Official translation
REPUBLIC OF LITHUANIA
LAW ON COMMERCIAL BANKS
21 December 1994 No. I-720
Vilnius
as last amended by 20 June 2002 No. IX-977
CHAPTER I
GENERAL PROVISIONS
Article 1. The Purpose of the Law
The purpose of this Law is to regulate the activities of commercial banks (hereinafter referred to as "banks") in order to assure a stable, credible, efficient and safe system of banks.
The Law shall set out the procedure and conditions for establishing and licensing banks and their subdivisions as well as the character of their activities, reorganisation and liquidation.
Banks and their subdivisions shall be registered in accordance with the procedure established by the Law of the Republic of Lithuania on the Register of Enterprises.
In their activities banks shall be guided by the Law of the Republic of Lithuania on Companies and other legal acts unless this Law provides otherwise, as well as by their statutes/articles of association.
This Law shall not apply to the banks whose activities are regulated by individual laws.
Article 2. Definitions
Bank - an enterprise operating on the basis of share capital, engaged in the business of accepting deposits and other repayable funds, extension of loans, assuming all the risks and responsibility related thereto; it also engages in other activities specified by this Law, carrying out all or part of the transactions referred to in Article 25 of this Law.
Subsidiary - a bank in which any other bank controls directly or indirectly a proportion of the authorised capital entitling it to more than 50 per cent of voting rights or a proportion of the authorised capital enabling it to control management of this bank.
Branch - a subdivision of a bank registered in the Republic of Lithuania or a foreign state, or a subdivision of a foreign bank in the Republic of Lithuania, without the rights of a legal person, operating on behalf of the bank in a place other then the place where the registered office of the bank is situated and carrying out at least one of transactions under the authorisation of the bank which is liable for the transactions and activities of the branch to the extent of all its assets;
Representative office - a territorial subdivision of a bank representing the bank abroad or in the Republic of Lithuania which, however, is not engaged in transactions and any other commercial and economic activity.
Banking licence - a written authorisation granted by the Bank of Lithuania to a bank to engage in the activities specified in its statutes/s, carrying on all or part of the transactions referred to in Article 25 of this Law.
Qualifying holding - one-tenth or larger portion of the share or voting capital of the bank acquired or managed directly or indirectly by legal or natural persons or a group of such persons.
Controlling interest- a qualifying holding acquired or managed directly and/or indirectly by legal or natural persons enabling its owner or holders to control management and activities of the bank.
Shares acquired and/or managed directly - a portion of share capital which a shareholder has acquired and/or manages in his or her own name or delegates the powers of management thereof to a third person.
Shares acquired and/or managed indirectly - a portion of share capital acquired and/or managed through property relations by a shareholder or a group of shareholders or a third person through a group of shareholders.
Article 3. Prohibitions
It shall be prohibited to engage in credit activities without a banking licence.
The words "bank", "commercial bank" or any other combinations or derivatives of these words may be used in their name or for advertising or any other purposes only by legal persons registered in the Republic of Lithuania which have been issued with a banking license according to the procedure established by this Law.
Words specified in paragraph 2 hereof, as well as their combinations and derivatives may be used in the names of other economic entities provided the context in which they occur implies that such usage is not associated with the activities of the bank.
The word "state" or derivatives of the word may only be used in a bank's name where at least 51 per cent of the bank's share capital belongs to the State of Lithuania by the right of ownership.
Article 4. Name and Seal of a Bank
The name of a bank or its subdivisions must include the words "bank" or "commercial bank". The name of a bank and its logo must be registered according to the procedure established by the laws of the Republic of Lithuania.
The seal must bear a full or abbreviated name of the bank.
Article 5. Liability of Banks
A bank shall be a legal person of limited liability. It shall not be liable for the obligations of the shareholders and/or founders, and the shareholders and/or founders shall be liable for the obligations of the bank only to the extent of the assets they have transferred to the bank either as founders or by acquiring shares thereof.
A bank shall not be liable for the obligations of the state, nor the state shall be liable for the obligations of banks, except in cases when the state assumes such liability.
Article 6. Activities of Foreign Banks in the Republic of Lithuania
A foreign bank in the Republic of Lithuania may:
[Version of subparagraph 1) as of the day of accession of the Republic of Lithuania to the European Union:
2) acquire shares of a bank which is being founded or of a functioning bank and, subject to the authorisation of the Bank of Lithuania, acquire a qualifying holding of a functioning bank;
3) establish subsidiaries/branches and representative offices of a bank.
A subsidiary of a foreign bank may be established as a private or public company only in a closed manner. Only banks may be founders of a subsidiary of a foreign bank. The memorandum of association of the bank shall be drawn up in accordance with the procedure provided for in the Law of the Republic of Lithuania on Companies.
[Version of paragraph 2 as of the day of accession of the Republic of Lithuania to the European Union:
A subsidiary of a foreign bank may be established as a private or public company. At least one founder of a subsidiary of a foreign bank must be a foreign bank which acquires the controlling interest of the bank which is being founded. The memorandum of association of the bank shall be drawn up in accordance with the procedure provided for in the Law of the Republic of Lithuania on Companies.]
Subsidiaries/branches and representative offices of foreign banks may commence their activities in the Republic of Lithuania subject to authorisations issued by the Bank of Lithuania for setting up of subsidiaries/branches or representative offices and their operation as well as their registration with the Register of Enterprises. Authorisations for subsidiaries/branches and representative offices of foreign banks shall be issued in accordance with the procedure established by the Bank of Lithuania.
The Bank of Lithuania shall grant a banking license to a foreign bank subsidiary provided:
2) the core capital of the subsidiary which is being founded is no less than the minimum core capital set by the Bank of Lithuania and is fully paid-in;
3) the laws of the foreign state which has jurisdiction over the foreign bank permit its banks to set up subsidiaries abroad, and there is no objection to that on the part of the banking supervisory institution of that country;
4) the statutes/articles of association of the bank have been registered in accordance with the procedure established by the laws of the Republic of Lithuania.
The Bank of Lithuania shall grant an authorisation for a subsidiary/branch of a foreign bank to be established and to operate provided:
1) the Republic of Lithuania has concluded an agreement with a foreign state on the security of capital investments and legal assistance, or a foreign bank provides sufficient guarantees to the Bank of Lithuania that it will assume liability for the operation of its subsidiary/branch in the Republic of Lithuania;
2) the regulations of the subsidiary/branch are in compliance with the laws and other legal acts of the Republic of Lithuania;
3) the foreign bank has a banking license issued by the state under whose jurisdiction it is operating;
4) the financial position of the bank is sound and stable and, according to the criteria set by the Bank of Lithuania, it is rated as sound, and the banking supervisory institution of the state having jurisdiction over the bank has no objection to the establishment of a subsidiary/branch of the bank in the Republic of Lithuania;
5) the Bank of Lithuania has signed an agreement with the banking supervisory authority of that state on supervision of the operation of the subsidiary/branch and on provision of information, or the banking supervisory authority of the foreign state has assumed unilateral obligations to supervise the operations of the subsidiary/branch of a bank of that state and to provide information to the Bank of Lithuania;
6) documents referred to in paragraph 6 hereof have been submitted.
A foreign bank seeking an authorisation for setting up a subsidiary/branch and its operation in Lithuania, must submit to the Bank of Lithuania the following documents:
3) the statutes/articles of association of the bank/founder, the licence, registration certificate or any other documents confirming the right to engage in banking;
6) documents certifying that the premises which will be used by the subsidiary/branch meet the requirements set forth by the Bank of Lithuania;
7) a written consent of the banking supervisory authority of the state having jurisdiction over the foreign bank to establish a subsidiary in the Republic of Lithuania if it is provided for in the laws of that foreign state;
8) other additional documents at the request of the Bank of Lithuania necessary for the adoption of a decision.
A subsidiary/branch of a foreign bank shall have the right to accept deposits and other repayable funds into the accounts opened for its customers and manage them in the Republic of Lithuania provided:
1) the bank which has established it has the right to accept deposits and other repayable funds into the accounts opened for its customers in its home country;
2) the deposits held at the subsidiary/branch of a foreign bank are insured or are covered by any other protection under the legislation of the home country of the bank which has established a subsidiary/branch and the terms and the conditions of deposit insurance/safety guarantees are no less favourable than those provided by the laws of the Republic of Lithuania or if the deposits held at the subsidiary/branch of the foreign bank are insured pursuant to the laws of the Republic of Lithuania.
