The Supreme Court of Lithuania spoke on legal assessment of a notice on intent to sell shares of a private limited liability company

      The Supreme Court of Lithuania (hereinafter the SCL) had examined civil case No. 3K-3-276/2008 regarding invalidation of transaction, validation of sale-purchase agreement and obligation to remove a record from the share register.

      The panel of judges examined whether the notice on intent to sell shares of a private limited liability company, made according to Article 47 of the Law on Companies of the Republic of Lithuania, is an offer (Article 6.167 of the Civil Code of the Republic of Lithuania).

      The SCL had noted that a contract was concluded either by the proposal (offer) and the assent (acceptance) or by any other actions of the parties that were sufficient to show their agreement (Article 6.162 (1) of the Civil Code of the Republic of Lithuania). A proposal for concluding a contract shall be deemed to be an offer if it is sufficiently definite and indicates the intention of the offeror to be restricted in his rights by a contract and to be bound in the case of acceptance (Article 6.167 (1) of the Civil Code of the Republic of Lithuania). The principle of freedom of contract set out in Article 6.156 of the Civil Code of the Republic of Lithuania, according to which the parties are free to enter into agreements and establish conditions of agreements at their own discretion, shall be applicable to offer and acceptance as the actions creating, changing or terminating civil legal relations. Namely within the meaning of this principle of freedom of contract, the area to which Article 6.156 of the Civil Code is applicable is separated from implementation of the pre-emptive right to acquire the assets being sold, established by imperative rules of law.

      The SCL examining, within the context of the case, a major legal regulation established in Article 47 of the Law on Companies of the Republic of Lithuania according to which the pre-emptive right to acquire shares of a private limited liability company was granted to the shareholders of such a company, had noted that such legal regulation implied that the shareholder‘s notice about intent to sell all or part of shares of a private limited liability company was an integral part of procedure for transfer of shares of a private limited liability company, ensuring implementation of the pre-emptive right of company‘s shareholders to acquire company‘s shares being sold, which was established as imperative in the law.

      With regard to that, the SCL had stated that within the meaning of Article 6.167 of the Civil Code of the Republic of Lithuania the shareholder’s notice on intent to transfer company‘s shares could not be deemed a proposal to conclude an agreement, since the imperative to implement the pre-emptive right contradicted to the essential feature of offer which was a civil legal action based on free will. The SCL had noted that the pre-emptive right of the shareholders of a private limited liability company to acquire the shares being sold, also implied the prevailing safeguard applicable against the rights of the acceptor of an offer in case the offer was made to third persons without respect to pre-emptive right.

      Taking into account the above argumentation, the court of cassation had acknowledged on the merits the arguments of the appellate court, according to which a notice on sale of shares of a private limited liability company, made in accordance with the procedure established in Article 47 of the Law on Companies of the Republic of Lithuania (Article 6.167 of the Civil Code of the Republic of Lithuania), was refused to be legally considered an offer.