Enterprise law developed in Lithuania as a result of the transition from a
centrally planned to a market economy. Due to the role of commercial units as
extremely important actors in a market economy, basic legal acts establishing
the types and procedures for incorporation of enterprises were adopted in the
first years of independence.
The 8 May 1990 Law on Enterprises provides that only legal entities registered
as enterprises under this law are entitled to transact business in Lithuania
(with the exceptions for private individuals working in certain professions or
occupations). Due to this fundamental provision and changing legal and economic
environment during the country's transition, laws regulating the establishment
and activity of enterprises have been repeatedly amended, supplemented and
improved. Furthermore, the European Agreement Establishing an Association
Between the European Communities and their Member States and the Republic of
Lithuania (effective from 1 February 1998) requires the harmonisation of laws
of the Republic of Lithuania with the acquis communautaire, including the area
of enterprise law. Thus, development of the enterprise legislation in Lithuania
has also been oriented towards the requirements of the EC law.
The 18 July 2000 Civil Code of the Republic of Lithuania;
The 8 May 1990 Law No. I-196 of the Republic of Lithuania "On Enterprises";
The 31 July 1990 Law No. I-440 of the Republic of Lithuania "On the Register of
The 16 October 1990 Law No. I-676 of the Republic of Lithuania "On
The 16 April 1991 Law No. I-1222 of the Republic of Lithuania "On Agricultural
The 1 June 1993 Law No. I-164 of the Republic of Lithuania "On Cooperative
The 13 July 2000 Law No. VIII-1835 of the Republic of Lithuania "On Companies"
("the Company Law");
The 21 December 1994 Law No. I-722 of the Republic of Lithuania "On State and
The 7 July 1999 Law No. VIII-1312 of the Republic of Lithuania "On
The 5 July 1995 Law No. I-1018 of the Republic of Lithuania "On Investment
The 1 July 1999 Law No. VIII-1286 of the Republic of Lithuania "On Trade
The 3 August 1993 Resolution No. 601 of the Government of the Republic of
Lithuania "On Provisions of Establishment and Activity of Concerns, Consortia
and Associations of Enterprises";
The 13 July 2000 Resolution No. 827 of the Government of the Republic of
Lithuania "On the Procedure for Submission of Documents Required for the
Registration of Branches and Representative Offices of Enterprises";
The Regulations of the Registration of Enterprises wherein Foreign Capital is
Invested, adopted by the 23 November 1995 Order No. 46 of the Department of
There are several administrative bodies that are entrusted with the
registration of enterprises, although registration is but one of their
All enterprises with foreign capital invested, as well as branches and
representative offices of foreign enterprises, are registered with the Ministry
of Economy of the Republic of Lithuania. Permission to commence commercial
activities must be received from the local municipal authorities prior to
registration. Firm names are registered with the State Patent Bureau. However,
the newly enacted Civil Code (effective from 1 July 2001) provides that a
separate registration of the trade names will not be required when the new
Register of Legal Persons is established and certain provisions of the Civil
Code regulating the names of the legal persons come into force. Other
administrative bodies are responsible for specialised sectors. For example, the
Bank of Lithuania is responsible for the registration of commercial banks,
subsidiaries of foreign banks and representative offices of Lithuanian and
Point of Interest
The Civil Code which entered into force on 1 July 2001 and the 12 June 2001 Law on the Register of Legal Persons provide for the establishment of the new Register of Legal Persons which will function under supervision of the Ministry of Justice. It is anticipated that the new Register will start operating in 2004 and it is expected to take over the database and the functions currently carried out by the institutions mentioned above. Certain provisions of the Civil Code relating to the establishment and registration of legal persons will come into force upon establishment of the Register of Legal Persons. Under those new provisions, the notaries public will have an active role in the establishment of enterprises.
