Official translation

REPUBLIC OF LITHUANIA

LAW ON PARTNERSHIPS

6 November 2003 No. IX-1804

Vilnius

Chapter I. GENERAL PART

Article 1. Scope of the Law

This Law shall regulate the establishment, management, activities, transformation and dissolution of enterprises having the legal form of a general partnership and enterprises having the legal form of a limited partnership, the rights and duties of the members of the enterprises.

Article 2. General Partnership and Limited Partnership

1. The general partnership shall be an enterprise all of whose members are general partners.

2. The limited partnership shall be an enterprise whose members are general partners and limited partners.

3. Where the provisions of this Law apply both to the general partnership and the limited partnership, the word “partnership” shall be used.

4. The partnership shall be a private legal person of unlimited civil liability.

5. The partnership shall acquire civil rights, assume civil obligations and implement the above through the general partners.

6. The name of the general partnership shall comprise the words stating its legal form – “general partnership” (tikroji ūkinė bendrija) or the acronym “TŪB”. The name of the limited partnership shall comprise the words stating its legal form – “limited partnership” (“komanditinė ūkinė bendrija“) or the acronym “KŪB”.

7. The head office of the partnership shall be in the Republic of Lithuania.

8. In its activities the partnership shall be governed by the partnership agreement, the Civil Code, this Law and other laws and legal acts.

Article 3. Foundation of the Partnership

1. The founders of the partnership shall be the persons who have concluded the partnership agreement. The partnership agreement shall also constitute both the contract for the founding of the partnership and the partnership founding document. The partnership agreement must be notarised.

2. The founders of the partnership may be both natural and legal persons.

3. The partnership may have no less than two and no more than twenty founders.

4. The founders of the partnership shall not be persons listed in paragraphs 5 and 6 of article 7 of this Law.

5. The partnership agreement of the partnership being founded shall grant the right to open the accumulation account with the bank registered in the Republic of Lithuania. The funds in the accumulation account may be used only after the registration of the partnership.

6. Where a limited partnership is being founded, a limited partner’s agreement must be concluded in writing with every person seeking to become a limited partner. The founders shall grant the person seeking to become a limited partner access to the concluded partnership agreement. After the conclusion of a Limited Partner’s Agreement the limited partner shall be considered to have familiarised himself with the partnership agreement.

7. The partnership shall be considered to have been founded from the moment of its registration in the Legal Entities Register.

8. The general partnership shall be registered after the partnership agreement has been concluded and the Legal Entities Register has been submitted the documents indicated in the Civil Code as necessary for the registration of the partnership. The limited partnership shall be registered after the partnership agreement and the limited partner’s agreement have been concluded and the Legal Entities Register has been submitted the documents indicated in the Civil Code as required for the registration of the partnership.

9. From the moment of registration of the partnership in the Legal Entities Register all the founders of the partnerships shall become its general partners.

10. A person who has concluded a Limited Partner’s Agreement and made a contribution into the limited partnership being founded shall become a limited member from the moment of registration of the limited partnership in the Legal Entities Register.

Article 4. Partnership Agreement

1. The partnership agreement shall be the partnership foundation document governing the activities of the partnership.

The partnership agreement shall state:

1) the name of the partnership;

2) the legal form taken by the partnership (general partnership or limited partnership);

3) the head office of the partnership;

4) the object of the partnership activities;

5) data of the general partners (natural person’s name, surname, personal number, place of residence; legal person’s name, legal form; code number, head office);

6) procedure for compensating the costs of partnership founding;

7) partnership founders’ contributions, the procedure and time limits for making the contributions. Where the contribution is made otherwise than in cash the value thereof must be stated;

8) liability of the general partners for failure to discharge the obligations;

9) the procedure for transferring the rights of the general partner to another person;

10) the procedure for admitting new general partners;

11) the procedure for effecting settlement with the general partners who retire from the partnership;

12) the procedure for drawing on the partnership cash at hand as profit paid in advance for the personal needs of the general partners;

13) the procedure for establishing branches and representations of the partnership and for the dissolution thereof;

14) whether or not the partnership draws up financial statements;

15) the daily of the Republic of Lithuania in which public notices shall be published when required under the Civil Code and this Law;

16) the procedure for amending the partnership agreement;

17) duration of the partnership where it is limited;

18) the date of drawing up the partnership agreement.

