Official translation
COMPANY LAW
5 July 1994 No. I-528
(As amended by 5 October 1999 No. VIII-1345)
Vilnius
CHAPTER ONE
GENERAL PROVISIONS
Article 1. Purpose of the Law
The Law shall regulate the establishment, reorganisation and liquidation of public and private companies, their management and activities, as well as the rights and obligations of their shareholders. When the text of the Law applies both to public and private companies, they shall be referred to by the term "companies."
Article 2. Public Companies and Private Companies
1. The company is an enterprise whose authorised capital is divided into shares. It may be formed for any business not prohibited by the laws of the Republic of Lithuania. The company is a legal person.
2. The company is a limited liability formation. It shall be liable for its obligations only to the extent of its assets. The shareholders shall be liable only for the amounts which they must pay for their shares.
3. The amount of the authorised capital of a public company may not be less than 100 000 litas. Its shares may be circulated and traded in publicly.
4. The amount of the authorised capital of a private company may not be less than LTL10,000. A private company must limit the number of its shareholders to 50. The shares of a private company may not be circulated or traded in publicly, unless the laws regulating the sale of state-owned property (shares) provide otherwise.
6. The company may be established for a period of limited or unlimited duration. If the Articles of Association of the company do not specify the period for which it is established, it shall be deemed to have perpetual existence. The duration of the company may be extended, accordingly amending its Articles of Association.
Article 3. The Incorporators
1. The incorporators of the company shall be natural or legal persons who have executed the company incorporation agreement (act) in accordance with the procedure established by this Law. Natural and legal persons of the Republic of Lithuania and other states may be incorporators. The number of incorporators shall not be limited. Each incorporator of the company must be its shareholder. If at least one of the incorporators (investors) of the company is a foreign person, the laws of the Republic of Lithuania which regulate foreign investment shall also apply to the company.
2. If the company is set up by one person, the incorporation act shall be drawn up instead of the company incorporation agreement and the requirements of the incorporation agreement shall apply to it.
3.The incorporators shall conclude the agreement on the incorporation of the company. The following must be specified in the incorporation agreement :
4) the rights and obligations of the incorporators in the setting up of the company and liability for failure to fulfil their obligations;
9) the incorporators who may represent the company.
The agreement shall be signed by all incorporators or persons authorised by them. If at least one of the incorporators is a natural person, the agreement must be certified by the notary. If all the incorporators are legal persons or enterprises, the signature of their manager or authorised person shall be certified by a seal. The procedure established for natural persons shall apply to a foreign legal person who does not possess a seal.
The agreement on the incorporation of the company shall be a public document.
4. The company incorporation agreement or an act on the incorporation of the company concluded in accordance with the procedure established in this Law shall grant the right to open a cummulative account with a bank registered in the Republic of Lithuania.
5. Upon executing the company incorporation agreement, the incorporators shall draw up the company's Articles of Association and offer for sale the shares. The incorporators of a public company shall have the right to offer shares for sale only upon registering the company's Articles of Association in accordance with the procedure established by the Law on the Register of Enterprises of the Republic of Lithuania as well as upon registering the issue of shares with the Securities Commission.
6. Prior to the statutory general meeting the persons specified in the incorporation agreement shall have the right to enter into transactions in the name of the company which is being incorporated. Upon their approval by the statutory general meeting, the above transactions shall create obligations for the company. If the meeting refuses to approve the transactions, the incorporators shall be jointly liable for the obligations thereunder, whereas other persons specified in the incorporation agreement shall be severally liable. On the proposal of the incorporator the general meeting may transfer to the company the obligations under the transactions concluded by the incorporator in his own name.
7. The shareholders shall have the right to request that the incorporators compensate for the losses incurred by the company prior to the day of its registration by reason of failure to fulfil the obligations, dishonest management of the affairs related to the incorporation, with the exception of cases where the losses have been incurred because of normal production or business risks. Disputes concerning the compensation of losses shall be settled in court.
Article 4. Shareholders
1. A shareholder is a natural or a legal person, the state or municipality who has at least one share in the company acquired in the manner prescribed by law. The state or the municipality shall be represented in the company by a state or municipal institution or a state-owned or municipal enterprise.
