Lithuania - Recent Proposals for Amending the Republic of Lithuania Law on Companies
- Roschier, Attorneys Ltd. - Finland
In order to facilitate the conditions for starting a business, enhance protection of investors, improve the management of enterprises and establish definite rules which clearly determine reimbursement to members of the Board or the Supervisory Board for their activities in a company, as well as to provide a possibility of giving financial support for the acquisition of the company’s shares, the Ministry of Economy of the Republic of Lithuania has presented the Draft Law Amending the Law on Companies. The amendments provided in the Draft Law would require amendments in the Civil Code and the Code on Administrative Offences accordingly.
The main proposed amendments are as follows:
1. Currently the Law on Companies determines that the minimum authorized capital of a private limited liability company (LTL 10,000) must be fully paid up while registering a company. The proposal is to eliminate this requirement by establishing that incorporators may themselves determine the time limits for the payment of initial contributions:
i. the shares constituting the minimum authorized capital should be fully paid up within the time period set (in any case not exceeding 12 months after the signing date of the act of establishment or the memorandum of association) and according to the terms and conditions provided for in the act of establishment or the memorandum of association;
ii. if the incorporators decide not to pay up the shares constituting the minimum authorized capital untill the registration of the company is complete, they will not be obliged to open a settlement account;
iii. if the shareholders of a company fail to pay up the shares within the set time limit, the management body of the company will then be obliged to refer to court for the redemption of the shares within 30 days;
iv. failure to act as stated in the clause above should incur administrative liability for the management body of the company.
2. In accordance with the conditions established in the Law on Companies, a company, would have a right to provide financial support for the acquisition of the company’s shares, whereas currently the Law on Companies does not provide shareholders, devoid of own resources, with a possibility of enhancing their shareholding by borrowing from the company.
3. Presently the Law on Companies does not oblige companies to form a collegial (supervisory or management) body. The proposal is to lay down an obligation for a public limited liability company to establish a collegial body – either a supervisory board or a management board. Moreover, the management board, would under certain conditions, have a right to execute supervisory functions in a company (which under the Law on Companies are attributed to the supervisory board). If a supervisory board is not formed in the company, its functions may not be assigned to other management bodies according to the current wording of the Law on Companies.
4. The proposal is to determine that members of collegial bodies would be entitled to receive not only bonuses, but other benefits as well.
5. Whereas the legal status of a company’s manager is peculiar and basically coincides with legal relations of a civil nature, the proposal is to establish a possibility of concluding either an employment contract or a civil agreement with the manager of a company.