3 Besides the terms and conditions specified in paragraph 2 of this Law, the partnership agreement of the limited partnership shall also establish the procedure according to which persons become limited partners.

4. The partnership agreement may also contain other provisions which are not contrary to this and other laws.

5. The partnership agreement shall be amended by the decision of all general partners taken by common consent.

6. Where amendments are made to the partnership agreement, the Legal Entities Register shall be presented the amendments to the partnership agreement together with other documents prescribed by legal acts and the entire text of the partnership agreement. The entire text of the partnership agreement shall be signed by one of the general partners and the authenticity of his signature shall not be subject to notarisation.

7. The partnership agreement as well as the amendments to the partnership agreement shall become effective from the moment of registration thereof in the Legal Entities Register, except for the provisions of the partnership agreement relating to partnership foundation procedure and those relating to the making of contributions during the foundation, which shall become effective from the moment of conclusion of the partnership agreement of the partnership being founded.

Article 5. Limited Partner’s Agreement

1. The limited partner’s agreement shall be concluded in writing with every person seeking admission as a limited partner of the limited partnership. The agreement shall be concluded according to the requirements set in paragraph 6 of Article 3 of this Law.

2. The limited partner’s agreement shall indicate the following:

1) the limited partner’s contributions, the procedure and time limits of making the contributions. Where the contribution is made otherwise than in cash, the value thereof must be stated;

2) liability of the limited partner for failure to discharge the obligations;

3) the share of partnership profits allocated to the limited partner;

4) duration of the agreement, where the agreement of limited duration is concluded.

3. The limited partner’s agreement may also contain other provisions which are not contrary to the Civil Code, this and other laws.

4. Where the activities of the limited partnership are of limited duration, the duration of the limited partner’s agreement shall not exceed the period of activities of the limited partnership.

Article 6. Data of the Legal Entities Register

Besides the data listed in Article 2.66 of the Civil Code, the following data relating to the partnership shall be indicated in the Legal Entities Register:

1) the amount of the general partners’ contributions;

2) ownership of the contributions of the general partners by the right of joint common ownership;

3) duration of activities where limited;

4) dates of beginning and end of financial year.

Article 7. Partnership Members

1. The general partner shall be a member of the partnership who has concluded the partnership agreement and has made a contribution into the partnership in the manner prescribed by this Law and the partnership agreement or committed himself to make it.

2. The limited partner shall be a member of the limited partnership who has concluded the limited partner’s agreement with the limited partnership and has made a contribution into the limited partnership in the manner prescribed by this Law and the limited partner’s agreement.

3. Where the provisions of this Law are applied both to the general partner and the limited partner, the word “member” shall be used.

4. The general partnership shall have not less than two and not more than twenty general partners. The limited partnership shall have not less than three members (two general partners and one limited partner) and not more than twenty members.

5. General partners of other Partnerships, owners of individual enterprises, the state, municipalities, state-owned enterprises, municipal enterprises, budgetary institutions as well as partnerships and individual enterprises shall not be general partners of the partnership.

6. European Economic Interest Groupings shall not be general partners of the partnership.

7. The general partners of the limited partnership shall not at the same time be its limited partners, while the limited partners shall not be its general partners.

8. Where the assets of the partnership prove insufficient to satisfy its obligations, the general partners of the partnership shall be jointly and severally liable for the partnership obligations to the extent of all their property whereas the limited partners shall be liable only to the extent of the property they contributed to the limited partnership.

Article 8. Rights and Duties of the General Partners

1. The rights and duties of the general partners shall be set by the Civil Code, this Law and other laws and the partnership agreement.

2. The general partner shall have the following rights:

1) to take part in the settling of partnership affairs and in the decision-making;

2) to act on behalf of he partnership unless otherwise established in the partnership Agreement;

3) to propose to amend the partnership agreement;

4) to be granted access to the documents of the partnership;

5) to transfer the general partner’s rights to another person;

6) to receive a share of the partnership profits;

7) to draw, in the manner set in the partnership agreement, on the partnership cash at hand as profits paid in advance for the personal needs of the general partner;

8) to request repayment of the contribution when retiring from the partnership;

9) to be allocated a share of assets of the partnership in liquidation;

10) to exercise other rights prescribed by laws or the partnership agreement.