2. Each shareholder shall have such rights in the company which are incidental to the shares in the company held by him.
Article 5. Special Purpose Companies
1. The status of special purpose companies may be assigned to companies which fulfil functions that are of vital significance for the state or companies whose activities require a special regime. The sphere of activity in which special purpose companies may operate shall be approved by the Seimas on the recommendation of the Government of the Republic of Lithuania.
2. The shares held by an institution of state governanance in a special purpose company must carry at least 2/3 of all the votes.
3. The state or municipal institution holding controlling interest in a special purpose company shall have the right to additionally prescribe:
Article 6. Incorporation of the Company
1. A private company may be founded only in a closed manner, whereas a public company may be founded either in a closed or in an open manner.
2. The company shall be founded in a closed manner by forming its authorised capital from contributions received for issued shares acquired only by the incorporators.
3. The company shall be founded in an open manner by forming its authorised capital from contributions received for issued shares a portion whereof is acquired by the incorporators while the remaining shares are offered for sale to other persons.
4. The business year of the company shall be the calendar year. Other 12-month periods may also be established in the Articles of Association for the beginning and the end of the company's business year. If the company is registered after the commencement of the business year, the day of the end of the company's business year provided in the company's Articles of Association shall be considered as the end of the first business year of the company. If the company is removed from the Register prior to the end of the business year, the last business year shall end by the day the company is removed from the Register.
5. The incorporators must prepare a statutory report specifying:
3) non-pecuniary (property) contributions, the value of said contributions and valuation methods submitted to the meeting for approval;
6. The statutory report must be audited and conclusions thereon must be submitted to the statutory meeting by an independent auditor or the inspector who shall have the right to invite property valuation experts. If the incorporators deny the auditor, inspector the required information and explanations, the auditor, inspector shall inotify the statutory meeting thereof in writing. Each shareholder shall have the right of access to the statutory report and the auditor's findings and the right to make copies thereof.
7. If, during incorporation, not all shares in a public company are subscribed for during the time period set for the subscription for shares, the amount of the authorised capital may be reduced on the resolution of the statutory meeting, but by not more than 50%. The reduced amount of the authorised capital may not be less than the minimum amount specified in Paragraph 3 of Article 2 of this Law. If during the time period set for the subscription for shares not all shares are subscribed for and the amount of the authorised capital is not reduced, the public company may not be registered. In this case the contributions of the subscribers must be returned to them without any deductions within 15 days. All the incorporators shall be jointly liable for the return of the contributions.
8. Within 60 days of the end of the subscription period or the last day of the subscription for shares (in the event that all shares are subscribed for prior to the fixed date) the incorporators must call the statutory general meeting. If the general meeting is not called within the above period, all the subscribers shall be relieved of their obligations to the company and shall have the right to request full return of their contributions for the shares within 15 days.
9. The provisions established by this Law for the general meeting shall apply to the statutory general meeting. The statutory general meeting shall also be attended by the incorporators of the company. If there is no quorum, a repeat meeting shall be called.
10. The statutory general meeting shall approve the statutory report of the company and the transactions concluded by the incorporators, shall elect the managing bodies, the inspector or auditor, may amend or supplement the Articles of Association, settle other issues within the competence of the general meeting.
11. The first Supervisory Board or the Board of the company shall be elected for no longer than 2 business years.
12. Remuneration for the incorporation of the company or compensation of the incorporation expenses may be paid to the incorporators or to third persons provided that civil contracts have been concluded with them and the incorporation costs are substantiated by documents. Disputes between the incorporators, shareholders and third persons concerning the compensation of incorporation costs and remuneration for the incorporation shall be settled by court.
Article 7. The Company's Articles of Association
1 The Articles of Association of the company constitute the legal document governing the conduct of the company's business.
2. The Articles of Association must state:
4) the procedure for transferring registered shares to the ownership of other persons in the cases specified in Paragraph 7 of Article 34 of this Law;
9) procedure for electing the Supervisory Board, the Board and the inspector, and their respective powers;
10) the powers of the general meeting, the procedure for calling the meetings and their voting rules;
3. The Articles of Association of the company may also contain other rules that are in conformity with the laws of the Republic of Lithuania.
