Redagavo: Ramunė Lūžaitė (1997

Consolidated version as of 1 January 2023

REPUBLIC OF LITHUANIA

LAW

ON STATE DEBT

22 August 1996 No I-1508

(As last amended on 20 December 2022 – No XIV-1696)

Vilnius

Article 1. Purpose of the Law

This Law shall stipulate borrowing by the Government of the Republic of Lithuania on behalf of the State, management of the obligations assumed when borrowing on behalf of the State, provision of state guarantees, as well as the relations related to the State’s right of claim against state borrowers and state-guaranteed borrowers.

Article 2. Definitions

1. ‘Insurer of export credit’ means a creditor exporter who has concluded an insurance contract with an insurance undertaking to cover the losses incurred as a result of non-receipt of payments deferred under commercial credit in respect of the exported goods manufactured, or services provided, in the Republic of Lithuania.

2. ‘Financial instrument’ shall be interpreted as defined in the Law of the Republic of Lithuania on Markets in Financial Instruments.

3. ‘Limit for net change in debt liabilities’ means the largest possible net change in liabilities over a budget year.

4. ‘Net change in debt liabilities’ means the difference between the amounts of obligations assumed and discharged by the Government when borrowing on behalf of the State over a certain period.

5. ‘Financial derivatives’ means the financial instruments referred to in points 4-10 of Article 3(15) of the Law on Markets in Financial Instruments.

6. ‘Other debt instruments’ means the documents attesting to an obligation assumed when borrowing (excluding the obligations assumed under Government securities issued, loan agreements, financial lease (leasing) contracts signed, state guarantees provided) to repay the sum of money indicated in the documents under the terms and conditions agreed upon/specified in these documents (commercial papers, promissory notes and bills of exchange, certificates of deposit, Government’s deposit obligation agreements, etc.).

7. ‘Creditor exporter’ means a legal person operating in the Republic of Lithuania and pursuing economic and commercial activities or a branch of an undertaking of a member country of the European Economic Area not having legal personality who exports to other countries the goods manufactured in the Republic of Lithuania or who exports services and applies to the buyer of these goods or services a deferral of payment for the goods sold or services provided (i.e. grants to the buyer commercial credit).

8. ‘Non-equity securities’ shall be interpreted as defined in the Law of the Republic of Lithuania on Securities.

9. ‘Loan’ means an instrument for borrowing or lending funds whereby, under a loan agreement, one party (the lender) transfers funds into ownership of the other party (the loan beneficiary), and the loan beneficiary undertakes to repay to the lender the same sum of money and to pay interest, unless the loan agreement stipulates otherwise. Such a loan agreement shall not cover issuance of securities or signing of other debt instruments.

10. ‘Debt repayment agreement’ means an agreement concluded by the Ministry of Finance of the Republic of Lithuania representing the Government and a state borrower or a state-guaranteed borrower on repayment of a debt to the State arising from the obligations not discharged or inappropriately discharged by these borrowers under an on-lent loan agreement or a state-guaranteed loan agreement or documents of issuance of state-guaranteed non-equity securities.

11. ‘International financial institution’ means an entity established by an international treaty to which the Republic of Lithuania is a party, an agreement entered into on the basis of this treaty or European Union legislation, having legal personality and carrying out the financial and/or investment activities specified in such an treaty, agreement or European Union legislation or a fund managed by such an entity.

12. ‘Foreign creditors’ means the legal or natural persons that have the seat of their personal and economic interests in other countries (outside the Republic of Lithuania) and permanently operate or reside in other countries or operate or reside in the Republic of Lithuania for a period not exceeding one year and have purchased Government securities or non-equity securities, have granted loans under loan agreements or other debt instruments.

13. ‘General government’ means a sector including the subsectors of central government (the Government and other entities attributed to this sector), local government (municipalities and other entities attributed to this sector) and social security funds (the State Social Insurance Fund, the Compulsory Health Insurance Fund and other entities attributed to this sector). The attribution of entities to the subsectors and classification according to sectors shall be specified by the Government or an institution authorised by it.

14. ‘State guarantee’ means the property obligation of the State to repay a debt in full or in part and to pay interest on the debt or part thereof to a domestic or foreign creditor for a state-guaranteed borrower.

15. ‘State guarantee to an international financial institution’ means the property obligation of the State to discharge, under the terms and conditions laid down in an international treaty of the Republic of Lithuania, an agreement entered into on the basis of this treaty or European Union legislation, the property obligations under agreements on the loans signed or guaranteed by the international financial institution, issue underwriting agreements or other borrowing/lending agreements in the event of full or partial default by the international financial institution or entities of third countries on the obligations stipulated in these agreements.

16. ‘State guarantee for a guarantee institution’ means the property obligation of the State to discharge obligations of a guarantee institution guaranteed by the State to the guarantee institution’s guarantee beneficiaries in the event of the guarantee institution’s full or partial default on its obligations under the guarantee.