The capital of the foreign bank which is establishing its subsidiary/branch in the Republic of Lithuania must be no less then the minimum core capital determined by the Bank of Lithuania.
The activities of a subsidiary or a branch of the foreign bank shall be governed by the laws and other legal acts of the Republic of Lithuania.
The subsidiaries/branches and representative offices of the foreign bank shall be registered in accordance with the procedure laid down in the Law of the Republic of Lithuania on the Register of Enterprises.
A foreign bank subsidiary/branch shall have the right to establish its other subdivisions in the place other than the place of its head office, if this is provided in the statutes/articles of association of the subsidiary/branch, and to carry out all the operations set out in the statutes/articles of association of the branch.
Article 7. Founders of the Bank
Legal and natural persons of the Republic of Lithuania and enterprises without the rights a legal person, as well as foreign banks which have concluded a memorandum of association in accordance with the procedure prescribed by the Law of the Republic of Lithuania on Companies may be founders of a bank. The memorandum shall define the founders' rights and duties at the moment of founding the bank, as well as their liability for failure to perform their obligations. The minimum number of founders may not be less than 7. Each founder of a bank must also be its shareholder who acquired at least 2 per cent of the bank's share capital at the moment of founding of the bank.
[Version of paragraph 1 as of the day of membership of the Republic of Lithuania in the European Union:
Legal and natural persons as well as enterprises without the rights a legal person of the Republic of Lithuania and foreign countries, which have concluded a memorandum of association in accordance with the procedure set out in of the Law of the Republic of Lithuania on Companies may be founders of a bank. The memorandum shall define the founders' rights and duties at the moment of founding of the bank, as well as their liability for failure to perform their obligations. The minimum number of founders may not be less than 7. Each founder of a bank must also be its shareholder who acquired at least 2 per cent of the bank's share capital at the moment of founding of the bank.
The provision of paragraph 1 of this Article, relating to the number of founders shall not apply to the founders of a foreign bank or the founders of a subsidiary of a bank registered with the Register of the Enterprises of the Republic of Lithuania or when a bank is being established by the Government of the Republic of Lithuania.
Article 8. Establishment of a Bank
A bank may be founded in a closed or an open manner.
After registration of the statutes/articles of association of the bank in accordance with the procedure established by the Law of the Republic of Lithuania on the Register of Enterprises, issue of shares and accumulation of the core capital, the founders of the bank shall file an application for a banking licence to the Bank of Lithuania.
The shares of the bank issued during its founding may not be offered for sale publicly irrespective of the manner in which the bank was founded until the bank is registered in accordance with the procedure established by law.
Where a functioning public or private company intends to engage in the business of banking, the provisions of the Law of the Republic of Lithuania on Companies relating to reorganisation of the company by restructuring shall apply. Following adoption of a resolution by the general shareholders' meeting of the company to engage in the business of banking, the company may apply to the Bank of Lithuania for a licence.
Upon been granted a licence by the Bank of Lithuania and after registration in the manner prescribed by the Law of the Republic of Lithuania on the Register of Enterprises, the bank shall acquire the right to commence its activities. Amendments to the statutes/articles of association of the bank, regulations of its subsidiaries/branches and representative offices as well to the regulations of subsidiaries/branches and representative offices of foreign banks shall be registered in accordance with he procedure established by the Law of the Republic of Lithuania on the Register of Enterprises, subject to a prior authorisation of he Bank of Lithuania.
Upon being granted a licence by the Bank of Lithuania and having been registered in the manner laid down in the Law of the Republic of Lithuania on the Register of Enterprises, a bank acquires the right to commence its activities. Amendments to the statutes/articles of association of the bank shall be registered following the procedure laid down in the Law of the Republic of Lithuania on the Register of Enterprises, subject to a prior authorisation of the Bank of Lithuania.
Article 9. Establishment of Subsidiaries/Branches and Representative Offices of the Bank
Subsidiaries/branches and representative offices of a bank shall be established in the Republic of Lithuania and abroad subject to an authorisation of the Bank of Lithuania and shall be registered according to the procedure established by the laws of the Republic of Lithuania. Other subdivisions of the bank shall be established pursuant to the procedure provided for in the statutes/articles of association of the bank. They shall function without exceeding their powers granted to them by the bank and in compliance with the regulations approved by the bank.
Article 10. Application for Banking Licence
The application for a banking licence must contain the following:
4) the names of the chairmen of the bank's supervisory board and the management board as well as of the head of the bank's administration.
The application shall be accompanied by the following documents and information:
2) the founding documents of the bank (the memorandum of association, minutes of the statutory meeting, the resolution on the establishment of the bank and the certificate of registration of the bank's name);
3) a three-year programme of economic activities/business plan completed in the form and contents prescribed by the Bank of Lithuania, and a description of structural organisation of the bank and the services it intends to provide by it;
4) information about the members of the bank's supervisory board and management board, the chairman of the management board and the chief accountant/financier: their age, educational background, citizenship, knowledge of the Lithuanian language, description of work experience, professional qualifications, participation in the administrative bodies of other enterprises, participation in the activities of other enterprises with own capital, their place of residence, and information whether he has had any convictions;
5) a document of the banking supervisory authority of the foreign state under whose jurisdiction the foreign bank is operating, certifying that this authority does not object to the establishment of a subsidiary of the bank in the Republic of Lithuania;
6) the list of the bank's founders and shareholders compiled in the form prescribed by the Bank of Lithuania;
8) documents and information about the status of the bank's founders and shareholders, the origin of the funds used for the acquisition of the bank's shares, the financial position, participation in the management of other enterprises and about their share in the capital of these enterprises, as well as the relations of kinship, property and management between the founders and the shareholders;
9) documents certifying that the premises which will be used by the bank meet the requirements established by the Bank of Lithuania;
10) a document certifying payment of the stamp duty for the banking licence.
An operating company, upon adopting a decision to be reorganised into a bank, must terminate, prior to the issue of a banking licence or within the period specified therein, its previous activities and, in addition, submit the following:
1) the founding documents, the resolution of the general shareholders' meeting to be reorganised into a bank and the reorganisation plan;
2) description of its former activities, financial statements of the preceding and current year which are submitted together with the report of independent auditors, information about the structure of the share capital, and the owners of qualifying holdings;
3) documents verifying that the company holds a sufficient amount of capital necessary for banking activities;
Article 11. Decision on Granting of a Banking Licence
The Bank of Lithuania shall, within 6 months of the date of the receipt of the application, adopt a decision on granting a banking licence and notify the applicant about it in writing. If, under the procedure set out in paragraph 4 of Article 10 of this Law, the Bank of Lithuania requested additional documents, the six-month time-period shall be calculated from the date of the receipt of all the documents and information necessary for making a decision. The state and municipal institutions, as well as enterprises, agencies and organisations must, at the request of the Bank of Lithuania, provide all the available information concerning the founders and shareholders of the bank, their financial position, activities, established violations of laws and other legal acts, the findings of the checks and revisions as well as other information necessary for the Bank of Lithuania in order to adopt a decision concerning the issue of a banking licence.
A banking licence issued by a decision of the Bank of Lithuania may include conditions and limitations on certain operations for which the bank in question is not yet ready.
Conditions and limitations stipulated in the banking licence shall also apply to the subdivisions of the bank.
The Bank of Lithuania, when communicating to the applicant its decision to refuse granting a banking licence or to grant a licence with certain conditions and limitations, shall present a written justification of such decision and duly inform about it the Administrator of the Register.
The management board of the Bank of Lithuania shall consider the application and issue a banking licence only in such cases when the documents submitted and the available information prove that:
1) the statutes/articles of association of the bank about to be founded are in conformity with the laws and other legal acts of the Republic of Lithuania;
3) the laws and other legal acts of the Republic of Lithuania have not been violated during the founding of the bank;
4) the bank's chief executive officers/members of the management board and heads of the administration possess the requisite qualifications, are of high moral standing and have experience in banking;
5) the financial position of the founders and shareholders is good and stable, they are persons of high moral standing, and the origin of the funds used for the acquisition of the shares of the bank which is being founded is legal;
6) the premises and equipment owned or rented by the bank meet the requirements prescribed by the legal acts of the Bank of Lithuania for carrying out banking operations;
7) the founders have paid the state charges.
The banking licence shall be issued for an unlimited term and may not be transferable.