Local Representation of Foreign Companies
A foreign company may operate in the Republic of Lithuania through a
representative office or a branch. The representative office of a foreign
enterprise (company) may be established for representational and promotional
purposes only and may not engage in commercial - economic activities. The
representative office does not have the capacity of a legal person and
therefore may not conduct independent commercial activity. It may not have a
settlement account, but may open an account solely to cover the necessary
expenses of the office. The representative office is not required to keep a
separate balance sheet. The foreign parent enterprise is liable to the extent
of all of its assets for the obligations of its representative office. The
representative office may perform various actions that are within the
competence of the managing body of a representative office and are set forth in
its regulations. The regulations of a representative office are approved by the
authorised body of the enterprise which has established the representative
office. The representative office may enter into transactions on behalf of the
foreign parent only for the purpose of meeting the needs of the representative
office and within the scope of the powers granted to it. Export and import
operations may be performed between the representative office and its foreign
parent or the entities that are related to such foreign parent. At least one of
the persons authorised to act on behalf of a representative office must reside
Representative offices of foreign enterprises are registered with the Ministry
of Economy. After the submission of an application and related documents, the
Ministry of Economy must decide on registration within 15 days. The
representative office is considered established as of the date of its
registration. A foreign entity, that has established a representative office in
Lithuania, is required to provide the Ministry of Economy with its annual
financial statements (including the consolidated statements, if any), if such
statements are mandatory according to the legal requirements applicable to such
foreign entity. The foreign entity also has to inform the Ministry of Economy
about changes in the documents, information, and legal status of such entity.
Branches, as a form of representation of foreign enterprises, have been
introduced in Lithuania since 22 December 1999 when respective amendments to
the Law on Enterprises took effect. The provisions of the Civil Code also
regulate the status of the branches of foreign enterprises.
A branch of a foreign enterprise is a division of a foreign enterprise which
has its seat in Lithuania. The branch of a foreign enterprise may engage in
commercial - economic activities, enter into transactions and assume
obligations only within the scope of the powers granted by the foreign parent
enterprise. The foreign parent is liable to the extent of all of its assets for
the obligations of its branch, and the branch is liable with all of its assets
for the obligations of the foreign parent. The branch does not have the
capacity of a legal person. The activities of the branch are organised and
carried out by the manager of the branch who has the right to represent the
branch in relations with third parties only upon registration of the branch. At
least one of the persons authorised to act on behalf of the branch must reside
The registration and information filing requirements described above in relation
to representative offices are similar to those applicable to the foreign
companies' branches registered in Lithuania.
Corporate Legal Entities
According to the Lithuanian law, the following eight types of enterprises may
be established: (1) a personal enterprise; (2) a general partnership; (3) a
limited partnership; (4) a public or private stock company or an investment
company; (5) a State enterprise; (6) a municipal enterprise; (7) an
agricultural company; or (8) a cooperative company. Enterprises of all types
are considered to be legal persons.
Types of Enterprises
A personal enterprise may be owned by a single individual or, jointly and
equally, by spouses. Non-profit organisations, which have the capacity of a
legal person and do not engage in production activity, may also own personal
enterprises. The owner's liability for the obligations of its personal
enterprise is unlimited and applies to all "personal property" (e.g. a personal
house or other property not utilised by the personal enterprise). The owner
remains liable for the obligations of its personal enterprise even after its
General partnerships are enterprises with unlimited liability established on
the basis of a partnership or joint venture agreement between several
individuals and/or legal persons. The general partnership is created through
transfer of property from individual ownership to co-ownership within the
partnership, with the purpose of conducting business activities under a common
name of the firm. All partners of a general partnership are jointly and
severally liable for the obligations of the general partnership, including with
their personal property. The partners remain liable even after the liquidation
of the general partnership. The general partnership, however, is not liable for
the obligations of its partners if such obligations arise in their activity
unrelated to the activities of the general partnership.
A limited partnership consists of general and limited partners. The difference
between limited and general partnerships lies mainly in the degree of liability
of their respective partners. General partners of the limited partnership have
unlimited joint and several liability, identical to the unlimited liability of
the partners of a general partnership as explained above. In contrast, limited
partners are liable only to the extent of their contributions to the
partnership under the agreement. The limited partnership must have at least one
general and one limited partner.
Under the Company Law, public and private stock companies are enterprises with
authorised capital divided into shares. Public and private companies may be
formed for any type of business not prohibited by the laws of Lithuania.
Shareholders of stock companies enjoy limited liability. The company is liable
for its obligations only to the extent of its assets. The shareholders are
liable only to the extent of the amounts due to be paid for the shares
subscribed. However, the Civil Code introduces a provision that in the case
when a company is unable to perform its obligations due to unfair actions of a
shareholder, the shareholder may incur subsidiary liability for the obligations
of the company with its personal property.
An investment company is a public company providing a specific financial
holding service. A special law, the law on Investment Companies, regulates the
formation and activities of investment companies.
Point of Interest
The most convenient and popular way to invest foreign capital in Lithuania is through incorporation of a private or public stock company or acquisition of shares of existing Lithuanian stock companies. For this reason, stock companies are more thoroughly described in this section.
The following tables present the principal characteristics of private and
public stock companies:
||Number of shareholders
|In a private company, the minimum share (authorised) capital required is LTL 10,000 (app. EUR 2,900).
