LAW ON INDIVIDUAL ENTERPRISES

Official translation

REPUBLIC OF LITHUANIA

LAW ON INDIVIDUAL ENTERPRISES

6 November 2003 No. IX-1805

Vilnius

Article 1. Purpose of the Law

This Law regulates the establishment, management, activities, transformation, liquidation of the enterprises whose legal form is the individual enterprise, the rights and duties of the owners of the enterprises.

Article 2. Concept of the Individual Enterprise

1. The individual enterprise is a private legal entity of unlimited liability.

2. The name of the private enterprise shall contain the words defining its legal form “individuali įmonė” or the acronym “IĮ”.

3. The head office of the individual enterprise shall be in the Republic of Lithuania.

Article 3. Establishing an Individual Enterprise

1. The founder of an individual enterprise may be only a legally capable natural person.

2. The individual enterprise shall be established by a sole natural person.

3. The individual enterprise shall be considered established from the date of its registration in the Legal Entities Register.

4. The individual enterprise shall be registered after the appointment of the individual enterprise manager, where he is not the owner of the individual enterprise, and after the filing with the Legal Entities Register of the documents specified in the Civil Code as required for the enterprise registration.

5. From the moment of the enterprise registration the founder of the individual enterprise shall be considered as the owner of the individual enterprise.

Article 4. Bylaws of the Individual Enterprise

1. The bylaws of the individual enterprise shall be the document of establishment of the individual enterprise whereby the enterprise governs its activities. The document of establishment of the individual enterprise shall at the same time be its establishment agreement.

2. The bylaws of the individual enterprise shall state:

1) the name of the individual enterprise;

2) the legal form;

3) head office of the individual enterprise;

4) objectives of the enterprise indicating the areas of the enterprise business;

5) competence of the owner of the individual enterprise (rights and duties);

6) procedure for appointing and recalling the manager of the individual enterprise, where he is not the individual enterprise owner, his competence;

7) whether or not the individual enterprise is required to draw up the financial statements;

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

9) procedure for amending the bylaws of the individual enterprise;

10) length of operation of the individual enterprise, where limited;

11) date for drafting the bylaws of the individual enterprise.

3. The bylaws of the individual enterprise may also set other provisions which are not contrary to this and other laws.

4. Specifying in the bylaws the competence of the individual enterprise owner, the procedure for appointing and recalling the manager of the individual enterprise and defining his competence shall not be mandatory where it does not differ from that established in the this Law and a notice to the effect is given in the enterprise bylaws.

5. The bylaws of the individual enterprise being established shall be signed by the founder of the individual enterprise. The amended bylaws of the individual enterprise shall be signed by the owner of the individual enterprise. The signature of the person who signed the bylaws and the amended bylaws of the individual enterprise being established need not be notarised.

6. Where the bylaws of the individual enterprise are being amended, the amended bylaws of the individual enterprise and the amendments to the bylaws of the individual enterprise shall be submitted to the Legal Entities Register together with the documents prescribed by legal acts.

7. The bylaws of the individual enterprise as well as the amended bylaws of the individual enterprise shall become effective immediately upon their registration in the Legal Entities Register.

Article 5. Legal Entities Register Data

In addition to the data listed in Article 2.66 of the Civil Code, the following data shall be provided in the Legal Entities Register:

1) registration date;

2) data of the owner of the individual enterprise (name, surname, personal number place of residence);

3) length of operation of the individual enterprise, where limited;

4) dates of beginning and end of financial year;

5) date of removal from the Register.

Article 6. Owner of the Individual Eenterprise

1.The individual enterprise shall have one owner.

2. Only a natural person may be the owner of the individual enterprise.

3. The owner of the individual enterprise shall not be the owner of another individual enterprise.

4. The rights and duties of the individual enterprise owner shall be established in the Civil Code, this Law and other laws as well as the bylaws of the individual enterprise.