4. If the conduct of business activities provided for in the company's Articles of Association is regulated by other laws of the Republic of Lithuania, said laws must be complied with when drafting the company's Articles of Association.
5. The Articles of Association of the company must be signed by all incorporators and the signatures must be certified: in the case of natural persons - by a notary, in the case of legal persons, when the signature belongs to the head of the enterprise or to the authorised person - by a seal. The procedure established for natural persons shall apply to a foreign legal person who does not posses a seal.
Article 8. Registration of the Articles of Association and the Company
1. Prior to offering their shares to the public for subscription or purchase, companies must register their Articles of Association according to the procedure established by the Law on the Register of Enterprises.
2. In the event that the general meeting amends or supplements the company's Articles of Association, said amendments must be registered. Amendments to the Articles of Association shall be effective only upon their registration.
3. The company must be registered in the Register of Enterprises of the Republic of Lithuania within 6 months of the day of conclusion of the incorporation agreement. If the company is not registered within the prescribed time period, it shall be deemed not to have been incorporated and the contributions of persons to the company's authorised capital must be returned without any deductions within 15 days of the day of expiry of the period prescribed for the registration.
In the event of failure to register the company because of reasons not related to the activities of the company's incorporators or shareholders, the incorporators may appeal the actions of the registrar in court.
4. The company shall be registered according to the procedure established by the Law on the Register of Enterprises after the shares have been subscribed for, initial installments have been collected and the statutory general meeting has been held. The sum of the collected initial installments must be not less than the amount of the minimum authorised capital as established in Article 2 of this Law, of which sum pecuniary contributions must constitute no less than 1/4.
Article 9. Affiliate of the Company
1. The company shall have the right to establish affiliates. Affiliates shall be established on the resolution of the company's Board. The number of affiliates of the company shall not be limited.
2. The affiliate is a division of the company possessing a separate registered office. The affiliate shall not be a legal person and shall use the name of the company as a legal person. It shall operate in compliance with the Articles of Association of the company and within the powers which are granted by the Board and which must be specified in the company's Articles of Association.
3. The assets of the company's affiliate shall be accounted in the company's balance sheet and in a separate balance sheet of the affiliate.
Article 10. Reorganisation of the Company
1. Reorganisation is transformation of the company as a legal person without the liquidation procedure. The successors to all the rights and liabilities of reorganised companies shall be the companies newly incorporated in the process of reorganisation and companies continuing to operate after reorganisation as going concerns.
2. Companies may be reorganised in the following ways:
3. Reorganisation by merger or consolidation of companies shall be carried out by:
1) joining the companies (one or several) which cease their existence as separate legal entities to the Company which continues its business; or
4. Reorganisation of companies by way of company division shall be carried out by:
1) parcelling out the company which terminates its activities to other companies which continue their business; or
5. When the type of the company is being changed, it may be reorganised:
1) from a private company into a public company by registering its shares with the Securities Commission; or
6. Reorganisation by changing the status of the company means cancelling of the special purpose status of the company by amending its Articles of Association.