In a public company, the minimum authorised capital required is LTL 150,000 (app. EUR 43,450).
The issue of shares of a public company must be registered with the Securities Commission.
Capital may be contributed in cash or in kind.
When establishing a company or increasing its capital, (1) at least 25% of the capital or the increase in capital
should be paid prior to registration - if in cash; or (2) the increase in
capital should be paid in full - if the contribution is in kind, provided that
when establishing the company at least the minimum authorised capital amount
indicated above and not less than 25% of the subscription price must always be
paid in cash prior to registration.
|In a private company, the minimum number of shareholders is 1 and maximum number is 100.
In a public company, the minimum number of shareholders is 1 and there are no limitations on the maximum number.
|Status of Shareholders
||Rights and Obligations
|Shareholders are liable up to the issue price due to be paid for all the shares they have subscribed for.
In case a company becomes unable to perform its obligations due to unfair actions of a shareholder, the shareholder is
liable for the obligations with its personal property.
to receive dividends if the company generates profit;
to receive a portion of the assets or proceeds of the sale of the assets of the
company in liquidation;
to receive shares without additional payment if the authorised capital is
increased from the funds of the company;
to have priority in acquiring newly issued shares, unless the general meeting
of shareholders decides not to grant the pre-emptive right to all shareholders;
to bequeath all or part of the shares to one or several persons;
to sell or transfer all or part of the shares to other persons (the law
establishes the right of first refusal for the other shareholders of the
private companies in case of a sale of shares to a third party); and
to have other rights.
to attend meetings of shareholders;
to receive information on business activities of the company;
to challenge in court the resolutions of the general meeting or resolutions and
actions of the Supervisory Council, the Board or the Head of Administration;
to conclude an agreement with an audit firm for auditing of the company's
activities and documents (under certain conditions);
to authorise another person to vote for the shareholder as his/her proxy at the
general meeting or perform other legal actions; and
to conclude voting/shareholder agreements and to have other rights.
Shareholders are obligated to pay the necessary amount for the subscribed shares and to act fairly in respect of the
Public companies may issue bonds convertible into shares.
Registered (in private and public companies) or bearer (only in public
Ordinary and preference;
Material (only in private companies) and non-material (in private and public
|In private companies, consent of the Head of Administration for the transfer of shares is required; the consent for the transfer may be refused only if it would increase the number of shareholders in excess of the maximum number permitted (i.e., 100). In addition, the law establishes the right of first refusal (under the terms offered by a third party) for the other shareholders of private companies in case shares are offered to a third party that is not a shareholder of that company.
A shareholder has no right to transfer his/her shares prior to registration of the company or prior to registration of the increase of its authorised capital and until he/she has fully paid for the subscribed shares.
Insider trading in public companies is prohibited.
Points of Interest
When deciding on the amount of the authorised capital to be invested into a newly established company, the provisions regulating the authorised capital/shareholders' equity ratio should be taken into consideration. Shareholders' equity may not be less than 75% of the authorised capital of the company. If it becomes less, the situation must be rectified. If the situation cannot be rectified otherwise, the company must reduce its authorised capital (the company may also increase its capital to achieve the mandatory capital/equity ratio).
In the newly enacted version of the Company Law and the Civil Code certain provisions regulating the activities of the companies have been modified. Therefore, the provisions of the Articles of Association of such companies, where they are inconsistent with the Company Law or the Civil Code, may not be applied and the respective provisions of the laws should be applied instead.
The following tables present the principal characteristics of the management
structure of private or public stock companies and the financial control:
|General Meeting of Shareholders
|Status: the supreme decision-making body.
Convening: the annual General Meeting is convened by the decision of the Board within 4 months after the beginning of each fiscal year. Extraordinary meetings may be convened by the Board, the Supervisory Council or the shareholders having the right to request the meeting to address certain specified situations or when otherwise necessary.