The limitations imposed on the banking licence shall be lifted by a decision of the Bank of Lithuania.
State charges established by the Law of the Republic of Lithuania on Fees and Charges and other laws shall be paid for the granting of a banking licence.
A decision to refuse granting of a banking licence may be appealed against in court within 10 days of its adoption.
Article 12. Revocation of the Banking Licence
The banking licence shall become invalid as of the day the Bank of Lithuania adopts a decision to revoke it by reason of:
Article 13. Revocation of the Banking Licence upon the Request of the Bank
Upon adopting a decision on self-liquidation, the bank shall file to the Bank of Lithuania a written application seeking authorisation for liquidation and revocation of the banking licence. The application must be accompanied by the last balance sheet and the scheme for settling its creditors' claims.
The Bank of Lithuania shall grant an authorisation for self-liquidation if the bank is in a position to fully satisfy the creditors' claims within the time period acceptable to them. Upon the settlement of the creditors' claims the Bank of Lithuania shall revoke the banking licence.
Article 14. Shareholders and Shares of the Bank
A shareholder of the bank shall be a natural or legal person or an enterprise without the rights of a legal person who has acquired at least one share of the bank in accordance with the procedure established by law. The number of the bank's shareholders may not be less than 7, with the exception of cases when the controlling interest of the bank is held by the Government of the Republic of Lithuania, a bank registered in the Register of Enterprises of the Republic of Lithuania or a foreign bank.
It shall be prohibited to issue bearer shares for the formation of the bank's share capital.
An individual who acquires a qualifying holding in the bank without the authorisation of the Bank of Lithuania shall have no right to vote at the general shareholders' meeting.
A non-monetary/property contribution for the acquired bank shares may be only immovable property necessary for guaranteeing the direct activities of the bank. The portion of the bank's share capital paid in non-monetary/property contributions may not be more than 20 per cent of the bank's share capital.
By the decision of the bank supervisory board, the bank may repurchase its shares, however, their nominal value may not exceed 5 per cent of the bank's share capital.
The following entities may not be shareholders of a bank:
1) bodies of state power and administration, with the exception of the Government and municipalities of the Republic of Lithuania;
5) persons who have been convicted for the offences against economy and business practices and the financial system;
6) persons who cannot provide any proof that the funds used for the acquisition of shares have been acquired legally;
8) economic entities which refuse to supply information to the Bank of Lithuania about their owners, activities and the financial position.
The Government and municipalities of the Republic of Lithuania shall be prohibited from acquiring and holding non-voting shares of the bank.
To increase the share capital, new shares shall be issued by the decision of the bank's shareholders. The newly issued bank shares must be subscribed for and fully paid up within the time-period set out in the subscription agreement, but not longer than 12 months from the date of the shareholders' meeting which passed the resolution to issue new shares.
If within 12 months of the date of the shareholders' meeting the amendments to the bank statutes/articles of association relating to the increase of share capital are not registered in accordance with the procedure established by the laws of the Republic of Lithuania, the share capital shall be deemed not to have been increased.
The Bank of Lithuania shall grant an authorisation to register the amendments to the bank statutes/articles of association relating to the increase of share capital, provided the information supplied by the bank to the Bank of Lithuania proves that:
2) the shares have been issued and fully paid up in compliance with the laws and other legal acts, as well as with the terms and conditions prescribed by the resolution of the shareholders' meeting, the bank statutes, the share issue prospectus/memorandum and subscription agreements;
3) the origin of funds for the purchased shares is legal.
The bank shall be prohibited from accepting the shares held by a debtor of the bank in return for an outstanding loan.
The funds for the accumulation of the core capital of the bank which is being founded or for the payment for the newly issued bank shares shall be accumulated in the account opened with Bank of Lithuania or any other bank. The accumulated funds shall be transferred to the account of the bank subject to the registration with the Register of Enterprises of the Republic of Lithuania of the bank which is being founded or the amendments to the bank statutes/articles of association relative to the increase of the capital indicated in the statutes/Articles of association
Where the bank or the amendments to the bank statutes/articles of association relative to the capital increase have not been registered in accordance with the procedure established by law, the accumulated funds shall be disbursed at the request of the persons who deposited them. The resolutions of the management board of the Bank of Lithuania concerning the increase of the share capital shall be made public in the manner prescribed by law.
Article 15. Property and Non-Property Rights of the Shareholders of the Bank
Individuals who acquire bank shares shall acquire property and non-property rights:
1) during the founding of the bank - from the moment of paying up the shares and registration of the bank in accordance with the procedure established by law;
2) the persons who have acquired shares of the bank's new share issue - from the moment of registration, in accordance with the procedure established by law, of the amendments to the bank's statutes/articles of association related to the increase of the bank's share capital by reason of a new share issue;
Article 16. Managing Bodies
The managing bodies of the bank shall be comprised of the general shareholders' meeting, the supervisory board, the management board of the bank, and the head of the bank administration.
Article 17. The General Shareholders' Meeting
The general shareholders' meeting shall be the supreme managing body of the bank. All shareholders shall have the right to participate in the general shareholders' meeting, irrespective of the class, type and number of shares they hold. Members of the management board and the employees of the administration, though they are not shareholders, may participate in the general shareholders' meeting with the right of a deliberative vote.
It shall be solely within the competence of the general shareholders' meeting:
2) to elect and dismiss members of the supervisory board of the bank and members of the internal audit service/the internal auditor, if necessary, also before the expiry of the term of their office;
3) where the supervisory board has been dismissed, to consider the issue of the dismissal of the management board of the bank;
4) to approve the bank's annual balance sheet, the estimate of income and expenses, distribution of profit, and to decide the matters related to the compensation of losses;
6) to make decisions on the liquidation or reorganisation of the bank, elect and dismiss the members of the bank's liquidation commission and to approve the report of said commission in the event of the bank's voluntary liquidation;
8) to decide other matters proposed by the management board, the supervisory board and the internal audit service/the internal auditor;
9) to analyse the shareholder's proposals and complaints concerning the work of the management board and the supervisory board of the bank;
10) to make a decision to apply to court for the institution of bankruptcy proceedings against the bank in accordance with Article 45 of this Law.
The rules of procedure of the general shareholders' meeting and adoption of decisions during the shareholders' meetings shall be set forth in the Law of the Republic of Lithuania on Companies. Decisions on the matters specified in items 1, 3, 5, 6 and 10 of paragraph 2 hereof shall be adopted by 2/3 vote of the shareholders present.
Where an administrator is appointed in the manner prescribed by Article 39 of this Law, all decisions about the issues within the competence of the general shareholder's meeting must be co-ordinated with the Bank of Lithuania and the Government or an institution authorised by it. The procedure for such co-ordination shall be established by a resolution of the Government and the Bank of Lithuania.
The Bank of Lithuania shall have the right to authorise the management board of the bank to convene an extraordinary general shareholders' meeting.
Article 18. The Procedure of the Formation of the Supervisory Board of the Bank
and its Powers
The number of members of the supervisory board shall be specified in the statutes/ articles of association of the bank: it must be odd and not less than three.
The supervisory board of the bank shall be elected by the general shareholders' meeting. During the election of the supervisory board, each shareholder shall have a number of votes equal to the votes of the shares held by him multiplied by the number of members of the supervisory board. The votes shall be cast at the discretion of the shareholder himself - for one or several candidates. The candidates receiving the majority of votes shall be elected.
The supervisory board of the bank shall be elected for the maximum period of four years from among its shareholders and individuals, who are not the bank's shareholders, representing legal persons, the bank's shareholders.
Only a legally capable natural person may be a member of the supervisory board of the bank. If a legal person revokes the powers of the person representing it in the supervisory board, the person must be dismissed form the supervisory board regardless of whether or not he is the bank's shareholder. A new member of the supervisory board may be elected to fill in the vacant position at the general shareholders' meeting according to the general procedure. A member of the bank's supervisory board may be re-elected for another term.
The supervisory board of a bank shall commence its activities upon the closure of the general shareholders' meeting which has elected it.
The following individuals may not be elected members of the supervisory board:
2) a person, who, according to the procedure established by law, has been deprived of the right or who has been prohibited from holding this position.
The supervisory board of the bank and its members shall not have the right to authorise other persons to discharge their functions or to delegate their functions to them.
The general shareholders' meeting may determine the salary/bonuses to members of the supervisory board only from the profit of the bank.