7. The companies under reorganisation must prepare a plan of reorganisation, which must state:
2) valuation of assets of each Company under reorganisation, performed in the manner prescribed by the Government;
3) assumption of liabilities, including debts to the state social insurance fund budget, also the amounts due, including penalties and default interest, calculated by the tax administrator's officers and other state institutions prior to the removal from the register, in the manner prescribed by law, of the enterprise under reorganisation, and the deadline for assuming said liabilities;
4) the criteria and rules for dividing the shareholders and shares of the companies which are connected with the reorganisation among the companies which will continue as going concerns after the reorganisation. If the shares are distributed for the companies which will continue as going concerns after the reorganisation not in proportion to their authorised capital, the procedure providing each shareholder with the possibility to choose companies in which they desire to hold shares must be established in the plan. If prior to the company’s reorganisation the state or the municipality held shares therein carrying 2/3 (3/4) of the total number of votes or in excess of 1/2 or 1./3 (1/4) of all votes, then upon its reorgatisation according to the method specified in subparagraph 2 of paragraph 4 hereof the state or the municipality must own in all the newly set up companies shares carrying accordingly not less then 2/3 (3/4) of all votes or over 1/2 (1/4) of all votes;
5) the rate at which the shares held by shareholders shall be exchanged for new shares taking into account the difference in price; the number of new shares according to class and their par value;
6) the difference between the price of shares held by the shareholders and shares received by them after the reorganisation which shall be paid out to them in cash. The payment in cash may not exceed 10% of the par value of shares;
8) property and non-property rights of holders of shares and other securities after company reorganisation and the time period of acquisition thereof;
9) the projected business indices of the companies which will be going concerns after the reorganisation; and
8. The Articles of Association of each of the companies which will function after the reorganisation must be drafted together with the reorganisation plan.
9. The Board of each company under reorganisation shall make a comprehensive written evaluation of the plan of reorganisation and shall also assign one or more experts to conduct an examination of the plan. The experts shall be entitled to obtain any related information from the companies under reorganisation. Prior to the announcement of the general meeting, the experts shall submit to the Board the Examination Act which must contain findings concerning the valuation of property, the terms and conditions of loan extension and changes in the price of shares. During the reorganisation of the company in the way specified in Subparagraph 3 of Paragraph 2 hereof valuation of property in the reorganisaton plan and examination of the plan by experts shall not be required unless requested by the shareholders by a simple majority vote.
10. Every company must make a public announcement and notify each creditor in writing of its projected reorganisation not later than 30 days prior to the general meeting which has the consideration of issue of the company reorganisation on its agenda. During the stated period every shareholder shall have the right to familiarise himself with the company's plan of reorganisation, its evaluation, business indices of the companies under reorganisation and the Examination Acts as well as making copies thereof.
11. The resolution to reorganise the company may be passed and the plan of reorganisation and the draft Articles of Association may be at the same time approved by shareholders possessing at least 2/3 of votes of every class of shares. The approved reoganisation plan and the minutes of the general meeting which approved the plan must be delivered to the registrar of the register of enterprises within 15 days from the day of the meeting which approved the plan. The general meetings of shareholders of companies which have been given loans, warranties or guarantees, with the exception of banks, shall have no right to adopt resolutions on the reorganisation of companies without obtaining a written consent of all entities who have granted the loans, warranties or guarantees, or their authorised representatives. The economic entity which granted the loan, warranty or guarantee must file its consent or objection to the company’s reorganisation within 30 days of the receipt of the company’s reorganiastion notice.
12. The company against which bankruptcy proceedings have been instituted or with respect to which extrajudicial bankruptcy procedure is applied may be reorganised in accordance with the procedure established by the Enterprise Bankruptcy Law of the Republic of Lithuania.
13. Public announcement of the company's reorganisation shall be made at leastthree times with an at least a 2-month interval between the announcements, or each shareholder and creditor shall be given a written notice thereof. The company must provide additional guarantees to every creditor who requests them.
14. The Articles of Association of companies which are going concerns after the reorganisation shall be registered after the first general meeting. The registration of the reorganised companies shall be regulated by the Law on the Register of Enterprises of the Republic of Lithuania. For the purpose of registration of the company or its Articles of Association after reorganisation the minutes of the general meeting which approved the reorganisation plan shall be presented instead of the incorporation agreement.
Article 11. Liquidation of the Company
1. The company may be liquidated on the following grounds:
1) the time period of the company's duration as specified in the Articles of Association has expired;
2) the court or the creditors' meeting has passed a resolution to liquidate a bankrupt company. In this case the company shall be liquidated in accordance with the procedure established by the Law on Enterprise Bankruptcy;
3) the court has passed a decision to liquidate the company for the violations of law established by the laws of the Republic of Lithuania; and
2. The institution or the managing body which takes a decision, according to the procedure prescribed by law, to liquidate the company shall appoint, remove from office or replace the company liquidator (administrator of the company in liquidation). If the company is put in liquidation in the manner prescribed by this Law, the managing bodies of the company, except for the general meeting, shall be divested, as of the day of the liquidator's appointment, of the powers to manage the company. The right to call the general meeting according to the procedure established in Article 21 of this Law shall be vested in the liquidator, the court or the holders of shares carrying over 1/2 of all votes.