3. Unless otherwise established in the partnership agreement, the general partner may transfer the general partner’s rights to another person only after having received the consent of all the general partners.

4. The general partner shall make a contribution into the partnership according to the procedure and within the time limits established in the partnership agreement.

5. The retired general partner shall be liable in respect of the partnership obligations incurred before his retirement as the general partner or in respect of the Partnership transactions concluded before his retirement in the same way as he would be liable if he were the general partner. The provisions of this paragraph shall also be applicable to the successor to the rights of the general partner.

6. The general partner which is a legal person in bankruptcy or in liquidation must no later than within 10 days after the institution of bankruptcy proceedings in court or commencement of application of extrajudicial bankruptcy procedure or after the acquisition by it of the status of a legal person in liquidation give a written notice thereof to other general partners.

Article 9. Rights and Duties of the Limited Partners

1. The limited partner shall have the following rights:

1) to receive a share of the limited partnership’s profits allocated in the limited partner’s agreement;

2) upon the expiration of the limited partner’s agreement to request the contribution be returned;

3) to transfer the rights of the limited partner to another person;

4) to be granted access to the partnership agreement and amendments thereto;

5) to be granted access to the documents of the limited partnership’s general affairs management and its financial statements where these are drawn up by the limited partnership;

6) to be granted access to all information that must be presented under the Civil Code to the creditors of the limited partnership;

7) other rights established by laws and the limited partner’s agreement.

2. The limited partner must make a contribution into the limited partnership according to the procedure and by the time limits set in the limited partner’s agreement. The limited partner’s agreement may also establish other limited partner’s commitments that are not contrary to the Civil Code, this and other laws.

Article 10. Contributions into the Partnership

1. The contribution of the partnership member shall be the member’s property transferred to the partnership.

2.Contributions may be made in cash and property other than cash that is the object of the right of ownership of the partner.

3. Contributions other than cash shall be assessed by the decision of all general partners of the partnership adopted by common consent.

4. The contributions of the partnership members shall be owned by the partnership.

Article 11. Management of Partnership Affairs

1. The affairs of the partnership shall be managed and decisions on all issues relating to the partnership activities shall be taken by the general partners of the partnership. The decisions shall be taken by common consent of all the general partners. The partnership agreement may provide that decisions shall be taken by majority vote of the general partners, except in the cases provided for in this Law. The decisions shall be executed in writing.

2. When implementing the adopted decisions each general partner shall have the right to act on behalf of the partnership, unless otherwise provided in the partnership agreement. In case only all the general partners jointly are entitled to act on behalf of the partnership, the transactions shall be signed by all the general partners, while if the other general partners have given a written power of attorney for concluding transactions, these may be signed by one general partner.

3. General partners shall be appointed in the partnership for discharging the duties of the managing bodies prescribed by paragraph 3 of Article 2.82 of the Civil Code.

4. The decision taken by the general partners to fully release any one of the general partners from covering common expenses or losses, to exclude any one of the members when distributing the partnership profits, to restrict or cancel the members’ right of access to the partnership documents, to restrict the right of the general partners to cancel the partnership agreement of unlimited duration or to annul the right shall be invalid.

Article 12. Partnership Accounting and Financial Statements

1. Partnership accounting, its organisation and management as well as the drawing up of financial statements shall be established by laws and other legal acts.

2. The partnership shall draw up financial statements according to the established procedure where this is prescribed by the partnership agreement. The annual financial statements of the partnership shall be not later than within three months after the end of the financial year approved by the general partners of the partnership and submitted to the Legal Entities Register.

3. The partnerships all of whose general partners are public or private limited-liability companies shall draw up the financial statements in the manner established by laws regardless of whether or not this is prescribed by the partnership agreement.

Article 13. Distribution of Partnership Profits

1. At the end of the financial year of the partnership the profits received from the partnership activities shall be distributed on the decision of all the general partners. The decision shall be taken by common consent of the general partners.