The supervisory board of the bank shall:
3) at the request of the board, make a decision about dismissal of a member of the supervisory board who is an employee of the bank;
4) observe and analyse the activities of the board, the application of financial funds, organising of management, return on the capital, salaries, and a long-term evaluation of the financial situation of the bank;
5) submit proposals and comments to the general shareholders' meeting on the bank's annual balance sheet, profit and loss account, distribution of profit and the report of the board;
6) represent the bank in court during the hearing of disputes arising between the bank and the board, a member of the board, or the head of the bank administration;
7) decide other matters provided for in the statutes/articles of association and resolutions of the general shareholders' meeting;
9) establish the procedure for granting loans which may be granted only subject to the approval of the supervisory board;
10) adopt decisions on the establishment of the subsidiaries/branches, bank representative offices and enterprises of the bank and investments into the capital of other enterprises;
11) set the procedure for the formation and use of the parts of the bank's capital listed in subparagraphs 5-12 of paragraph 2, Article 33 of this Law.
The supervisory board of the bank shall have a right to appoint an expert/group of experts to inspect and evaluate the bank's financial accounting.
At the request of the supervisory board, the management board and administration of the bank must supply documents relating to the activities of the bank.
Article 19. Rules of Procedure of the Supervisory Board
Members of the supervisory board shall have equal rights. When voting, each member shall have one vote. In the event of a tie, the chairman shall have the casting vote.
Where a member of the supervisory board is not able to attend the meeting of the supervisory board, having got acquainted with the draft resolution, he may inform the meeting in writing of his opinion on the resolution that was put to the vote by voting "for" or "against".
A meeting of the supervisory board shall be valid if it is attended by more than half of the members of the supervisory board. A resolutions shall be adopted by a simple majority of votes, with the exception of resolutions on the dismissal of the members of the management board which shall be adopted by no less than 2/3 majority vote of members of the supervisory board.
Meetings of the supervisory board must be held at least once every three months. Meetings of the supervisory board shall be convened by the chairman of the supervisory board and when he is not available - by a deputy chairman.
Meetings shall also be convened if no less than 1/3 of members of the supervisory board or the management board of the bank. Issues put forward by the initiators of the meeting must be included in the agenda of these meetings.
Article 20. The Management Board of the Bank
The management board of the bank shall direct the activities of the bank, manage its
affairs, represent the bank, and shall be liable under law for carrying out the transactions of the bank. The number of members of the management board which may not be less than three, as well as the activities, powers and rights of the management board and its members, and the procedure for passing of resolutions shall be set forth in the statutes/articles of association of the bank and the rules of procedure of the bank management board.
The chairman, deputy chairmen and members of the management board shall be appointed for a term of not more than 4 years. The number of terms a management board member may serve shall not be limited.
Only a legally capable person may be appointed a member of the bank's management board. The following persons may not be appointed members of the management board:
2) a member of the management board or head of the administration of any other bank registered in the Republic of Lithuania;
3) a person who, according to the procedure established by law, has been deprived of the right or prohibited from holding this position.
The statutes/articles of association may provide for some additional requirements for a member of the management board.
A member of the management board may resign after submitting a written application.
The application must be considered and granted within 14 calendar days of its filing.
The chairman of the management board, deputy chairmen and members of the management board shall work in the bank and get a salary which shall be determined by the supervisory board of the bank. By a decision of the general shareholders' meeting, bonuses may be paid to the members of the management board, the chairman of the management board and deputy chairmen.
The members of the management board shall have no right to delegate their duties to other persons. A member of the management board who is temporarily unavailable may be replaced by a member of the supervisory board who shall be appointed by the supervisory board of the bank. The powers of a member of the supervisory board shall be suspended for the period he or she is performing the duties of the management board member.
Article 21. Administration of the Bank
The administration of the bank shall be comprised of the heads and deputy heads of the central management body, structural subdivisions and subsidiaries/branches of the bank.
The administration of the bank shall implement the resolutions of the general shareholders' meeting, the supervisory board, and the management board.
The duties and powers of the administration of the bank shall be set forth in the statutes/articles of association of the bank, and the regulations approved by the management board of the bank.
The administration of the bank and its head shall be recruited by the management board of the bank. The head of the bank administration may not perform the duties of the chief financier/accountant, be a member of the management board of another bank or work in the administration of another bank.
The head of the bank administration shall conclude employment contracts with the other employees of the bank.
The duties of the head of the bank administration may be performed by the chairman or any other member of the management board.
Article 22. The Internal Audit Service of the Bank/Internal Auditor
There must be at least one internal auditor at the bank. He shall be elected by the general shareholders' meeting for a period determined by the statutes/articles of association of the bank but not longer than for 4 years.
The number of terms of office of the internal auditor shall not be limited. Any legally capable natural person with relevant qualifications may occupy said position.
A member of the supervisory board or the management board, the head of the administration, or the chief financier/chief accountant may not be the internal auditor of the bank.
The internal audit service/internal auditor must:
1) inspect the implementation of the income and expenditure estimate, the activities of the bank, and control compliance of the bank in its activities with the laws and the statutes/articles of association of the bank;
2) audit the annual balance sheet and other financial accounting documents on the basis of which resolutions are adopted by the general shareholders' meeting;
3) report at the next general shareholders' meeting or the meeting of the bank management board about the violations established during the audit.
The internal audit service/internal auditor shall carry out audits on the instruction of the general shareholders' meeting, the management or the supervisory board of the bank.
Article 23. Committees and Services of the Bank
Every bank must have a standing loan committee and a standing internal audit service. Other committees and services of the bank may also be formed. Their functions as well as the procedure of their formation and operation shall be determined by the legal acts of the Bank of Lithuania and the bank statutes/articles of association.
Article 24. Bank Statutes/Articles of Association of the Bank
The statutes/articles of association of the bank shall state:
4) the nominal value of share capital and its composition according to the classes of shares as well as the rights and duties granted to the owners of the shares;
8) the procedure of conversion of the shares of one class or type into the shares of another class or type;
11) the procedure of the formation of managing bodies and election or appointment of their heads, their rights, duties and liability;
Article 25. Bank Operations
Banks shall have the right to:
1) take deposits and other repayable funds into the clients' accounts opened with the bank and to manage these accounts;
4) issue instruments of payment (cheques, letters of credit, bills, etc.) and carry out transactions with them;
9) receive from clients valuables for safe-keeping and let safe deposit boxes of the bank vault to clients for safe-keeping of valuables and documents;
10) provide services and consultations on issues of banking activities, finances, and management of clients' investments;
Article 26. Prudential Requirements
The following requirements shall be established for banks:
6) other requirements set by the legal acts of the Bank of Lithuania provided they do not contradict the recommendations of the Basle Committee on Banking Supervision and the directives of the European Union.
The requirements and the methods of their calculation shall be established by the Bank of Lithuania.
Article 27. Bank Investments
Banks may establish enterprises, be their co-owners or shareholders.
The total amount of a bank's investments into the shares or capital of other enterprises may not exceed 40 percent of the bank's capital.
The total amount of a bank's investments into the shares or capital of one enterprise may not exceed 10 per cent
Provisions of paragraphs 2 and 3 of this Article shall not apply to the investments of a bank into the shares or capital of enterprises which are, under the laws of the Republic of Lithuania and the legal acts of the Bank of Lithuania, assigned to the enterprises engaged in credit and financial business. The requirements of paragraph 2 of this Article shall not apply where a bank acquired the shares as a compensation for an outstanding loan. In this case the bank must, within one year, transfer the portion of investments in excess of the threshold prescribed in paragraph 2 of this Article into the shares or capital of other enterprises.
A bank shall be prohibited from acquiring shares of an enterprise having a qualifying holding in the bank or from being a co-owner of the enterprise.
Article 28. Keeping of Bank Documents
During the term of validity of agreements and for ten years following their expiration a bank shall keep the following documents:
2) any other documents of the bank's partners on the basis of which the agreements have been concluded;
Article 29. Connected Lending
Lending by a bank to connected persons may not exceed 10 per cent of the bank's capital.
The following individuals shall be considered as connected persons:
1) owners of a qualifying holding in the bank, its subsidiaries and its enterprises, their spouses, parents and children or enterprises in which said persons have, directly and/or indirectly, acquired or own more than 20 percent of own capital;
2) members of the supervisory board and the management board of the bank, its subsidiaries and enterprises, internal auditors, heads of the bank's administration and bank's subsidiaries/branches and their spouses, parents, and children, or the enterprises in which said persons have, directly or/and indirectly, acquired or own more than 20 percent of own capital.