3. The liquidator shall, in accordance with the procedure established by the Law on the Register of Enterprises, notify the registrar who registered the company of the alteration of the company's status and shall furnish the registrar with the information concerning the liquidator. After the company acquires the status of the company in liquidation, the words "in liquidation" shall precede its name.
4. The company in liquidation may conclude only transactions which are related to its liquidation as well as those transactions which are provided in the liquidation resolution.
5. The liquidation of the company shall be announced publicly not less than three times at no shorter than 2-month intervals or each shareholder or creditor shall be personally notified thereof in writing.
6. The distribution of the company's assets to the shareholders may be carried out only upon the expiry of two months after the day of the third public announcement of the liquidation of the company or of the personal notification of each shareholder and creditor.
7. In the event of disputes concerning the payment of the company's debts, the assets of the company may be distributed to the shareholders only after the dispute has been settled in court and settlements with the creditors have been effected. Disputes concerning the mortgaged assets of the company shall be considered in accordance with the procedure established by the Law on Mortgage of the Republic of Lithuania.
8. After the payment of the required taxes into the budget, including debts to the state social insurance fund budget, also the amounts due, including penalties and default interest, calculated by the tax administrator's officers and other state institutions prior to the removal from the register of the enterprise in liquidation in the manner prescribed by law, and after the discharge of liabilities to the creditors and the employees, the remaining assets shall be distributed to the shareholders in proportion to the par value of the shares owned by them. Any contingent assets shall later be distributed in an analogous manner. If the shares of the Company carry different rights, said rights must be taken into account during the distribution of assets.
9. After the decision to liquidate the company is adopted and after the company liquidator effects settlements with at least one shareholder (assigns and transfers to the shareholder the remaining share of the company’s property), the general meeting of shareholders of the company in liquidation shall be divested of the right to change the status of the enterprise in liquidation.
Article 12. Powers of the Liquidator
1. The liquidator shall have the rights and obligations of the company's Board. The liquidator shall represent the company in liquidation in court, in its relations with the state governance institutions, and with other natural and legal persons.
2. The liquidator of the company shall:
1) make a stock-taking of material and financial valuables and draw up the act of receiving same, draw up the company’s financial statement as of the beginning of the liquidation period (the liquidation balance sheet);
2) complete the discharge of the obligations under contracts concluded previously and enter into new transactions within their powers;
6) apply to the Securities Commission with a request to remove the shares from the Register (annul the registration of the shares) if the company is put in liquidation;
7) transfer the documents of the company in liquidation for safekeeping in accordance with the procedure established in the Law on Archives;
3. If the liquidation of the company lasts for several years, within 3 months of the end of each business year the liquidator shall draw up the annual financial statement and the liquidation report. These documents shall be open for review to all the shareholders and the third persons with vested interests.
4. The liquidator shall be liable to the company and the third persons for the losses incurred through his fault.
Article 13. Company's Rights and Obligations
1. Every company must have a name which must include the words "Public Company" (in Lithuanian - akcine bendrove or the acronym - AB) or "Private Company" (in Lithuanian - uzdara akcine bendrove or the acronym UAB). The name of an investment Company must include the words "Investment Company" (in Lithuanian - investicine akcine bendrove or the acronym IAB). The name of the company must be in compliance with the regulations of names of enterprises, institutions and organisations approved by the Government. Disputes over the name of the company shall be settled in court.
2. The company may:
1) have accounts with banking institutions registered in the Republic of Lithuania and other states, its own seal which may be altered and used at the company's discretion;
2) buy or acquire in other ways assets, or sell, lease, or mortgage its assets or dispose thereof in any other way. Seeking to avoid institution of bankruptcy proceedings, the company may offer its assets, in the manner prescribed by the Government, to pay off its arrears of payments to the state, municipal or state social insurance fund budgets. The state, municipality or state social insurance board shall have the right to decide, by 31 December 2000, on the issue regarding the payment of arrears in assets.