to amend or supplement the company's Articles of Association;
to elect the audit firm, members of the Supervisory Council or, in the event
that the Supervisory Council is not formed, members of the Board or, if neither
the Supervisory Council nor the Board is formed (only in private companies), to
elect the Head of Administration;
to recall the audit firm, to remove from office members of the Supervisory
Council, the Board and/or the Head of Administration who had been elected by
the General Meeting;
to fix the conditions of payment for audit services, the annual payment
(bonuses) from net profit to members of the Board and the Supervisory Council;
to approve annual financial statements and the report of the Board (if the
Board is not formed, then a report by the Head of Administration) on the
to increase the authorised capital;
to identify the class, number and minimum issue price of newly issued shares,
to approve the value of non-pecuniary (in - kind) contributions into the
to adopt a resolution to revoke the pre-emptive right of all shareholders in
acquiring newly issued shares or convertible bonds of a specific issue of
shares or convertible bonds;
to issue convertible bonds;
to exchange the shares of one class for shares of another;
to adopt a resolution on redemption of the company's own shares;
to liquidate the company, to revoke the liquidation;
to appoint and revoke company's liquidator;
to reorganise the company, approve the reorganisation project;
within 2 years after establishment of the company, to approve acquisition of
assets from the founders of the company when the value of one or a group of
such transaction amounts to 1/10 of the company's authorised capital in value;
to adopt a resolution concerning distribution of profit;
to adopt a resolution to form reserves, with the exception of a revaluation
to adopt a resolution on the sale, transfer, lease or mortgage of fixed assets
the value whereof exceeds 1/20 of the company's authorised capital, as well as
on offering a guarantee, surety for the discharge of obligations of other
entities when the amount of the obligations exceeds 1/20 of the company's
|Formation: consists of 3-15 members, elected by the General Meeting for a term of up to 4 years.
in a public company, either a Supervisory Council or the Board must be formed;
in a private company, the formation of the Supervisory Council or the Board is
not mandatory (i.e. neither mandatory);
if the Supervisory Council is not formed in the company, its functions may not
be assigned to other management bodies. Where the Board is not formed in the
company, its functions, rights, duties and responsibility are taken over by the
Head of Administration, save for the rights and duties taken over by the
Supervisory Council or the General Meeting.
to form and dismiss the Board (if the Board is not formed - to elect the Head
of Administration and remove him/her from office);
to supervise the performance of responsibilities of the Board, the Head of
Administration and the management and report to the General Meeting; and
to represent the company in court proceedings against the members of the Board
or the Head of Administration or his/her deputies.
|Status: a management (executive) body;
Formation: consists of a minimum of 3 members and is formed by the Supervisory Council (the General Meeting if the Supervisory Council is not formed) for a term of up to 4 years.
to form the company's management team;
to conclude certain agreements (on purchase and disposition of fixed assets and
other matters, as provided in the company's Articles of Association);
to decide on investments into other companies;
to formulate the company's strategy and the organisation of its work; and
to prepare materials for consideration at the General Meetings.
|Status: a management (executive) body. The Head of Administration (usually titled General Director or General Manager) must be an employee of the company.
Appointment: the Head of Administration must be employed in each company; he/she is appointed by the Board (when the Board is not formed, by the General Meeting or the Supervisory Council).
Authority: the Head of Administration concludes agreements on behalf of the company and is responsible for general management issues. Duties may be delegated to other employees of the company in certain areas.
Limitations: without authorisation of the management body which elected him/her, the Head of Administration may not be
the Head of Administration of another company.
|Election: the General Meeting must elect an audit firm for a term established in the Articles of Association in all public companies and in private companies which meet 2 of the following requirements set forth in the Company Law:
Responsibilities: the audit firm is responsible for the inspection of the annual financial statements of the company and the annual business report.
annual revenue amounts to LTL 5 million (approximately EUR 1.4 million);
more than 50 employees; and
value of assets amounts to LTL 2.5 million (approximately EUR 0.72 million).
Procedure: the audit is carried out in accordance with the legal acts regulating audit and the work of auditors.
State enterprises are enterprises owned by the State (the Republic of
Lithuania) while municipal units may own municipal enterprises. These two types
of enterprises enjoy limited liability. A respective State or municipal unit is
not liable for the obligations of the enterprise and the enterprise is not
liable for the obligations of the State or municipal unit.
An agricultural company is an enterprise which derives at least 50% of its
income from the sale of agricultural products or services in the field of
agriculture. It is formed when individuals or legal persons contribute their
property to a pool of jointly owned assets to undertake commercial activities
in agriculture. The agricultural company must have at least 2 members. There is
no limitation on the maximum number of members. The agricultural company enjoys
limited liability. The company's liability for its obligations is limited to
the amount of the company's capital. The agricultural company is not liable for
the obligations of its owners where such obligations are incurred in activities
of the owners that are not related to the activities of the company.