Banks must communicate to the Bank of Lithuania information about loans extended to connected persons in accordance with the procedure established by the Bank of Lithuania.
Article 30. Security for Fulfilment of Obligations
In order to secure fulfilment of obligations under loan agreements, banks may accept as security goods and other valuables, bills and other securities, bills of lading, foreign exchange and other valuables, conclude pledge, guarantee, security or other agreements, which are in conformity with the laws of the Republic of Lithuania.
If the borrower fails to repay the loan at maturity under the agreement and the repayment of the loan is secured by property, the bank shall have the right to have its claims satisfied from the value of the pledge before other creditors.
If the borrower defaults on his obligations the fulfilment whereof was secured by a pledge consisting of the securities of the Government of the Republic of Lithuania or of the Bank of Lithuania, the bank shall have the right to give an instruction to the manager of the securities accounts to transfer to the bank's securities account the pledged securities for the amount corresponding to non-fulfilled obligations, according to the procedure established by the Securities Commission, if so provided under the agreement concluded between the bank and the borrower. Provided the bank is the manager of the accounts of securities pledged to it, it shall have the right to transfer these government securities of the Republic of Lithuanian as well as the securities of the Bank of Lithuania to its own securities account, pursuant to the conditions, procedure and amounts specified in paragraph 3 of this Article.
The bank may request that its client/credit recipient submit information or documents required for the assessment of its financial position during the period he makes use of the loan.
In the event of a threat that the loan may not be repaid when due, the bank may unilaterally terminate the agreement or change it, or request additional security.
Banks shall be prohibited from accepting securities issued by the bank itself or by connected persons as well as agreements of pledging and guarantee in order to secure fulfilment of bank obligations under loan agreements.
Article 31. Confidentiality
The present and former members of the supervisory board, the management board, the administration and the employees of the bank must protect confidentiality of the information obtained in the course of their work at the bank and not use it for their own or other persons benefit.
The Bank of Lithuania shall be supplied, whenever it requests it, all documents and information related to the founding and activities of a bank. Documents and information at the request of other institutions shall be supplied in the cases and according to the procedure established by the laws of the Republic of Lithuania.
The bank must provide the information specified in Articles 8 and 12 of the Law on the Prevention of Money Laundering to the Financial Crimes Investigation Unit under the Ministry of the Interior.
Banks must establish the procedure for protection of confidentiality.
Article 32. Liability for Losses Caused to the Bank
Liability for losses caused to the bank through the fault of members of the supervisory board, the management board, the administration and the employees of the bank shall be established by the laws of the Republic of Lithuania as well as by other legal acts and the statutes/articles of association of the bank.
Article 33. Capital of the Bank
The capital of a bank shall be the amount of parts of the capital specified in paragraph 2 of this Law less the amounts and in accordance with the procedure determined by the Bank of Lithuania.
The parts of the bank's capital shall be as follows:
1) ordinary capital less the purchased own shares and without preference shares with an accumulated dividend;
12) debt/subordinated capital.
Ordinary capital means the nominal value of all registered shares.
Core capital means the parts of the bank's capital listed in subparagraphs 1, 2, 3 and 4 of paragraph 2 of this Article.
Reserve capital means additional contributions of the shareholders/founders of the bank or/and deductions from the profit of the bank.
Debt/subordinated capital means borrowed and received cash funds by the bank in accordance with the terms and conditions established by the Bank of Lithuania.
Article 34. Size of the Bank's Capital
Core capital of a bank may not be less than the minimum size of the core capital established by the Bank of Lithuania, with the exception of the case specified in paragraph 4 of this Article.
A bank may reduce, subject to a prior authorisation of the Bank of Lithuania, its core capital to the amount of the minimum core capital established by the Bank of Lithuania.
Reserve capital of a bank shall be formed from additional contributions of its shareholders and/or deductions from the bank profit. The purpose of reserve capital of a bank shall be to guarantee e the bank's financial stability.
The bank's share capital must be reduced, by a decision of the general shareholders' meeting, by the amount of the loss where the losses stated in the annual and quarterly financial statements of the bank amount to 75 per cent of the nominal value of the bank's share capital.
If the losses stated in the annual and/or quarterly financial statements are in the amount specified in paragraph 4 of this Article the bank management board must, within 3 days, notify the bank supervisory board and the Bank of Lithuania about it and within 45 days convene an extraordinary shareholders' meeting where, if necessary, an independent auditor's findings shall be presented. The meeting shall decide on the issues of the reduction of the bank's share capital and further activities of the bank.
If the losses stated in the annual and/or quarterly financial statements of the bank are equal to the nominal value of the bank's share capital or exceed it, the general shareholders' meeting must reduce the share capital of the bank by cancelling its shares in order to cover the losses. After adopting such a decision, the Bank of Lithuania shall appoint an administrator pursuant to the procedure provided for in Article 39 of this Law.
If the general shareholders' meeting is not convened within the prescribed period, does not take place or does not approve the reduction of the share capital by the amount of loss, the Bank of Lithuania shall appoint the administrator in accordance with the procedure prescribed by Article 39 of this law or apply to court for the institution of bankruptcy proceedings against the bank.
In such a case the administrator must, within 7 days from his appointment, apply to court for the reduction of the bank's share capital. When the court renders a decision to reduce the share capital, the administrator shall, with the approval of the Bank of Lithuania, adopt a decision to reorganise the bank or shall advise the Bank of Lithuania to institute bankruptcy proceedings against the bank pursuant to Article 45 of this Law.
The procedure prescribed in paragraphs 4, 5, 6, 7 and 8 hereof shall also apply when the Bank of Lithuania establishes the losses in the amount specified in paragraph 4 of this Article and notifies the bank management board thereof.
All shareholders must be notified of the forthcoming general shareholders' meeting and its agenda not later than 30 days before the meeting. The amendments to the banks' statutes made as a result of the reduction of the share capital shall be registered in accordance with the procedure prescribed by the laws of the Republic of Lithuania. The share capital shall be deemed reduced only after the registration of the amendments of the statutes.
If a bank is insolvent, its share capital may be increased by additional contributions generated from public trading in shares whose subscription agreements indicate that the bank is insolvent.
Share capital may be increased pursuant to the procedure specified in paragraph 11 of this Article only subject to an authorisation of the Bank of Lithuania, with the exception of the case when bankruptcy proceedings have been instituted against the bank.
When banks reduce their share capital in the manner prescribed by this Law, paragraphs 6, 7, 10 and 14 of Article 54 of the Law of the Republic of Lithuania on Companies shall not apply.
Article 35. Distribution of Profit
Bank profit shall consist of the funds which remain after deducing bank expenses and losses of the financial year from the bank income of the current year.
The financial year of a bank shall coincide with the calendar year.
The resolution on the distribution of profit must specify:
5) deductions to other categories of capital and funds specified by bank statutes/ articles of association;
8) retained profit.
Profit of the bank remaining after mandatory payments and deductions to the bank's reserve capital and other categories of capital and funds provided for in the bank statutes/articles of association may not be paid out in the form of dividends and bonuses if, after an appropriate decision of the shareholders' meeting, the capital adequacy ratio and minimum core capital are below the thresholds prescribed by the Bank of Lithuania.
The taxable profit of the bank shall be computed and profit tax shall be paid in accordance with the procedure established by the Law of the Republic of Lithuania on Profit Tax of Legal Persons.
Article 36. Accounting and Reporting
Banks and their subdivisions shall keep records and accounts according to the procedure set forth by the Bank of Lithuania.
The financial statement of a bank must be examined by an independent auditor and, within three months of the close of the financial year, must be approved by the general shareholders' meeting and submitted to the Bank of Lithuania. The financial statement of a bank shall be made public by 1 May in accordance with the procedure established by the Bank of Lithuania. A bank shall be liable for the accuracy of the information presented in the annual account according to the procedure prescribed by law.
Auditors shall be obliged to present to the Bank of Lithuania explanatory notes on financial statements.