5. The owner of the individual enterprise shall take the following decisions:

1) to amend the bylaws of the individual enterprise;

2) to appoint another person manager of the individual enterprise where this is prescribed by the bylaws, to recall him, to conclude with him the contract of employment or the civil agreement on behalf of the individual enterprise;

3) to approve the annual financial statements where drawing up of the annual financial statements is provided for in the bylaws of the individual enterprise and another person has been appointed manager of the individual enterprise;

4) to establish branches and representative offices, terminate their activities and approve the bylaws of the branches and representative offices;

5) to transform the individual enterprise;

6) to reorganise the individual enterprise when it may be reorganized pursuant to this Law;

7) to liquidate the individual enterprise.

6. The owner of the individual enterprise shall have the following rights:

1) to receive the profit of the individual enterprise ;

2) to withdraw cash from the till for his personal needs as profit paid in advance;

3) take assets from the individual enterprise;

4) after the settlement of accounts with the enterprise creditors receive residue assets of the individual enterprise being liquidated;

5) be provided with all information about the operations of the individual enterprise and get access to all documents of the individual enterprise if another person is appointed manager of the individual enterprise;

6) other rights established by law and bylaws of the individual enterprise.

7. In case of legal incapacity or limited legal capacity of the owner of the individual enterprise, the court shall by its ruling appoint the administrator of the property of the individual enterprise. The guardian (curator) of the individual enterprise owner or any other person may be appointed administrator of the property of the individual enterprise. The administrator of the property of the individual enterprise shall acquire the rights and duties of the individual enterprise owner from the day of his appointment.

Article 7. Management of the Individual Enterprise

1. The individual enterprise shall have a single-person management body – the manager of the individual enterprise. Unless otherwise established by the individual enterprise bylaws, the owner of the individual enterprise shall at the same time be the single-person management body of the enterprise.

2. Where the owner of the individual enterprise is at the same time the enterprise manager, he shall be assigned the competence of the individual enterprise manager.

3. The owner of the individual enterprise may appoint another person as the individual enterprise manager, where this is set forth in the bylaws of the individual enterprise. The appointment of the individual enterprise manager or the expiry of the employment contract or civil agreement concluded with him shall be not later than within 5 days notified to the Legal Entities Register. In the event of establishment of an individual enterprise the person appointed manager of the individual enterprise shall start performing duties of the manager from the day of registration of the individual enterprise in the Legal Entities Register.

4. Where the owner of the individual enterprise appoints another person manager of the individual enterprise, the employment contract or civil agreement shall be concluded with the manager of the individual enterprise. On behalf of the individual enterprise the contract/agreement with the manager of the individual enterprise shall be signed by the owner of the individual enterprise. The manager of the individual enterprise shall take up his duties immediately after the signing of the contract/agreement unless otherwise established in the contract/agreement concluded with him. Where a contract of employment is concluded with the individual enterprise manager, his full liability contract may be concluded. After the individual enterprise owner takes a decision to recall the manager, the contract of employment or the civil agreement concluded with him shall be terminated. Labour disputes between the individual enterprise manager and the individual enterprise owner shall be settled in court.

5. The manager of the individual enterprise shall act at his own discretion on behalf of the individual enterprise, unless the bylaws provide otherwise, and shall be responsible for organising the business of the individual enterprise, protecting the documents and other information about the assets of the individual enterprise, drawing up financial statements where the drawing up of financial statements of the individual enterprise is prescribed by the bylaws of the individual enterprise, presenting the documents of and information about the individual enterprise to the Legal Entities Register. The manager of the individual enterprise shall also have other rights and duties established in the Civil Code, this Law and other laws, the bylaws of the individual enterprise.

Article 8. Assets of the Individual Enterprise

1. The assets shall be owned by the individual enterprise by the right of ownership.

2. The assets of the individual enterprise shall be the assets which constituted personal property of the individual enterprise owner transferred into the ownership of the individual enterprise as well as assets acquired on behalf of the individual enterprise.

3. When transferring money or any other property to the individual enterprise or withdrawing it from the individual enterprise the individual enterprise owner shall draw up and sign documents of transfer/withdrawal of money or any other property. The documents of transfer of money and of withdrawing money shall be executed according to the procedure established by legal acts. The documents of transfer or withdrawal of other property shall contain the following mandatory particulars: name of the document, date of drawing up of the document, name of the individual enterprise, code number of the individual enterprise, name, surname and personal number of the individual enterprise owner, name, amount, measuring unit, values and total sum of the property being transferred/withdrawn. In case the property being transferred to/withdrawn from the individual enterprise is registered in the Legal Entities Register, the property code number or the unique number in the public register shall be indicated in the property transfer/withdrawal documents.