2. The share of profits of the general partnership due to the general partners shall be distributed to each general partner in proportion to the amount of his contribution, unless otherwise established in the partnership agreement.

3. The share of the limited partnership’s profits due to the members shall be first of all distributed among the limited partners according to the terms set in the limited partners’ agreements. The remaining share of profits of the limited partnership shall be distributed to the general partners in proportion to the amount of their contributions, unless otherwise established in the partnership agreement.

4. The share of profits allocated to each member of the partnership must be paid out within three months from the day of decision-making on the distribution of profits.

Article 14. Expiration of the Partnership Agreement

1. The partnership agreement shall expire on the grounds of expiration of the partnership agreement as specified in the Civil Code.

2. Unless no other deadline for decision-making is provided in the partnership agreement, all the general partners must within thirty days after the emergence of the grounds for the expiration of the partnership agreement take, by common consent, a decision to retain the partnership agreement or to terminate the partnership activities, except in cases where it is established in the partnership agreement that the agreement remains valid for the rest of the general partners. If the general partners take a decision to retain the partnership agreement as well as where it is established in the partnership agreement that it is valid for the rest of the general partners, the general partners must amend the partnership agreement.

3. Where only one general partner remains in the partnership, the partnership shall within three days after the fall in the number of the general partners notify the Legal Entities Register thereof. The partnership with only one general partner remaining must be liquidated if the general partner does not decide to reorganise or transform the partnership within a six-month period from the fall in the number of the general partners, except in cases where a new general partner is admitted into the partnership within the above-specified period.

4. Where the grounds for the expiration of the partnership agreement is the retirement of the general partner and the remaining general partners take a decision by common agreement to keep the partnership agreement, the partnership shall refund the outgoing general partner on his request in the manner and within the time limits established in the partnership agreement the amount in cash equivalent in value to his contribution. The general partner whose contribution made otherwise than in cash, being an item characterised by specific traits, shall have the right to request the return of this non-cash contribution, whereas the partnership must return it provided that this will not infringe the interests of the partnership members and creditors. The partnership agreement may also establish another procedure for the return of the general partner’s contribution which is an item characterised by specific traits. The provisions of this paragraph shall also be applicable with respect to the heir or successor of the general partner provided that he has not become the general partner according to the procedure established by the partnership agreement.

Article 15. Expiration of the Limited Partner’s Agreement

1. The limited partner’s agreement shall expire:

1) upon the expiration of the term of partnership agreement of the limited partnership;

2) upon the termination of the agreement by one of the parties to the agreement or by common agreement of both parties;

3) upon the expiration of the term of the agreement.

2. Upon the expiration of the limited partner’s agreement settlement with the former limited partner or his heirs or successors to the rights shall be effected according to the procedure established in paragraph 4 of Article 14 of this Law, unless otherwise prescribed by the limited partner’s agreement.

3. In the event of expiration of all limited partner’s agreements in the limited partnership, the limited partnership shall notify the Legal Entities Register thereof within three days after the expiration of the last limited partner’s agreement. The limited partnership in which all limited partner’s agreements have expired shall be subject to liquidation, unless the general partners decide within a six-month period after the expiration of the last limited partner’s agreement to reorganise or to transform the limited partnership, except in cases where the limited partnership concludes a new limited partner’s agreement within the above period.

Article 16. Peculiarities of Partnership Reorganisation

1. Both general partnerships and limited partnerships may take part in the reorganisation.

2. From the day of public announcement of the establishment of terms of reorganisation the partnership which is to be dissolved after the reorganisation shall acquire the status of the partnership in liquidation, while the partnership which is to be continued after the reorganisation shall acquire the status of the partnership taking part in the reorganisation.

3. The decision on the reorganisation shall be taken by common agreement by all the general partners of the partnership being reorganised and the partnership taking part in the reorganisation. The document confirming the decision to reorganise the partnership shall be presented to the Legal Entities Register.

4. The general partnership formed by way of reorganisation shall be registered after the partnership agreement has been drawn up and the documents indicated in laws as required for partnership registration have been presented to the Legal Entities Register. The limited partnership formed by way of reorganisation shall be registered after the partnership agreement and limited partner’s agreements have been drawn up and the documents indicated in laws as required for partnership registration have been presented to the Legal Entities Register.