17. ‘State-guaranteed guarantee institution’ (hereinafter: a ‘guarantee institution’) means a legal person established by the Government which, under a guarantee issued by it, ensures to a beneficiary of that guarantee the discharge of obligations in the amount and under the terms and conditions specified in that guarantee.

18. ‘State-guaranteed loan’ means a loan granted to a legal person of the Republic of Lithuania, a branch of an undertaking of a member country of the European Economic Area established in the Republic of Lithuania or the beneficiary of a state-supported loan referred to in the Law of the Republic of Lithuania on Higher Education and Research under an agreement concluded with a domestic or foreign creditor or under other debt instruments, where the discharge of obligations assumed thereunder in respect of repayment of a debt wholly or in part and payment of interest on the debt or part thereof to be repaid is guaranteed by the State.

19. ‘State-guaranteed borrower’ means a legal person of the Republic of Lithuania, a branch of an undertaking of a member country of the European Economic Area established in the Republic of Lithuania or the beneficiary of a state-supported loan referred to in the Law on Higher Education and Research who has received a state-guaranteed loan under an agreement, where the discharge of obligations assumed thereunder in respect of repayment of a debt wholly or in part and payment of interest on the debt or part thereof to be repaid is guaranteed by the State, also a legal person of the Republic of Lithuania or a branch of an undertaking of a member country of the European Economic Area established in the Republic of Lithuania which has issued state-guaranteed non-equity securities.

20. ‘State-guaranteed non-equity securities’ means non-equity securities issued by a legal person of the Republic of Lithuania or a branch of an undertaking of a member country of the European Economic Area established in the Republic of Lithuania, where the discharge of the obligations, as laid down in documents of issuance of such securities, to redeem of all or part of the securities, to pay the interest accrued on the securities or part thereof to be redeemed and other amounts payable under the documents of issuance of these securities is guaranteed by the State.

21. ‘Individual guarantee of a state-guaranteed guarantee institution’ (hereinafter: an ‘individual guarantee’) means an obligation of a guarantee institution to guarantee to a beneficiary of a guarantee of this institution, in the amount and under the terms and conditions specified in the guarantee, the discharge of obligations guaranteed by it.

22. ‘Portfolio guarantee of a state-guaranteed guarantee institution’ (hereinafter: a ‘portfolio guarantee’) means an obligation of a guarantee institution to guarantee to the beneficiary of a guarantee of that institution, in the amount and under the terms and conditions specified in the guarantee, the discharge of obligations guaranteed by it and included in the guaranteed portfolio.

23. ‘State on-lent loan’ (hereinafter: an ‘on-lent loan’) means a loan granted to a legal person of the Republic of Lithuania (except for budgetary institutions of the Republic of Lithuania other than the State Social Insurance Fund Board under the Ministry of Social Security and Labour of the Republic of Lithuania) and a branch of an undertaking of a member country of the European Economic Area established in the Republic of Lithuania from the funds borrowed on behalf of the State in accordance with the procedure laid down by the Government.

24. ‘State debt’ means the aggregate amount of the obligations assumed but not yet discharged by the general government entities entitled to borrowing in respect of the repayment to creditors of the funds borrowed under Government securities issued, loan agreements, financial lease (leasing) contracts signed and other debt instruments.

25. ‘State borrower’ means a legal person of the Republic of Lithuania, a branch of an undertaking of a member country of the European Economic Area established in the Republic of Lithuania which have been granted an on-lent loan under an agreement concluded with the State or under other debt instruments and which are under the obligation to the State to appropriately use and repay it and/or which have assumed obligations under loan repayment agreements.

26. ‘Funds borrowed on behalf of the State’ means the funds borrowed, in accordance with the procedure laid down by the Government, by the Ministry of Finance representing the Government and received under Government securities issued, loan agreements signed and other debt instruments.

27. ‘Domestic creditors’ means the legal or natural persons that have the seat of their personal and economic interests in the Republic of Lithuania, permanently operate or reside in the Republic of Lithuania or operate or reside in other countries for a period not exceeding one year and have purchased Government securities or non-equity securities, have granted loans under loan agreements or other debt instruments.

28. ‘Government’s deposit obligation agreement’ mean an agreement confirming the obligation assumed by the Government on behalf of the State to repay a sum of money received from a domestic or foreign creditor under the terms and conditions and in accordance with the procedure laid down in this agreement.

29. ‘Government securities’ means the securities issued by the Government on behalf of the State on the domestic or foreign markets and attesting to the right of holders thereof to receive, within fixed time limits, an amount corresponding to the nominal value thereof, interest or any other equivalent.