Article 37. Sanctions Applicable to Banks
The Bank of Lithuania, with a view to protecting the interests of depositors and ensuring safety, credibility and stability of the bank and the banking system, shall have the right to impose on the banks the following sanctions:
1) to give a warning to the bank for the shortcomings and violations of their activities and set the time period for removing them;
2) to impose administrative penalties on the executives of the bank according to the procedure prescribed by law;
3) to suspend or withdraw the authorisation for carrying out one, several or all of its operations (moratorium);
4) to suspend or withdraw the authorisation for a subsidiary/branch or subsidiaries/branches of the bank to engage in banking;
5) to request the removal of or remove a member/members of the bank management board or the head of the bank administration;
6) to request, if necessary, the suspension of or suspend the powers of a member/members of the supervisory board;
7) to divest the supervisory board of its functions, to remove from office the management board of the bank, the head of the bank administration and to appoint the administrator and, if necessary, his assistants;
9) to revoke the banking licence.
The type of sanctions shall be chosen by the Bank of Lithuania having regard to the nature of the breach for which the sanction is imposed, and the effect that the violation and the sanction imposed shall have on the safety, stability and credibility of the bank and the banking system.
The reasons for the resolution to apply sanctions may be appealed against in court within one month unless the laws of the Republic of Lithuania establish otherwise. The appeal shall not suspend the implementation of the resolution.
The court shall consider whether there are reasonable grounds for the imposition of a sanction and whether the procedure of its application has been observed. The court may not decide upon the choice of the type of a sanction or the necessity of imposing it.
Article 38. The Grounds of and Procedure for Application of Sanctions
The Bank of Lithuania shall apply the sanctions listed in Article 37 of this Law if at least one of the following grounds is present:
2) failure to provide to the Bank of Lithuania the required information or documents necessary for banking supervision;
4) violation of laws or legal acts of the Republic of Lithuania.
The sanctions specified in Article 37 of this Law shall be applied to banks by a resolution of the management board of the Bank of Lithuania.
A resolution shall be adopted by the management board of the Bank of Lithuania on the basis of the following:
3) evidence about previous violations and the sanctions applied to the bank by the Bank of Lithuania and other institutions;
4) a forecast about the likely effects of the determined violations on the position of the bank, the interests of the depositors and other bank creditors, and the stability of the entire banking system;
5) explanations provided by the chairman of the management board and the head of the administration.
The question concerning the application of a sanction to a bank shall be considered in the presence of bank representatives.
Where bank representatives fail to attend the meeting or to give explanations, the resolution to apply a sanction shall be passed without their participation.
A resolution to apply a sanction, with the exception of the sanctions specified in subparagraph 2 of paragraph 1, Article 37 of this Law, must be passed within three months of the establishment of the violation. Sanctions may not be applied if more than one year has lapsed since the commitment of violations.
Article 39. Suspension of Powers of the Bank Management Board and Divestiture of the Bank Management Board and Head of the Administration
The powers of the bank supervisory board shall be suspended, the bank management board and the head of the administration shall be divested of their functions, and the administrator shall be appointed only in exceptional cases, where credibility and stability of the bank are at stake, but where there is a real possibility to remedy the situation by suspending the powers of the bank supervisory board, divesting the bank management board and the head of the administration of the management of the affairs of the bank.
The purpose of appointing the administrator shall be to protect the interests of the creditors until the real position of the bank is assessed and measures are taken to remove the shortcomings or a decision to institute bankruptcy proceedings is made.
A decision on the appointment and dismissal of the administrator and, where necessary, his assistants shall be made by the management board of the Bank of Lithuania which shall communicate the decision to the Government. The administrator may be appointed for a period of up to 3 months. The Bank of Lithuania, upon notifying the Government, may extend the term for another 2 months.
From the day of the appointment of the administrator and, where necessary, his assistants:
1) the powers of the bank supervisory board shall be suspended and shall be taken over by the management board of the Bank of Lithuania;
2) the bank management board and the head of the administration shall be divested and the powers of the bank management board and the head of the administration shall pass on to the administrator. In this case the decisions on the issues falling within the competence of the bank management board must be co-ordinated with the Bank of Lithuania;
3) the decisions of the general shareholders' meeting shall become effective subject to co-ordination thereof with the Bank of Lithuania and the Government or an institution authorised by it.
This procedure shall also be applied where all the shares of the bank have been cancelled following the procedure prescribed by Article 34 of the Law of the Republic of Lithuania on Commercial Banks. In this case, the decisions on the issues falling within the competence of the general shareholders' meeting shall pass to the administrator and must be co-ordinated with the Bank of Lithuania and the Government or an institution authorised by it.
The administrator of a bank in which the state owns at least 51 per cent of the share capital may reach a peaceful settlement of a property dispute where the bank is one of the parties, following the provisions of the Code of Civil Proceedings and subject to an authorisation of the Government or an institution authorised by it.
All the decisions of the bank supervisory board, the management board and the head of the administration made after the day of appointment of the administrator shall be unlawful and not subject to enforcement.
The Bank of Lithuania shall be directly responsible for the course of administration of the bank.
Article 40. Administrator
The administrator shall be the manager of a bank appointed by the Bank of Lithuania for the term of suspension of powers of the bank supervisory board and divestiture of the bank management board and the head of the administration.
The administrator and his assistants shall be employees of the Bank of Lithuania. Their rights, duties and responsibility shall be set out in the contract of employment entered into with the Bank of Lithuania.
The administrator must, by giving a 7 calendar day notice, terminate contracts of employment with the members of the bank management board and the head of the bank administration and shall also have the right to terminate contracts of employment with the heads of subdivisions who, according to the instructions of their position, are entitled to make decisions about taking and extending loans and to carry out other financial operations. All the dismissed persons shall not be paid either a severance pay or a compensation, with the exception of a monetary compensation for the unused leave. The administrator shall also have the right to reduce the salaries of the employees without their consent up to the amount of the average monthly salary of the employees of budgetary institutions and organisations announced each month by the Statistics Department under the Government of the Republic of Lithuania, as well as to revise other conditions of the contract of employment (benefits, work schedule, work place, transfer to a position with a lower salary if this does not pose a risk for the employee's health). When necessary, the administrator shall announce idle time for all or part of the employees who shall be paid for every hour of the idle time a minimum hourly pay approved by the Government of the Republic of Lithuania.
The Bank of Lithuania shall set restrictions on the bank's economic activities and its disposition of the bank's property. The sale, rent, pledge or any other transfer of the bank's property with the exception of immovable property, its use as a guarantee or surety to ensure performance of the obligations by other entities without the permission of the Bank of Lithuania shall be prohibited. It shall be prohibited, without an authorisation or consent of the general shareholders' meeting co-ordinated in the manner prescribed by paragraph 4, Article 17 of this Law, to sell, rent, mortgage or transfer in any other way the bank's immovable property, to use it as a guarantee or surety to ensure performance of the obligations by other entities, to reorganise or liquidate the bank, with the exception of cases specified in paragraph 7 of Article 34 or decide other issues falling within the competence of the general shareholder's meeting.
The Bank of Lithuania shall approve the plan for administration of the bank and the estimate of expenses for the bank administration necessary for the implementation of the plan drafted by the administrator and shall set the procedure for reporting about the progress and results of administration. The Bank of Lithuania shall, at least once a week, hear the administrator's information about the decisions taken and other ways and means how to rectify the situation at the bank.
The administrator must also report about the course and results of administration to the general shareholders' meeting at the intervals and in accordance with the procedure set by it.
The administrator must, within three days of his appointment, initiate a full internal audit of the bank which is to be completed within two months of its assignment. This time period may be extended by the management board of the Bank of Lithuania for one more month. The nominations of internal auditors must be approved by the Bank of Lithuania. The internal auditor's report must state the actual situation of the bank's assets and liabilities.
If, according to the internal auditor's report, the bank is insolvent and is not in a position to avoid bankruptcy, the administrator shall advise the Bank of Lithuania to apply to court for the institution of bankruptcy proceedings.
The administrator shall be liable in accordance with the procedure established by the laws of the Republic of Lithuania for the damage inflicted on the bank through his fault. Upon the appointment of the administrator by the Bank of Lithuania, settlement of claims pending in court or out of court shall be suspended and the bank shall be prohibited from meeting any of its financial liabilities, including the payment of interest and taxes, without an authorisation of the Bank of Lithuania; it shall also be prohibited from transferring claims of the creditors and debtors of the bank to other persons and from distributing or in any other way apportioning the property of the bank.
Article 41. Recall of the Administrator
The administrator may be recalled before the expiry of his term :
1) upon establishment by the Bank of Lithuania that the bank is able to function in a credible and stable manner;
Article 42. Reorganisation of a Bank
A bank shall be reorganised in accordance with the procedure established by the Law of the Republic of Lithuania on Companies subject to the consent of the Bank of Lithuania.