5. The reorganisation shall be deemed completed after the registration of all new partnerships formed following the reorganisation or after the registration of all amendments to the partnership agreement of all partnerships which will continue their activities in the future

Article 17. Peculiarities of Partnership Transformation

1. The general partnership may be transformed into legal entities of the following legal form:

1) the limited partnership;

2) the public limited-liability company;

3) the private limited-liability company;

4) the agricultural company;

5) the cooperative society (cooperative);

6) the individual enterprise;

7) the public establishment;

8) the charity and sponsorship fund.

2. The limited partnership may be transformed into the general partnership or into any other legal entity of the legal form specified in subparagraphs 2 through 8 of paragraph 1 of this Article.

3. When all the general partners of the partnership by common agreement take a decision to transform the partnership, the founding documents of the legal entity of the new legal form shall be at the same time adopted. The above-mentioned documents shall meet the requirements of the legal acts regulating the legal form of that legal entity.

4. From the day of adoption of the decision to transform the partnership the partnership shall acquire the status of the partnership in transformation. The document confirming the decision to transform the partnership shall be submitted to the Legal Entities Register not later than on the first day of public announcement of the transformation of the partnership.

5. A public notice of the decision to transform the partnership must be published three times in the daily indicated in the partnership agreement with at least thirty-day intervals between the publications or published once in the daily specified in the partnership agreement and all the creditors of the partnership must be notified in writing. The notice shall give the information about the partnership specified in Article 2.44 of the Civil Code and shall indicate the legal form of the legal entity into which the partnership shall be transformed as well as where and when access shall be had to the founding documents of the legal entity of a new legal form.

6. The partnership may be transformed into a public limited-liability company or private limited-liability company if the assets of the partnership, minus all the obligations of the partnership are not less than the minimum amount of the statutory capital prescribed by the Law on Companies for a public limited-liability or private limited-liability company. Before the adoption of the decision to transform the partnership into a public limited-liability or private limited-liability company the assets of the partnership transferred for the company shares must be valued by an independent asset valuer according to the procedure set forth in the laws regulating valuation of assets. The asset valuation report must meet the requirements prescribed by the Law on Companies for the reports of valuation of contributions made otherwise than in cash and shall be submitted to the partnership and the Legal Entities Register not later than 10 days before the adoption of the decision to transform the partnership. The decision to transform the partnership into a public limited-liability company or private limited-liability company shall state, inter alia, the amount of the statutory capital, the number of shares, the nominal value of shares of the public limited-liability company or private limited-liability company that will operate after the transformation. When the partnership is being transformed into a public limited-liability company, in addition to the actions set forth in this and other laws the shares of the public limited-liability company shall be subject to re-registration with the Securities Commission of the Republic of Lithuania according to the procedure established by legal acts regulating the securities market and the audit firm shall be selected.

7. The partnership may be transformed into the agricultural company provided the company has not less than two members and its revenue from the sale of agricultural produce and services provided to agriculture during the preceding financial year accounted for over 50% of all sales revenue.

8. The partnership may be transformed into a cooperative society (cooperative) provided that the partnership has at least five members.

9. The partnership may be transformed into an individual enterprise in case the number of the general partners falls down becoming less than the minimum numbers set in this Law. In such case the remaining one general partner – natural person shall become the owner of the individual enterprise that will operate after the transformation.

10. The documents of founding of a legal entity of a new legal form shall be registered in the Legal Entities Register and the data in the Legal Entities Register shall be changed after the managing bodies of the legal entity of a new legal form have been elected/formed, the balance sheet of the partnership being transformed has been drawn up, the terms and conditions relating to the transformation of the partnership into a legal entity of a new legal form, set in this Law and other legal acts, have been met and the Legal Entities Register has been submitted the documents prescribed by laws.

11. The transformation shall be deemed completed after the changed founding documents of the legal entity of a new legal form have been registered in the Legal Entities Register.

Article 18. Peculiarities of Partnership Liquidation

1. From the day the decision to liquidate the partnership is taken by common agreement by all the general partners, the partnership shall acquire the status of the partnership in liquidation.