30. Other concepts used in this Law shall be interpreted as they are defined in the Civil Code of the Republic of Lithuania, the Law of the Republic of Lithuania on Insurance, the Law of the Republic of Lithuania on Tourism, the Law of the Republic of Lithuania on Insolvency of Legal Persons, the Law of the Republic of Lithuania on Public Sector Accountability, the Law of the Republic of Lithuania on a State of Emergency, the Law of the Republic of Lithuania on Civil Protection.

Article 3. Basic provisions of Government borrowing on behalf of the State and provision of state guarantees

1. A decision on the limit for net change in debt liabilities shall, on a proposal of the Government, be adopted by the Seimas of the Republic of Lithuania when passing a Law of the Republic of Lithuania on the Approval of Financial Indicators of the State Budget and Municipal Budgets for the corresponding year.

2. Government securities shall be issued, loans on behalf of the State shall be taken out, state guarantees shall be provided and obligations under other debt instruments shall be assumed by the Government in compliance with the limits established by law and in accordance with the procedure laid down in Articles 5 and 6 of this Law.

3. When borrowing on behalf of the State, the Government shall be represented by the Ministry of Finance. The Ministry of Finance shall, in accordance with the procedure laid down by the Government:

1) borrow funds on domestic and foreign markets by taking loans, issuing government securities and other debt instruments;

2) determine the characteristics of Government securities, the terms of issuance thereof and the provisions of collective actions by domestic or foreign creditors who have acquired the Government securities in connection with modification of the terms of issuance of the Government securities as well as the cases and procedure of their application, the terms and conditions of obligations under other debt instruments;

3) carry out operations with Government securities on domestic and foreign markets.

4. In managing on-lent loans, state guarantees and other property obligations, the Government shall be represented by the Ministry of Finance. The Ministry of Finance shall, by a decision of the Government and in accordance with the procedure laid down by it:

1) conclude delegation agreements with the manager of centrally managed state assets on the on-lent loans, state guarantees and other property obligations transferred for administration by the Ministry of Finance. The on-lent loans, state guarantees and other property obligations transferred to the manager of centrally managed state assets as well as the procedure for administering them shall be laid down by the Government;

2) write off the on-lent loans or debts recognised as non-performing, as referred to in Article 10 of this Law;

3) transfer, for consideration, a claim for the repayment of on-lent loans or debts and discharge of other property obligations related thereto, provided that the application of this measure is feasible in economic terms and that the application of this measure is in line with the principles of management, use and disposal of state assets;

4) where a state borrower or a state-guaranteed borrower increases the authorised capital by additional contributions, be permitted to acquire the shares of these borrowers at issue price by offsetting their debts to the State, provided that the application of this measure is feasible in economic terms and that the application of this measure is in line with the principles of management, use and disposal of state assets;

5) exercise other rights established by legal acts to the State as a creditor under agreements on repayment of on-lent loans, agreements on debt repayment and under other debt instruments.

5. In managing and administering the obligations assumed by the Government when borrowing on behalf of the State, administering on-lent loans, state guarantees and other property obligations, the Government shall be represented by the Ministry of Finance. The Ministry of Finance shall:

1) keep accounts of the funds borrowed, and obligations assumed, on behalf of the State under Government securities issued, loan agreements signed and other debt instruments and draw up sets of financial reports and reports on the implementation of the budget;

2) systematise, accumulate, store and process data on Government securities issued, the loans taken on behalf of the State, state-guaranteed loans, state-guaranteed non-equity securities, on-lent loans and other obligations under other debt instruments;

3) store originals of agreements on the loans obtained on behalf of the State, on-lent loan agreements, state guarantees, debts instruments related to the circulation of Government securities and other debt instruments, debt repayment agreements and other documents related to borrowing by the Government on behalf of the State and to management of the obligations assumed when borrowing on behalf of the State;

4) plan the borrowing requirement;

5) coordinate, after the close of a budget year, with creditors the balance of funds borrowed on behalf of the State;

6) use financial instruments (including derivatives) to manage the obligations assumed by the Government when borrowing on behalf of the State;

7) publish data on state borrowers and state-guaranteed borrowers in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation).

6. The Ministry of Finance or the manager of centrally managed state assets, where this manager administers the on-lent loans, state guarantees and other property obligations transferred by the Ministry of Finance, shall:

1) arrange the granting of on-lent loans and control their distribution, repayment and use and discharge of other financial obligations related to the on-lent loans;

2) analyse the financial position of state borrowers or state-guaranteed borrowers;

3) group the loans on-lent in accordance with the procedure laid down by the Minister of Finance, obligations under debt repayment agreements and state-guaranteed loans of state-guaranteed borrowers, state-guaranteed non-equity securities;

4) have the right, under the terms and conditions and in accordance with the procedure laid down by the Government, to revise the terms and conditions of repayment of an on-lent loan or debt and conclude with a state borrower or a state-guaranteed borrower an agreement on modification of the terms and conditions of the on-lent loan or a debt repayment agreement, provided that it is unfeasible in economic terms to initiate the opening of bankruptcy proceedings or recovery of the debt in accordance with the procedure laid down by the Code of Civil Procedure of the Republic of Lithuania.