Article 43. Liquidation of a Bank
A bank shall be liquidated in accordance with the procedure established by the Law of the Republic of Lithuania on Companies.
Article 44. Bankruptcy Procedure
The conditions under which a bank may be recognised as insolvent shall be determined by the Bank of Lithuania.
The Law of the Republic of Lithuania on Enterprise Bankruptcy shall apply to the bank unless this Law provides otherwise.
A bank's bankruptcy procedure shall be held only before a court.
Upon the institution of bankruptcy proceedings creditors' meetings shall be suspended.
An appropriate entry must be made in the Register of Enterprises about the institution of bankruptcy proceedings, their course and the bankruptcy procedure at the bank.
Article 45. Conditions for Instituting Bankruptcy Proceedings against a Bank
The court shall institute bank bankruptcy proceedings against a bank on the basis of a statement by the Bank of Lithuania on insolvency of the bank and the resolution of the general shareholders' meeting or a creditors' petition for bankruptcy by creditors, provided there is a conclusion of the Bank of Lithuania on insolvency of the bank.
Article 46. Instituting Bankruptcy Proceedings in Court
Bankruptcy proceedings against a bank shall be instituted in the court of the area where the head office of the bank is located.
Upon receiving a bankruptcy petition meeting the conditions set forth in Article 45, the court shall appoint the bank administrator on the recommendation of the Bank of Lithuania on the same day and fix his remuneration.
The court shall make an order to institute bankruptcy proceedings within 7 days and must:
1) notify known creditors, the bank's correspondents and the manager of the Register about the bankruptcy proceedings as well as make a public announcement thereof indicating:
the court in which the proceedings are to be held and the case number;
the requisites of the bank in bankruptcy;
the deadline for accepting creditors' claims
2) suspend other court proceedings instituted against the bank and notify other courts, where cases against the bank are pending, about the institution of bankruptcy proceedings in order to have all other legal actions against the bank suspended.
The court order to institute bankruptcy proceedings may be appealed against in the manner established by the Code of Civil Procedure of the Republic of Lithuania. The filing of appeal shall not stop the course of bankruptcy proceedings.
Following institution by the court of bankruptcy proceedings against the bank:
1) the powers of the managing bodies of the bank shall cease. Where bankruptcy proceedings against the bank are cancelled the managing bodies of the bank shall have the right to continue performing their functions;
2) payment of all liabilities, including interest and taxes, their enforcement by suing in court or without suit shall be prohibited; partition or any other distribution of bank assets shall be also prohibited without a special court order with the exception of expenses relating to the administrator's activities during the bankruptcy proceedings;
Article 47. Administrator of the Bank
The administrator of the bank shall be the bank manager appointed for the period of the bankruptcy proceedings .
An agent of a borrower, the owner/owners of the bank, shareholders, a member of the management board or the supervisory board, the head of the administration of the bank or a creditor may not be appointed the bank administrator.
The administrator of the bank must:
1) within three days from his appointment, transfer all balances of the bank with the correspondent banks to the correspondent account of the Bank of Lithuania at the Bank of Lithuania or prohibit making any payments therefrom;
2) within 6 months of the court order, make a list of the creditors of the bank and their claims as well as a list of the debtors of the bank and submit it to the court;
3) record foreign currency deposits according to the official exchange rate of the day bankruptcy proceedings against the bank were instituted;
4) exchange all the loans which are being repaid and the assets denominated in foreign currency into Litas;
5) report on the progress and results of administration to the court and the Bank of Lithuania within the time period and according to the procedure determined by them;
6) advise the court to liquidate the bank.
The bank administrator, after a prior 7 calendar days written notice, shall have the right to terminate a contract of employment with the members of the bank management board, the head of the bank administration as well as with the heads of structural subdivisions, without paying to them a severance pay and compensation, except a monetary compensation for the unused leave. The bank administrator shall also have the right to reduce the salaries of the employees without their prior consent, up to the amount of the average monthly wage of the employees of budgetary institutions and organisations announced each month by the Statistics Department under the Government of the Republic of Lithuania, and to change other terms and conditions of a contract of employment (benefits, working hours, work place, transfer to a lower position with a lower pay provided this does not pose a risk to the employee's health).Where necessary, the bank administrator shall announce idle time for all or part of the employees, and for every hour of idle time they shall be paid a minimum hourly pay approved by the Government of the Republic of Lithuania.
A bank against which bankruptcy proceedings have been instituted shall be exempt
from stamp duty in actions for recovery of assets.
Following the institution of bankruptcy proceedings and suspension of creditors' actions, creditors/plaintiffs shall be reimbursed from the state budget the amounts of the stamp duty they paid.
Article 48. Approval of the Decisions of Bank Administrator and His Responsibility
All decisions of the administrator which result in the increase of the bank's liabilities also those relating to the sale or any other transfers of the bank assets must be approved by the court. These decisions shall be invalid without such an approval.
The bank administrator shall compensate any losses resulting from the implementation of the unapproved decisions specified in paragraph 1 hereof.
Article 49. Creditors' Rights after Institution of Bankruptcy Proceedings against the Bank
Upon institution of bankruptcy proceedings against the bank, creditors shall have the right, within the time period set by the court, which shall be not shorter than 30 days nor longer than three months from the date of institution of bankruptcy proceedings, to inform the administrator about their claims and to specify the guarantees for the fulfilment of obligations.
The court shall have the right, while the case is pending, to accept the creditors' claims which, due to valid reasons, were submitted to the administrator in breach of the time period specified in paragraph 1 of this Article.
Article 50. Repealed
Article 51. Repealed
Article 52. Repealed
Article 53. Liquidation of the Bankrupt Bank
Following conclusion of bankruptcy proceedings against the bank and declaration of the bank bankrupt, on the recommendation of the bank administrator, the court shall make an order to liquidate the bank within three months of the date when an order to approve the creditors’ claims becomes effective. The court may extend the term at the request of the administrator of the bank.
The court order to liquidate the bank on the grounds of bankruptcy may be appealed against according to the procedure established by law.
The bankrupt bank may be cancelled from the Register not earlier than after one month from the date when the court order to liquidate the bank on the grounds of bankruptcy becomes effective.
By making an order to liquidate the bank, the court shall appoint the bank administrator or any other person as the liquidator of the bank.
The liquidator must organise the sale of the assets of the bankrupt bank and settlement or the creditors' claims following the procedure prescribed by this Law, and perform other actions pursuant to law which are necessary for the completion of the liquidation procedure of the bank.
An estimate of expenses necessary to ensure the activities of the liquidator shall be approved and revised by the court on the recommendation of the liquidator. The expenses approved in the estimate shall be covered from the income from the sale of the bank’s assets and from the assets recovered from the debtors of the bank.
The assets of the bank in liquidation, including the rights of claim, shall be sold by auction, with the exception of the shares and other securities of other undertakings held by the bank which are listed with the Securities Commission. These assets shall be sold following the procedure laid down in the legal acts regulating trading in securities.
The rights of claim/debts owed to the bank which cannot be recovered due to valid agreements, the debtor’s insolvency or for any other reasons by the end of the bank’s liquidation, also the assets, including the rights of claim unsold in the second/repeat auction may be transferred by the liquidator to the creditors for the settlement of their claims following their ranking established in Article 54 of this Law. These assets, including the rights of claim may be transferred to the creditors of the lower rank if the creditors of the first rank do not file applications following the established procedure to have their claims met in this way. Transfer of assets, including the rights of claim, to the creditors shall be announced publicly or each creditor shall be informed about it in writing, by indicating the time period during which the creditors have the right to file applications for taking over the assets, including the rights of claim. If, within 24 months of the date when the court order to liquidate the bank on the grounds of bankruptcy becomes effective, there are still assets which have not been sold and transferred to the creditors, the procedure of liquidation shall be deemed finished. The remaining rights of claim which have not been sold and taken over by the creditors shall be transferred gratis to the state undertaking Deposit Insurance Fund or any other institution specified by the Government. The rights of claim may be transferred to the state undertaking Deposit Insurance Fund only by such a bank in liquidation which insured the deposits of the individuals held with the bank following the procedure set out in the Law of the Republic of Lithuania on the Insurance of Deposits of Individuals and/or the Law of the Republic of Lithuania on Insurance of Deposits. Other assets shall be written off as having no market value and shall be used or destroyed following the procedure established by the liquidator and approved by the court. The written-off immovable property shall, within 30 days from the date of its writing off, be transferred gratis to the municipality of the territory where the assets are located.