A cooperative company is an economic entity with a changeable composition and
capital. It is established on a voluntary basis by a group of at least 5
individuals, or individuals and legal persons, for the purpose of satisfying
their collective business, economic and social needs. The founders of the
co-operative company may only be Lithuanian citizens or legal persons
registered in Lithuania. The cooperative company may engage in any activities
that are not prohibited by the laws of Lithuania. The cooperative company is an
economic entity of limited liability, i.e. liable for its obligations to the
extent of the value of its property. The cooperative company is not liable for
the obligations of its member-owners when these obligations are not related to
the activities of the cooperative company.
Incorporation of Enterprises
All enterprises, with limited exceptions, must record their trade names with
the State Patent Bureau prior to their registration. Temporary protection of a
registered trade name is given for a period of one year before the registration
of the enterprise itself. The registered name of a registered enterprise is
given protection during the active life of the enterprise and for an additional
one year after termination of its activities. When the new Register of Legal
Persons is established and certain provisions of the Civil Code regulating the
names of legal persons come into force, trade names will not require separate
registration and shall be protected from the date of submission of the
application to register a legal person with the register. Incorporators of the
legal person will then be able to apply for the temporary protection (6-month)
of the name of the legal person under formation.
All enterprises with foreign capital are registered with the Ministry of
Economy. Prior to registration with the Ministry, the incorporators must obtain
consent from the local municipal authorities for the stated activity of the
enterprise. The municipal permission is valid for up to 1 year.
Depending on the type of an enterprise, other actions must also be taken prior
to the registration: in public companies, a public offering of shares should be
registered with the Securities Commission; the initial contributions to the
authorised capital should be paid to the company's accumulative account (a
temporary account opened only for the purposes of collecting the initial
capital); a permission of the owner of rented premises, at which the enterprise
will be registered, should be obtained; in public companies, the incorporation
reports should be prepared and audited; the statutory general meeting of
shareholders of a founded company should be convened, the Articles of
Association should be adopted and managing bodies elected; etc.
In order to register an enterprise, a foreign company should submit to the
Ministry of Economy the following documents: an application for registration;
its own registration certificate (an excerpt from the commercial register); a
document proving the decision of the foreign company to invest the capital; a
certificate issued by the bank registered in Lithuania on initial contributions
to the accumulation account of the enterprise; a trade name registration
certificate; a municipal permission for the stated activities; a permission of
the owner of premises at which the enterprise will be registered; a document
confirming payment of the stamp duty; and certain other documents.
An enterprise should be registered when it presents to the Ministry of Economy
the incorporation documents consistent with the applicable requirements. A
decision on registration should be adopted within 15 days from the date the
documents were submitted. After respective provisions of the Civil Code become
effective, the term of adoption of a decision on registration will be 30 days.
Once the company is registered, before it may commence its activity it should
perform all of the following steps:
Point of Interest
registration with the local tax inspection office within 5 working days from
the date of registration;
registration at the local office of the State Social Insurance Board within 10
days from the date of registration;
opening of a settlement bank account (handling of normal commercial
if needed, registration as a value-added tax (VAT) payer when the newly
established company expects its annual income to amount to LTL 100,000
(approximately EUR 29,000);
production of a corporate seal of the company; and
obtaining of any other permissions or licenses, if required by applicable laws
in order to begin specific commercial activities.
The Civil Code, which entered into force on 1 July 2001, provides for an active role of the notaries public in the establishment of enterprises. The provisions, which will enter into force from the establishment of the Register of Legal Persons, require that the notaries approve the founding documents, verify the data to be included into the Register of Legal Persons and implementation of pre-registration procedures.
Lithuanian law provides for the establishment of three types of group
enterprises: concerns, consortia and associations.
A concern is an economic structure that unites independent companies related by
common interests, agreements on patents and licenses, joint scientific research
and production technology programs or other close co-operation. The concern is
established through acquisition of shares in other companies. The largest
member company or a special holding company is responsible for the management
of the concern.
Consortia are temporary, voluntary groups of enterprises brought together to
implement large projects and programs or resolve specific issues. The
consortium may be established as a partnership or by a joint-venture agreement.
An association of enterprises is a voluntary group of enterprises that
represents the economic interests of its members, co-ordinates and executes
matters brought to its attention by the membership. The following forms of
associations are recognized:
The association is a legal person, has its Articles of Association and is
registered with the Register of Enterprises. The association has its own assets
derived from income generated from its activities as well as other resources.
The association may use its assets and financial resources to further the aims
established in its Articles of Association, but income generated by the
association may not be distributed to its members.
an association of enterprises; and
a chamber of industry and commerce.
Point of Interest
Enterprises may form groups only in compliance with the market concentration regulations established by the Law on Competition.