7. All possible financial resources of the State, including new property obligations of the State, shall be employed to discharge all property obligations arising from the relationships regulated by this Law and assumed by the Government.

8. Existing and future assets of the State may not be pledged in order to secure the discharge of property obligations of the State, with the exception of the cases when Government securities are pledged under repurchase agreements and when financial collateral is provided using financial derivatives for the purpose of managing the obligations assumed by the Government when borrowing on behalf of the State.

9. The gold and foreign currency reserves of the Bank of Lithuania may not be pledged in order to secure the discharge of property obligations of the State.

10. The Government or an institution authorised by it may use the funds borrowed on behalf of the State only for the purposes indicated in this Law.

11. The Government or an institution authorised by it have the right to grant on-lent loans, with the exception of the cases when funds are obtained under the loan agreements stipulating otherwise. On-lent loan agreements with state borrowers shall be signed by the Minister of Finance or a person authorised by him.

12. A procedure for granting on-lent loans and state guarantees, repaying the on-lent loans granted and administering state guarantees shall be laid down by the Government.

13. Until property obligations have been fully discharged and without a written authorisation issued by the Ministry of Finance or the manager of centrally managed state assets, where this manager administers the on-lent loans, state guarantees and other property obligations transferred by the Ministry of Finance, and without first agreeing upon the terms and conditions of the carrying out of these actions, state borrowers or state-guaranteed borrowers, with the exception of credit institutions of the Republic of Lithuania and foreign states, beneficiaries of the state-supported loans referred to in the Law on Higher Education and Research and municipalities, shall not have the right to:

1) reorganise a legal person;

2) reduce the authorised capital;

3) sell or otherwise transfer, lease or pledge fixed assets, with the exception of the assets which are not used in the activities of the undertaking;

4) stand surety for or guarantee with their assets the discharge of obligations of other entities;

5) grant loans (with the exception of consumer credit);

6) invest assets in other economic entities;

7) assume new obligations through issuing debt securities, signing loan agreements (with the exception of the cases when a state on-lent loan is taken out), financial lease (leasing) contracts or other debt instruments (with the exception of the cases when a state guarantee is provided).

14. The restrictions established by the Republic of Lithuania Law on Companies and related to prohibition for companies to pledge their assets to shareholders when borrowing from the shareholders as well as restriction on the annual interest rate shall not apply to the relations governed by this Law.

15. Where the rights of claim secured by a state guarantee are transferred under the Law of the Republic of Lithuania on Securitisation and Covered Bonds, the state guarantee securing these rights of claim to be transferred shall be valid regardless of the fact that the transfer of the rights of claim under the state guarantee is prohibited or restricted.

Article 4. Purposes of Government borrowing on behalf of the State and provision of state guarantees

1. The Government may borrow on behalf of the State for the following purposes:

1) to finance the deficit of the state budget as well as to balance state cash flows;

2) to finance investments earmarked in the state budget;

3) to grant on-lent loans used for financing investment projects, implementing the objectives of promotion of the economy affected by an emergency and increasing the financial liquidity of business as well as for financing the payment of insurance compensations for deposits and/or liabilities to investors provided for in the Law of the Republic of Lithuania on Insurance of Deposits and Liabilities to Investors;

4) to cover state debt, also to accumulate the financial resources used to cover state debt;

5) to cover the debt liabilities of state social security funds as well as to balance the cash flows of these funds;

6) to discharge the guarantee obligations assumed by the State under the state guarantees provided;

7) to discharge the obligations of the Republic of Lithuania related to the implementation of European Union policies, including the accumulation and/or lending of reserve funds as provided for in European Union legislation, decisions of the institutions or organisations of the European Union and/or related contracts or agreements;

8) to achieve the goals stipulated in the Law of the Republic of Lithuania on the Approval of Financial Indicators of the State Budget and Municipal Budgets for the corresponding year and other goals, where a separate law has been passed to this end.

2. The Government may, on behalf of the State, provide a state guarantee in respect of:

1) loans used to finance investment projects;

2) loans used for implementing the objectives stipulated in the Law of the Republic of Lithuania on Financial Sustainability;

3) state-supported loans referred to in the Law on Higher Education and Research. The provisions of Article 8 of this Law shall not apply to the persons indicated in this point;

4) loans taken by a legal person of the Republic of Lithuania or a branch of an undertaking of a member country of the European Economic Area established in the Republic of Lithuania, where such loans are taken for the purpose of refinancing an on-lent loan or a state-guaranteed loan;

5) loans used for supplementary financing the working capital of undertakings critical for national security as indicated in the Law of the Republic of Lithuania on the Protection of Objects Critical for National Security, where these funds are used to achieve the strategic goals of the Republic of Lithuania;

6) loans and non-equity securities used for implementing the objectives of promotion of the economy affected by an emergency and increasing the financial liquidity of business.