4. The assets belonging to the individual enterprise owner and his spouse under the joint partial ownership plan shall be transferred on trust to the individual enterprise unless otherwise agreed by the spouses.

Article 9 Accounting and Financial Statements of the Individual Enterprise

1. Accounting of the individual enterprise shall be kept according to the procedure prescribed by the legal acts regulating accounting.

2. Where prescribed by the bylaws of the individual enterprise, the individual enterprise shall draw up financial statements according to the procedure established by laws. At the end of the financial year of the individual enterprise the annual financial statements of the individual enterprise shall be not later than within three months approved by the individual enterprise owner, except in cases where the owner performs the functions assigned to the competence of the individual enterprise manager, and submitted to the Legal Entities Register.

Article 10. Peculiarities of Inheriting the Individual Enterprise

1. The individual enterprise shall be inherited according to the procedure laid down in the Civil Code.

2. Where the individual enterprise is inherited by a person who according to law may not be the owner of the individual enterprise, he shall within 6 months from the day of acceptance of the inheritance transfer the individual enterprise into ownership of another natural person, reorganise, transform or liquidate the individual enterprise.

3. In the event of death of the individual enterprise owner the interested persons may apply to court with a request to appoint, pending the division of estate by the heirs of the decedent owner, the administrator of the individual enterprise constituting the estate. The administrator of the individual enterprise constituting the estate shall have the rights and duties of the individual enterprise owner and manager.

4. Having appointed the administrator of the estate of the individual enterprise the court shall within a three-day period send a copy of the effective court decision to the Legal Entities Register.

Article 11. Transformation of the Individual Enterprise

1. The individual enterprise may be transformed into a public limited-liability company, private limited -liability company as well as a public establishment.

2. When the individual enterprise owner adopts a decision to transform the enterprise, the documents of establishment of a legal entity of a new legal form, which must meet the requirements of laws establishing the legal form of the legal entity, shall be concurrently adopted.

3. From the day of adoption of the decision to transform the individual enterprise the individual enterprise shall acquire the status of the individual enterprise being transformed. The document confirming the decision to transform the individual enterprise must be submitted to the Legal Entities Register not later than on the first day of public announcement of the transformation of the individual enterprise.

4. A public notice of the decision to transform the individual enterprise must be published three times in the daily indicated in the bylaws of the individual enterprise with at least thirty-day intervals between the publications or published once in the daily specified in the bylaws of the individual enterprise notifying all the creditors of the individual enterprise in writing. The notice shall contain all the information about the individual enterprise indicated in Article 2.44 of the Civil Code as well as the legal from of the legal entity into which the individual enterprise is being transformed and where and from when access may be had to the documents of establishment of the legal entity of a new legal form.

5. The individual enterprise may be transformed into a public limited-liability company or private limited-liability company if the assets of the individual enterprise minus all the obligations of the individual enterprise 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 individual enterprise into a public limited-liability or private limited-liability company the assets of the individual enterprise 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 individual enterprise and the Legal Entities Register not later than 10 days before the adoption of the decision to transform the individual enterprise. The decision to transform the individual enterprise 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 individual enterprise 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 must be selected.

6. The documents of establishment of the legal entity of a new legal form shall be registered in the Legal Entities Register and the data of the Legal Entities Register shall be revised after the management bodies of the legal entity of a new legal form have been elected (formed), the balance sheet of the individual enterprise being transformed has been drawn up, the conditions relating to the transformation into the legal entity of a new legal form set in this Law and other legal acts have been fulfilled and the documents prescribed by legal acts have been submitted to the Legal Entities Register.

7. The transformation shall be deemed completed from the moment of registration of the legal entity of a new legal form in the Legal Entities Register.

Article 12. Reorganisation of the Individual Enterprise

1. The individual enterprise may not be reorganised save in the cases specified in this Law.

2. Where the individual enterprise is inherited by a person who is the owner of another individual enterprise, the individual enterprises owned by the person may be reorganised by way of merger in the manner set forth in the Civil Code.