[Version of paragraph 8 from 1 July 2002:
The rights of claim/debts owed to the bank which, due to valid agreements, insolvency of the debtor or for any other reasons, cannot be recovered by the closure of liquidation of the bank also the property unsold in the second/repeat auction, including the rights of claim, may be transferred by the liquidator to the creditors to satisfy their claims according to their ranking established in Article 54 of this Law. These assets, including the rights of claim, may be transferred to the creditors of the lower rank if the creditors of the higher rank fail to file their applications in the prescribed manner to have their claims satisfied in this way. Transfer of the assets, including the rights of claim, to the creditors shall be announced publicly or each creditor shall be informed in writing by indicating the time period during which the creditors shall have the right to submit requests in writing to take over the assets, including the rights of claim. If some assets remain unsold or were not transferred to the creditors within 24 months of the day when the court order to liquidate the bank becomes effective, the liquidation procedure shall be deemed closed. The remaining rights of claim that have not been sold and the rights of claim that have not been taken over by the creditors shall be transferred gratis to the state undertaking "Deposit and Investment Insurance" or any other institution specified by the Government. The rights of claim may be transferred to the state undertaking "Deposit and Investment Insurance" only by such a bank in liquidation which had its deposits insured in accordance with the procedure provided by the Law of the Republic of Lithuania on the Insurance of Deposits of Individuals and/or the Law of the Republic of Lithuania on Insurance of Deposits or the Law of the Republic of Lithuania on Insurance of Deposits and Liabilities to Investors. All other property as having no market value shall be written off and shall be used or destroyed in accordance with the procedure determined by the liquidator and approved by the court. The written-off immovable property shall, within 30 days of its writing off, be transferred gratis pursuant to the notice of transfer to the municipality of the territory where the assets are located].
Before each settlement with the creditors the liquidator of the bank shall submit to the court the schedule of settlement with the creditors. The schedule must specify the time periods of settlement, the amounts to be paid and the extent of satisfaction of the creditors' claims when transferring to the creditors the assets, including the rights of claim.
After the sale/transfer of all property of the bank which could be sold/transferred, including the rights of claim, the liquidator shall submit to the court for its approval the final schedule of settlement with the creditors.
Upon the completion of settlement with the creditors, the liquidator, in accordance with the final schedule of settlement with the creditors, shall submit to the court the liquidation balance statement and liquidation report specifying the procedure and extent of satisfaction of the creditors' claims also notices of writing-off, use or transfer of the assets and shall advise the court to take a decision on the winding-up of the bank
Where during the settlement with the creditors some creditors have not yet collected the funds due to them, the liquidator, before the start of satisfying the claims of the creditors of the lower rank or before advising the court to take a decision on the winding-up of the bank, shall transfer these unclaimed funds to the deposit account of the notary's office in the name of the creditor.
Having established that there is no property of the bank in liquidation left for meeting creditors' claims, the court shall approve the liquidation report and shall take a decision on the winding up-of the bank. The decision of the court shall serve as the basis for the cancellation of the bank from the Register of Legal Persons.
The bank shall cease to exist from the date of its cancellation from the Register of Legal Persons.
Article 53 (1). Settlement with the Security Holder
The claims of a secured creditor holding a pledge and/or a mortgage shall be satisfied first form the proceeds of the sale of the pledge or from its transfer. Where the pledge is sold at a higher price than the amount of the claims secured by a pledge or a mortgage, the balance of the proceeds shall be used for settlement with the other creditors following the procedure set out in Article 54. Where the holder of security surrenders the property pledged or mortgaged or where his claim has not been fully satisfied from the security he holds, these claims of the secured creditor shall be satisfied according to the ranking and following the procedure set out in Article 54.
Article 54. Ranking of the Creditors and the Procedure of Settlement with Them
Settlement with the creditors shall start after a court order to initiate the liquidation procedure of the bank has been made.
First in rank shall be employment -related claims of the bank employees.
Second in rank shall be the claims of the state undertaking Deposit Insurance Fund for the expenses related to the payment of insurance compensations to the bank depositors and the claims of the Ministry of Finance for the expenses which are not in excess of partial compensations for deposits paid to the depositors of the bank.
[version of paragraph 3 from 1 July 2002:
Second in rank shall be the claims of the state undertaking "Deposit and Investment Insurance" for the expenses related to the payment of insurance compensations to the bank depositors or investors referred to in the Law of the Republic of Lithuania on Insurance of Liabilities of Commercial Banks and Brokerage Firms to the Investors and the claims of the Ministry of Finance for the expenses which are not in excess of partial compensations paid to the depositors of the bank or the investors.
Third in rank shall be shall be claims for taxes and other payments into the budget, compulsory state social insurance and compulsory health insurance contributions as well as for loans extended, received in the name of the state or with the state guarantee.
Fourth in rank shall be claims of natural persons for deposits or their part not exceeding LTL 5, 000 if the deposits were not insured under the Law of the Republic of Lithuania on the Insurance of Deposits of Individuals. Where the deposits of natural persons or a part thereof were compensated from the Fund for Compensation of Deposits of Individuals, only claims on the difference between LTL 5, 000 and the amount of the compensation paid shall be satisfied in this rank.
Fifth in rank shall be claims of other creditors of the bank with the exception of those specified in paragraphs 2, 3, 4, 5, 7, 8 and 9 of this Article.
Sixth in rank shall be claims of creditors/lenders under a loan agreement if the parties to the agreement agreed that, in the event of the liquidation of the borrower, claims under the agreement shall be settled only after settlement with all the other creditors of the borrower.
Seventh in rank shall be claims of cumulative preferred stock holders for unpaid dividends.
Eighth in rank shall be claims of the shareholders of the bank, with the exception of those specified in paragraph 8 of this Article, for unpaid dividends.
Claims of creditors of each subsequent rank shall be satisfied only after claims of the preceding rank have been satisfied.
Where the resources of a bank are insufficient to fully satisfy the claims of the creditors of an appropriate rank, their claims shall be satisfied in proportion to the amount of the claim.
Article 55. Amendments to the Statutes/Articles of Association and Reorganisation of Activities of Functioning Banks
The procedure for amending statutes/articles of association of the functioning banks and reorganising their activities under this Law as well as the time periods thereof shall be determined by the Bank of Lithuania unless this Law provides otherwise.
The emergence of property rights to a dividend for persons who have paid for the subscribed shares of a new issue prior to coming into force of this Law shall be decided by the general shareholders' meeting unless the agreements on the subscription to the bank shares of a new issue provide a compensation for pecuniary and/or property contributions (to pay up for shares).
The Bank of Lithuania, in conjunction with he Government of the Republic of Lithuania, shall establish, by 1 April 1995, the procedure for implementing paragraph 3 of Article 31 of this Law and shall determine the amounts of cash deposited with the bank and paid out by the bank which have to be reported to law enforcement institutions.
The preference shares issued by banks and belonging to the state prior to the day of coming into force of this Law shall be converted into ordinary bearer shares. Appropriate amendments of the statutes/articles of associations, on the recommendation of the Government of the Republic of Lithuania or the management board of a relevant bank, may be registered without convening the general shareholders' meeting.
Article 56. Declaring Certain Legal Acts Invalid
The following legal acts shall be declared invalid: the Law on Commercial/Joint-stock Banks of the Republic of Lithuania ("Valstybės žinios"(Official Gazette), 1992 No. 24-696; 1994, No. 43-775, No. 55-048);
The Provisional Law of the Republic of Lithuania "On the Institution of Bankruptcy Proceedings against Commercial Banks and Characteristics of the Court Proceedings"("Valstybės žinios"(Official Gazette),1994 No. 59-1154);
The Resolution of the Supreme Council of he Republic of Lithuania "On the Procedure of Entry into Force of the Law of the Republic of Lithuania on Commercial/Joint-stock Banks"("Valstybės žinios"(Official Gazette),1992 No. 24-697);
Item 2 of Resolution No. I-2928, 6 October 1992, of the Supreme Council of the Republic of Lithuania "On Authorising the Government of the Republic to Lithuania to Make Decisions on Certain Issues".
I promulgate this Law passed by the Seimas of the Republic of Lithuania.