3. The Government may, on behalf of the State, provide a state guarantee to an international financial institution under European Union legislation, decisions of institutions or organisations of the European Union and/or related contracts or agreements, international treaties to which the Republic of Lithuania is a party or agreements concluded on the basis of these treaties with the international financial institution.

4. A guarantee institution may provide guarantees in respect of:

1) loans used for financing investments, as taken from financial institutions the set of annual financial statements whereof for the last financial year has been audited;

2) loans used for supplementary financing working capital, as taken out from financial institutions the set of annual financial statements whereof for the last financial year has been audited;

3) payment of the price, or a part thereof, of plant and/or equipment under contracts of financial lease (leasing) of plant and/or equipment concluded with financial institutions the set of annual financial statements whereof for the last financial year has been audited;

4) partial payment of a pecuniary claim to the investor the set of annual financial statements whereof for the last financial year has been audited under factoring agreements for supplementary financing the client’s working capital;

5) effecting of a part of the deferred payment, under a contract for the purchase and sale of goods manufactured in the Republic of Lithuania concluded by a creditor exporter and/or under a contract for the provision of services concluded by a creditor exporter, to the creditor exporter or to the sponsoring investor under a factoring contract or covering of a part of an insurance benefit paid to the insurer of export credit of an insurance undertaking;

6) partial payment of a pecuniary claim to the investor under the bonds acquired by the issuer the set of annual financial statements whereof for the last financial year has been audited, as used for financing investments and/or supplementary financing working capital;

7) covering of a part of an insurance or guarantee benefit paid by an insurance undertaking under a suretyship insurance contract or by a financial institution under a financial guarantee provided for default on obligations of a tour organiser established in the Republic of Lithuania;

8) covering of a part of an insurance or guarantee benefit paid by an insurance undertaking under a suretyship insurance contract or by a financial institution under a financial guarantee, where the suretyship insurance or financial guarantee was provided in respect of the validity of an offer submitted by a manufacturer of goods, a supplier of goods, a provider of services or a contractor of works, performance of a contract concluded by it, discharge of obligations for the guarantee period, repayment of an advance or payment for the goods, services provided or works performed;

9) effecting of a part of the deferred payment, under a concluded contract for the purchase and sale of goods or under a concluded contract for the provision of services, to a manufacturer of goods or a provider of services who deferred the payment or to the sponsoring investor under a factoring contract or covering of a part of an insurance benefit paid to the insurer of commercial credit of an insurance undertaking;

10) the loans guaranteed by the financial institution which financial institutions may provide as financial collateral or otherwise pledge to the Bank of Lithuania thereby securing their obligations under the loans granted by the Bank of Lithuania or other operations of the Bank of Lithuania for its loans to the financial institution. The obligations of the guarantee institution under the guarantee referred to in this point shall be discharged if the beneficiary of a loan guaranteed by this guarantee institution fails to discharge all or part of his obligations under a loan guaranteed by an individual guarantee to the Bank of Lithuania or to another financial institution to which the Bank of Lithuania has transferred the loans guaranteed by the guarantee institution and provided as financial collateral or pledged otherwise.

5. The guarantees referred to in paragraph 4 of this Article shall be provided in accordance with European Union legislation on state aid.

Article 5. Borrowing on behalf of the State

1. A decision on borrowing on behalf of the State shall be adopted by the Ministry of Finance representing the Government for the purposes specified in Article 4(1) of this Law without exceeding the limit for net change in debt liabilities as approved by the Law of the Republic of Lithuania on the Approval of Financial Indicators of the State Budget and Municipal Budgets for the corresponding year.

2. The Ministry of Finance representing the Government must, when borrowing on behalf of the State and managing the obligations assumed when borrowing on behalf of the State, ensure the financing of state expenditure stipulated in laws of the Republic of Lithuania and the discharge of the assumed debt liabilities with borrowed funds at minimum cost and with acceptable risk over the medium-term period.

3. Agreements on the loans received on behalf of the State, the instruments related to the distribution of Government securities, transactions in financial derivatives and other debt instruments shall be commercial arrangements signed by the Minister of Finance or the Vice-Minister(s) of Finance authorised by him.

4. A legal opinion made available at the request of a creditor regarding a loan received on behalf of the State or other debt instruments as well as regarding other legal instruments related to state borrowing, and a legal opinion made available at the request of the distributor of Government securities regarding the instruments related to the distribution of the Government securities shall be signed by the Minister of Justice or a person authorised by him.

5. The funds borrowed on behalf of the State shall be obtained and repaid through a fiscal agent of the State being the Bank of Lithuania or another bank.

6. The Ministry of Finance shall have the right, in accordance with the procedure laid down by legal acts, to select a fiscal agent to carry out operations with Government securities. Subject to consent of the Ministry of Finance, the fiscal agent may lay down a procedure for carrying out these operations.