3) buy or acquire in any other way and own, as well as issue, transfer, exchange, mortgage, or use in any way investment and debt securities. If the acquisition of shares and the exercise of the rights incidental to them reduces competition among companies (enterprises) or competition in the appropriate field of business activities, the number of shares of the other company which is acquired and held may be restricted in accordance with the procedure established by the Law on Competition of the Republic of Lithuania;
5) allocate funds for the purposes of charity, health care, culture, science, education, physical education and sport, as well as for relief in cases of natural calamities or other emergencies;
6) conclude contracts, assume obligations, lend and borrow money. When borrowing funds from its shareholders, the Company shall have no right to offer them its assets as a collateral. The Company shall have no right in engage in the activities of credit institutions. The amount of funds lent by the Company to legal and natural persons may not exceed the amount of its equity capital. When the Company borrows funds from its shareholder under a loan agreement, the annual rate of interest on the loan may not exceed the weighted average of the annual interest rate paid on treasury bills of the Republic of Lithuania issued by auction in litas the last calendar quarter, published in the “Official Gazette” by the Government or the competent authority;
7) charge prices, rates and tariffs for its products, services or other resources, with the exception of cases provided for in the laws of the Republic of Lithuania;
8) prepare and implement the systems of payment of pension supplements and benefits, as well as systems of incentives and privileges;
3. The company may also have other civil rights and obligations which are not established in this Law, provided that said rights and obligations do not contradict the laws of the Republic of Lithuania.
4. If the company acquires controlling interest in another company, the latter shall become a controlled company. Controlling interest shall consist of shares which give their holder more than 50% of votes at the general meeting. The controlled company shall be a subsidiary, and the controlling company shall be the holding company. A subsidiary may not acquire shares in the holding company.
Article 14. Rights and Obligations of Shareholders
1. The property and non-property rights as well as the obligations of the shareholders shall be established by this Law and other laws of the Republic of Lithuania and by the company's Articles of Association. The property and non-property rights of shareholders specified in Articles 15 and 16 of this Law may not be subjected to any restrictions, unless the laws establish otherwise.
2. The shareholders shall have no other liabilities to the company but the obligation to pay, in the established manner, the issue price of all the shares subscribed for. The resolution of the general meeting obligating all or some of the shareholders to make additional contributions shall be invalid if at least one of them objects to the resolution.
3. If the company is in liquidation and lacks funds to discharge its liabilities, shareholders whose shares have not been fully paid up may be requested to pay up for their shares in the manner established by the Articles of Association or by the subscription agreement.
4. A share shall not be divisible into smaller parts. If a shares is held by several persons, all its holders shall be considered to be a single shareholder. The rights carried by the share shall be exercised by one of the holders by the general agreement certified by a notary. All the holders of a share shall be jointly liable for the shareholders' obligations.
5. The shareholder or the securities accounts manager authorised by him must inform the company’s administration prior to the day of the general meeting of the changes in his address and in the requisites of the personal bank account.
6. In order to implement their property and non-property rights, two or more shareholders may conclude the shareholders’ agreement. The agreement must specify the following:
3) commitments of the shareholders concluding the agreement concerning voting on all or individual items on the agenda of the general meeting, concerning the implementation of non-property rights or resolutions adopted by the meeting;
Article 15. Property Rights of Shareholders
1. The shareholder shall have the following property rights:
3) to receive shares without payment if the authorised capital is increased with the funds of the company;
4) to have the pre-emption right, except in cases when the general meeting decides not to grant all the shareholders the pre-emption right in acquiring the company’s newly issued shares;
Article 16. Non-property Rights of the Shareholders
1. Shareholders shall have the following non-property rights:
1) to attend the meetings of shareholders as voting members, unless this Law and the Articles of Association provide otherwise;
2. If all the voting shares of the company are of the same par value, each share, except for the special shares whose status is defined in Article 371 of this Law , shall carry one vote at the general meetings.
