraud, the notary will have the right to refuse to perform a remote notarial act and invite the client to the office. In Latvia, remote notarial actions were legalised in July 2018, in Estonia – in February this year. The neighbours’ practice has proved that remote actions make up less than 10% of all notarial deeds. It was only the pandemic that caused an increase in the number of transactions certified remotely. The possibility of remote actions will add workload for notaries – they will be directly accessed by Lithuanian citizens scattered all over the world who are now forced to physically apply for notarial actions in Lithuanian consulates or do not have such an opportunity at all (e.g., in Africa or Asia, with the nearest diplomatic Lithuanian representations situated thousands of kilometres away). To conclude, I would like to note that the workload of notaries is directly related to the level of a national economic life: when it drops, the number of notarial deeds decreases, too. Therefore, as long as we live well in Lithuania, notaries will not be short of work for sure.

Thank You for Your substantive responses.

Interviewed by Jadvyga Miniotaitė

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