Article 6. State guarantees

1. A decision to provide a state guarantee in respect of a loan in excess of EUR 12 million or the equivalent amount in another currency, with the exception of the cases referred to in paragraph 2 of this Article, shall be adopted by the Seimas on a recommendation of the Government.

2. A decision to provide a state guarantee in respect of a loan not exceeding EUR 12 million or the equivalent amount in another currency, a decision to provide a state guarantee in respect of a loan or non-equity securities/state-guaranteed non-equity securities used for the purpose of promoting the economy affected by an emergency and increasing the financial liquidity of business and a decision to provide a state guarantee to an international financial institution shall be adopted by the Government in compliance with the Law of the Republic of Lithuania on the Approval of Financial Indicators of the State Budget and Municipal Budgets for the corresponding year, international treaties to which the Republic of Lithuania is a party or agreements entered into on the basis of these treaties or other laws.

3. A state guarantee, a state guarantee to an international financial institution and an agreement drafted on the basis of an international treaty to which the Republic of Lithuania is a party shall be signed by the Minister of Finance, whereas a legal opinion concerning the guarantee provided shall be signed, at the request of a creditor, by the Minister of Justice or a person authorised by him.

4. A guarantee fee shall be required for a provided state guarantee from a state-guaranteed borrower, with the exception of municipalities, state social security funds and the beneficiaries of a state-supported loan referred to in the Law on Higher Education and Research. The amount of the guarantee fee and rules for payment thereof shall be established by the Government. The amount of the guarantee fee shall be determined taking into consideration the strategic importance of the state-guaranteed borrower with regards to the State, the significance of a investment project under implementation or of the objective financed by the state-guaranteed loan or by state-guaranteed non-equity securities, the amount of the state-guaranteed loan taken and other criteria specified by the Government, unless laws of the Republic of Lithuania stipulate otherwise.

5. Property obligations of the State under state guarantees shall become state debt where bankruptcy or restructuring proceedings have been opened against a state-guaranteed borrower, the bankruptcy process is being conducted in respect thereof, it is in liquidation or has been liquidated, where a settlement agreement as indicated in the Law on Insolvency of Legal Persons is concluded with this borrower, also in other cases when the State systematically discharges its obligations under a guarantee for the state-guaranteed borrower.

Article 7. Establishment of guarantee institutions and state guarantee for a guarantee institution

1. The Government shall have the right to establish guarantee institutions providing the guarantees specified in Article 4(4) of this Law, provided that funds are earmarked for the implementation of certain programmes in the state budget for that year or state funds. The guarantees specified in Article 4(4) of this Law may be provided in the form of individual guarantees and/or portfolio guarantees.

2. The State shall guarantee the discharge of obligations of a guarantee institution under the guarantees specified in Article 4(4) of this Law. The Government shall annually set limits on obligations under guarantees for each guarantee institution. These limits may not exceed a limit set in the Law of the Republic of Lithuania on the Approval of Financial Indicators of the State Budget and Municipal Budgets for the corresponding year.

3. Guarantees of a guarantee institution shall be signed by the head of the guarantee institution or a person authorised by him in accordance with the procedure laid down by the Government or an institution authorised by it. The guarantees provided by the guarantee institutions established by the Government as specified in Article 4(4) of this Law shall be held equivalent to a state guarantee.

4. In implementing the programmes carried out by the State, a guarantee institution shall, in accordance with the procedure laid down by the Government or an institution authorised by it, examine applications for the provision of guarantees specified in Article 4(4) of this Law lodged by legal persons of the Republic of Lithuania, branches of undertakings of member countries of the European Economic Area established in the Republic of Lithuania or citizens of the Republic of Lithuania or other persons enjoying under European Union law the same rights as citizens of the Republic of Lithuania, keep accounts of obligations under the guarantees provided, control compliance with the terms and conditions of the guarantees and apply sanctions to borrowers and/or guarantors of the guarantee institution which fail to comply with the terms and conditions of the guarantees.

5. Activities of a guarantee institution shall be supervised and reporting of this institution shall be specified by an institution authorised by the Government.

6. A guarantee institution must, not later than within four months after the close of the financial year, submit to the Government a set of annual financial statements of an undertaking and the auditor’s report.

7. Where losses of a guarantee institution amount to one fourth of the authorised capital, the Government must suspend the provision of new guarantees.

Article 8. Control of financial activities of state borrowers and state-guaranteed borrowers

1. The persons wishing to receive an on-lent loan or a state guarantee must submit to the Ministry of Finance documents specified by the Government in respect of a loan received or non-equity securities issued.