Article 13. Liquidation of the Individual Enterprise

1. The individual enterprise may be liquidated on the grounds and according to the procedure of liquidation of legal persons as set forth in the Civil Code.

2. The individual enterprise shall acquire the status of the individual enterprise in liquidation from the day of adoption of the decision to liquidate the individual enterprise.

3. The liquidator of the individual enterprise shall acquire the rights and duties of the enterprise manager from the day of his appointment, except in the cases prescribed by the Civil Code.

4. In addition to other duties established in this Law and the Civil Code, the liquidator of the individual enterprise shall:

1) transmit to the Legal Entities Register the decision to liquidate the individual enterprise, submit the document confirming the decision and communicate his personal data (name, surname, personal number, place of residence) no later than on the first day of public announcement of the liquidation of the individual enterprise ;

2) draw up the balance sheet of the individual enterprise of the beginning of the liquidation period;

3) complete the discharge of obligations of the individual enterprise, conclude a settlement with the creditors of the individual enterprise in liquidation;

4) file claims to the debtors of the individual enterprise;

5) transfer to the owner of the individual enterprise the residue assets after the satisfaction of the creditors’ claims and draw up the transfer of assets document;

6) hand over the documents of the individual enterprise for safe keeping according to the procedure set forth by the Law of the Republic of Lithuania on Archives;

7) draw up the liquidation statement of the individual enterprise. The liquidation statement of the individual enterprise shall indicate the creditors and debitors, present information about the settlement with creditors and fulfillment of other obligations, the residue assets and the transfer thereof to the owner and shall confirm the execution of all the actions relating to the liquidation of the individual enterprise;

8) submit to the Legal Entities Register the liquidation statement of the individual enterprise and other documents necessary for removing the individual enterprise from the Register.

5. If the decision to liquidate the individual enterprise is cancelled, the document confirming the cancellation of liquidation must be presented to the Legal Entities Register.

Article 14. Final Provisions

1. The Law shall enter into force on 1 January 2004.

2. The individual (personal) enterprises established prior to the entry into force of this Law, whose name contains the words “personal enterprise” or the acronym “PĮ” as well as the individual enterprises whose name contains no indication of their legal form shall be considered as individual enterprises after the entry into force of this Law.

3. Should there be any alterations in the data of the individual enterprises established prior to the entry into force of this Law, which are required under Article 2.66 of the Civil Code and Article 5 of this Law, the managers of individual enterprises shall submit to the Legal Entities Register together with the documents required by legal acts for the registration of the altered data the bylaws of the individual enterprise drawn up according to this Law, except in cases where documents relating to reorganisation or liquidation are submitted.

4. Before the start of activity of the Legal Entities Register the individual enterprises 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 established by laws and other legal acts. From the date of start of activity of the Legal Entities Register the enterprises shall be considered as registered in the Legal Entities Register.

5. The owners of individual enterprises who possess two or more individual enterprises must within a 24-month period from the entry into force of this Law reorganise the enterprises by way of merger prescribed in the Civil Code into one individual enterprise or, leaving only one individual enterprise to operate, transform, transfer or liquidate the others.

6. The individual enterprises whose owners are non-production organisations shall be considered as established for the period until 31 December 2004 and may be transformed, liquidated or transferred to other persons before the specified date in the manner established in this Law. In case the individual enterprise whose owner is the non-production organisation does not acquire by 31 December 2004 the status of the enterprise in transformation or in liquidation or does not transfer it to other persons, its managing bodies as well as the administrator of the Legal Entities Register shall have the right from 1 January 2005 to apply to court to appoint the liquidator of the individual enterprise.

7. The individual enterprise in whose name both spouses are indicated as the owners must within 12 months from the entry into force of this Law adopt a decision regarding the owner of the individual enterprise or transform the individual enterprise into a legal entity of the legal form specified in Article 11(1) of this Law or into a partnership, reorganise by way of division into two individual enterprises, transfer the individual enterprise or liquidate the individual enterprise.

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

PRESIDENT OF THE REPUBLIC ROLANDAS PAKSAS