2. From the moment of his appointment, except in the cases provided for in the Civil Code, the liquidator of the partnership shall acquire the competence of the general partners of the partnership with respect to the conclusion of transactions as well as the rights and duties provided for in paragraph 3 of Article 11 of this Law.

3. Unless otherwise provided for in the partnership agreement, the assets remaining after the settlement of accounts with the creditors of the general partnership in liquidation shall be distributed among the general partners in proportion to the amount of their contribution that was on the day of taking the decision to liquidate the general partnership.

4. The assets remaining after the settlement of accounts with the creditors of the limited partnership shall be distributed among the members of the limited partnership. First of all the contributions shall be returned to the limited partners, thereafter to the general partners. The remaining assets of the limited partnership shall be distributed among its members in proportion to the amount of their contributions on the day of taking of the decision to liquidate the limited partnership, unless otherwise established in the partnership agreement

5. A member of the partnership in liquidation shall be returned his contribution in cash. The member of the partnership in liquidation whose contribution is an item characterised by individual traits may be with his consent returned the contribution. The partnership agreement or the limited partner’s agreement may establish any other procedure for returning the general partner’s contribution or the limited partner’s contribution which is an item characterised by individual traits.

6. In addition to other duties established in this Law and the Civil Code, the liquidator of the partnership shall:

1) make a public notice of the partnership liquidation in the daily indicated in the partnership agreement and present to the Legal Entities Register the documents confirming the decision to liquidate the partnership and information relating to the liquidator himself (name, surname, personal number, place of residence);

2) draw up the balance sheet of the partnership for the beginning of the liquidation period;

3) transfer to the partnership members in the manner set forth by this Law the residue assets of the partnership remaining after the settlement of accounts with the creditors of the partnership in liquidation and draw up the deeds of acceptance-transfer of such assets;

4) transfer the partnership documents for safekeeping according to the procedure established in the Law on Archives;

5) draw up the partnership liquidation deed. The partnership liquidation deed shall comprise the information about the discharge of obligations and confirm the performance of all actions relating to the partnership liquidation;

6) present to the Legal Entities Register the partnership liquidation deed and other documents necessary for removing the partnership from the Register.

7. Where the decision to liquidate the partnership is revoked, the document confirming the revocation of liquidation shall be submitted to the Legal Entities Register.

Article 19. Final Provisions

1. This Law shall come into force as of 1 January 2004.

2. Paragraph 6 of Article 7 of this Law shall become effective after the accession of the Republic of Lithuania to the European Union.

3. From the moment of entry into force of this Law, the Law on Partnerships shall be applied when reorganising and liquidating only those partnerships the decisions regarding whose reorganisation and liquidation were taken prior to the entry into force of this Law.

4. From the moment of entry into force of this Law the concepts “Partnership Agreement”” and “Limited Partner” shall be used within the meaning defined in this Law.

5. Until the beginning of activities of the Legal Entities Register partnerships shall be registered in the Register of Enterprises of the Republic of Lithuania and the data and documents thereof shall be submitted according to the procedure set forth by laws, other legal acts. From the beginning of activities of the Legal Entities Register the partnerships registered in the Register of Enterprises of the Republic of Lithuania shall be considered as registered in the Legal Entities Register.

6. The limited partnerships founded before the entry into force of this Law, which have only one general partner must within an eighteen-month period admit at least one more general partner or take a decision to transform the limited partnership into a legal entity of another legal form as specified in paragraph 1 of Article 17 of this Law, reorganise the limited partnership by way of merger or liquidate it.

7. A person who is a general partner of two or more partnerships must within an eighteen-month period from the entry into force of this Law remain a general partner of only one partnership transferring the rights of the general partner to another person, relinquishing his right to further membership in the partnership or becoming a limited partner of the limited partnership.

8. A person who is at the same time a general partner of a partnership and the owner of an individual enterprise must within an eighteen-month period from the entry into force of this Law choose membership in only one legal entity of unlimited civil liability transferring his general partner rights to another person, relinquishing his further membership in the partnership or becoming a limited partner of a limited partnership or transforming, transferring or liquidating the Individual Enterprise.

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

PRESIDENT OF THE REPUBLIC	ROLANDAS PAKSAS