2. State borrowers and state-guaranteed borrowers must submit to the Ministry of Finance or to the manager of centrally managed state assets, where this manager administers the on-lent loans, state guarantees and other property obligations transferred by the Ministry of Finance, annual economic and financial activity reports, the auditor’s report concerning the annual performance during the tenure of an on-lent state-guaranteed loan or the period of use of the funds received from the issuance of state-guaranteed non-equity securities, the auditor’s report for another period at the request of the Ministry of Finance or the manager of centrally managed state assets, also information about existing and newly opened accounts with credit institutions of the Republic of Lithuania and foreign states and changes in the accounts of the credit institutions of the Republic of Lithuania and foreign states and other details indicated in agreements.

3. Payment for audit services shall be effected from funds of a state borrower or a state-guaranteed borrower.

4. State and municipal control institutions and agencies (hereinafter: ‘control institutions and agencies’) shall, in accordance with the procedure laid down by legal acts, verify the economic and financial position of state borrowers and state-guaranteed borrowers, also the granting of on-lent loans and the provision of state guarantees, the use according to the purpose and repayment of the on-lent loans and the funds received from the issue of state-guaranteed non-equity securities.

5. A state borrower or a state-guaranteed borrower must submit to the Ministry of Finance or to the manager of centrally managed state assets, where this manager administers the on-lent loans, state guarantees and other property obligations transferred by the Ministry of Finance, audit firms, control institutions and agencies the documents required by them within the time limits laid down by them, with the exception of the documents the procedure for submission whereof is laid down by the Government.

Article 9. Legal consequences of default on obligations

1. In the case of delay in the discharge of the property obligations specified in on-lent loan or debt repayment agreements, late payment interest shall be stipulated in these agreements and charged for each day of delay. The amount of late payment interest shall be calculated on the basis of the weighted average of the annual interest rate on Government Treasury Bills, as issued by auction, for the previous calendar quarter, increased by 10 percentage points, divided by 360. If no Government Treasury Bills have been issued by auction in the previous calendar quarter, the last preceding amount of late payment interest shall be applied. The Government or, in the case of the granting of state-supported loans referred to in the Law on Higher Education and Research, an institution or agency authorised by it shall have the right to release a state borrower from the payment of calculated but not paid late payment interest on on-lent loans or debts not repaid on time and on unpaid interest or to suspend the calculation of late payment interest for a state borrower or a state-guaranteed borrower, also to release these borrowers from the payment of the unpaid difference in exchange rates, where this difference has been calculated after the borrowers have exceeded a time limit laid down for the discharge of an obligation, and from the payment of the unpaid difference in exchange rates, where after the expiry of the time limit laid down for the discharge of the obligation the currency in which the payment is to be made has depreciated due to a change in exchange rates. The conditions of release from the payment of late payment interest and from the payment of a difference in currency exchange rates as well as conditions of suspension of the calculation of late payment interest shall be as follows:

1) the state borrower or the state-guaranteed borrower is unable to pay the entire debt, including late payment interest and/or difference in exchange rates, but, having regard to the feasibility and costs of recovery of debt and potential detrimental effects of forced recovery of debt at the national or regional level and subject to exemption of the state borrower or the state-guaranteed borrower from the payment of calculated but unpaid late payment interest, or part thereof, and/or from the payment of unpaid difference in exchange rates, he undertakes to pay the remaining part of the debt and, if possible, provides debt repayment security instruments;

2) the state borrower or the state-guaranteed borrower being a natural person as well as a farmer, the owner of an individual enterprise or a member of a partnership is in a difficult economic and social situation. The criteria according to which it is determined that a state borrower or a state-guaranteed borrower being a natural person as well as a farmer, the owner of an individual enterprise or a member of a partnership is in a difficult economic and social situation shall be specified by the Government or an institution authorised by it.

2. The Ministry of Finance or, when granting the state-supported loans referred to in the Law on Higher Education and Research, an institution or agency authorised by the Government shall have the right to recover from a state borrower or a state-guaranteed borrower an on-lent loan or debt or part thereof which has not been repaid on time, unpaid interest, late payment interest, a difference in exchange rates or other payments provided for under agreements as well as the expenses incurred by the State and related to the filing of a claim for the discharge of an obligation. If a state-guaranteed borrower fails to discharge contractual obligations, as a result whereof the State, as the guarantor, has to discharge them, the Ministry of Finance or, when granting the state-supported loans referred to in the Law on Higher Education and Research, an institution or agency authorised by the Government shall acquire the right of recourse against the state-guaranteed borrower. If the state borrower or the state-guaranteed borrower exceeds a time limit laid down for the discharge of an obligation and the currency in which the payment is to be made has depreciated after the expiry of this time limit due to a change in exchange rates, these borrowers must pay to the Ministry of Finance or, when granting the state-supported loans referred to in the Law on Higher Education and Research, to an institution or agency authorised by the Government a difference between the exchange rate at the time of expiry of the time limit for the discharge of the obligation and the exchange rate at the time of payment. Decisions of the Ministry of Finance regarding the recovery of a debt from a state borrower or a state-guaranteed borrower shall be delivered to bailiffs for execution in accordance with the procedure laid down by the Code of Civil Procedure.

3. Where the manager of centrally managed state assets administers the on-lent loans, state guarantees and other property obligations transferred by the Ministry of Finance, it shall have the right to take over into ownership of the State the assets of a state borrower or a state-guaranteed borrower or of third parties if they have not been realised in accordance with the procedure laid down by the Code of Civil Procedure and/or the Law on Insolvency of Legal Persons, to administer and realise them in accordance with the procedure laid down by the Government or an institution authorised by it in order to discharge all property obligations of the borrowers as well as to compensate for the expenses incurred by the State and by the manager of centrally managed state assets in connection with the filing of a claim for the discharge of an obligation.

4. If a state borrower or a state-guaranteed borrower fails to timely discharge property obligations under agreements or if a security for the discharge of an obligation is insufficient, the Ministry of Finance or the manager of centrally managed state assets, where this manager administers the on-lent loans, state guarantees and other property obligations transferred by the Ministry of Finance, may request that these borrowers provide additional security for the discharge of the obligation.

5. If a state borrower or a state-guaranteed borrower fails to timely discharge property obligations and it is unfeasible in economic terms to amend the terms and conditions of repayment of an on-lent loan and/or debt in respect of this borrower or to take and deliver for execution a decision of the Ministry of Finance to recover the debt, the Ministry of Finance or the manager of centrally managed state assets, where this manager administers the on-lent loans, state guarantees and other property obligations transferred by the Ministry of Finance, shall have the right to refer, in accordance with the procedure laid down by legal acts, to a court for the opening of bankruptcy proceedings against the state borrower or the state-guaranteed borrower.

Article 10. Recognition of on-lent loans or debts as non-performing

1. An on-lent loan or debt which may be recognised as non-performing means a loan or debt or part thereof not repaid by a state borrower or a state-guaranteed borrower, also unpaid interest, late payment interest and other property obligations which it is impossible or unfeasible to recover for the following reasons:

1) in the event of the state borrower’s or the state-guaranteed borrower’s decease, there are no successors who could assume the state borrower’s or the state-guaranteed borrower’s property obligations to the State (when granting the state-supported loans referred to in the Law on Higher Education and Research – in the event of decease of the beneficiary of a state-supported loan); the state borrower or the state-guaranteed borrower has been liquidated;

2) a settlement agreement specified in the Law on Insolvency of Legal Entities is concluded with the state borrower or the state-guaranteed borrower or restructuring proceedings against these borrowers are closed;

3) if, upon transfer for consideration of a claim to repay on-lent loans or debts and to discharge other property obligations related thereto, the amount obtained is less than the on-lent loan or the debt, the remaining part of the on-lent loan or debt which has not been obtained shall be recognised as non-performing;

4) after the expiry of more than one year since the commencement of recovery actions, no assets of the state borrower or the state-guaranteed borrower are identified or the assets identified are non-liquid (they cannot be realised). If the assets identified are sufficient only to cover a part of the debt, the remaining part of the debt shall be recognised as non-performing;

5) the state borrower or the state-guaranteed borrower being a natural person as well as a farmer, the owner of an individual enterprise or a member of a partnership is in a difficult economic and social situation. The circumstances attesting to the difficult economic and social situation must be supported by the documents issued by competent authorities.

2. A decision on recognition of an on-lent loan or debt as non-performing shall, on a proposal of the Ministry of Finance, be adopted by the Government or, when granting the state-supported loans referred to in the Law on Higher Education and Research, by an institution or agency authorised by the Government.

3. An on-lent loan or debt recognised as non-performing on the grounds referred to in points 1, 2 and 3 of paragraph 1 of this Article shall expire and be written off from relevant accounting documents.

4. An on-lent loan or debt recognised as non-performing on the grounds referred to in points 4 and 5 of paragraph 1 of this Article shall, in accordance with the procedure laid down by the Government or an institution authorised by it, be audited, namely, feasibility of recovery thereof shall be reviewed, the financial position of borrowers shall be analysed, and search for assets shall be carried out. Upon establishing feasibility of the recovery of the on-lent loan or debt (or part thereof), recovery shall be executed in accordance with the procedure laid down by laws of the Republic of Lithuania.

5. The procedure for writing off, accounting for as well as auditing on-lent loans or debts recognised as non-performing shall be laid down by the Government or an institution authorised by it.

Article 11. Reporting

1. After the close of a budget year, the Government shall submit to the Seimas a national set of financial statements together with the information on state debt drawn up in accordance with the procedure established by the Ministry of Finance.

2. Information on state debt shall be provided in an annual national set of financial statements in accordance with the procedure laid down by the Law on Public Sector Accountability.

I promulgate this Law passed by the Seimas of the Republic of Lithuania.

PRESIDENT OF THE REPUBLIC ALGIRDAS BRAZAUSKAS