3. The company’s Articles of Association may provide for a rule according to which shares of certain classes do not carry voting rights. Government or municipal institutions shall be prohibited from acquiring non-voting company shares.
4. The shareholder shall have no right to take part in the voting at the general meeting on issues specified in Paragraph 7 of Article 3 or in Subparagraph 9 of Paragraph 3 of Article 19, in the settlement whereof the shareholder is directly interested.
5. If the voting shares are of different par value, one share of the smallest par value shall give its holder one vote. The number of votes given by other shares shall be equal to their par value divided by the smallest par value. The Articles of Association of the company may prescribe for other rules on the establishment of the number of votes, but the number of votes given by a share must be proportionate to its par value.
6. The right to vote at the general meetings held prior to the expiry of the term set for the payment of the first issue of shares as specified in the subscription agreement shall be given by the shares paid up according to the procedure set in Paragraph 3 of Article 41 of this Law, thereafter voting rights shall be carried only by fully paid up shares.
7. At the shareholder’s request the company must present to him for inspection or copying the annual and intermediate financial statements, the reports of the Board on the activities of the company, the minutes of the meetings, and the share register; the company shall also present minutes of the Supervisory Board and Board meetings to the shareholders who have given a written promise prescribed by the company not to spread confidential information provided that the minutes contain no officially unpublished information on the company’s stock events. Information (except for the public information specified by the laws of the Republic of Lithuania) which is accorded the status of confidential information by the resolution of the company Board shall be considered confidential. Upon giving a written promise not to spread confidential information, the shareholder who owns shares the total par value whereof accounts for at least 1/20 of the company’s authorised capital or the representative of the shareholders who own shares the total par value whereof accounts for at least 1/20 of the company’s authorised capital shall have the right of access to all minutes of the Supervisory Board or the Board, the transactions entered into by the company, also the offered guarantees, warranties, contracts of long-term pledge and exchange of tangible property. The shareholders who own shares which carry over 1/2 of all votes shall have the right of access to all company documents. The shareholder or the representative of shareholders shall be liable under law for the divulgence of confidential information. At the shareholder’s request refusal to present the requested documents must be executed in writing. Disputes concerning the shareholder’s right to information shall be settled in court.
8. Shareholders the total par value of whose holdings amounts to not less than 1/10 of the authorised capital or the institution which holds the special shares shall have the right to appoint an expert (a group of experts) to inspect the company's activities and accounting papers in order to establish whether or not there are any indications of insolvency or fraudulent bankruptcy, or waste of the company’s assets, entry into unprofitable transactions, infringement of the shareholders’ rights, including, among all other things, unjustified payment of wages or granting of concessions or privileges (when this causes reduction of the company’ profit or brings about losses). The inspection expenses shall be covered by the shareholders who appoint the experts. If the expert (the group of experts) confirms the facts stated in the shareholders’ application, the company must refund the inspection expenses, but not in excess of 1/4 of the damage caused to the company or its shareholders. Disputes concerning the experts’ findings shall be settled in court. When carrying out the inspection the experts shall enjoy the same rights as the company inspector (auditor).
Article 17. Proxies
1. The shareholder shall have the right to authorise another person to vote for him as his proxy at the general meeting or perform other legal acts. The proxy of the shareholder-natural person must be certified by a notary, whereas the proxy of the shareholder-legal person or of an enterprise must be certified by the manager's signature and the seal. The inspector of the company the shares whereof are held by the person who is appointing the proxy may not act as the proxy.
2. The proxy to represent a shareholder at the meeting must be presented to the person who is responsible for the registration of the participants in the meeting; the person shall record in the list of registration the name of the person who certified the proxy and the date when it was certified as well as its number and term of validity.
3. Shares owned by the state or municipality may be represented in the company, in the manner established by the Government of the Republic of Lithuania, by the authorised central or local government public servants, state-owned or municipal enterprise employees, who may be members of managing bodies of the company.
Article 18. Managing Bodies
1. The managing bodies of the company shall include the general meeting, the Supervisory Board, the Board, and the head of the Administration.
2. On the resolution of the general meeting a public company may decline to form either the Supervisory Board or the Board. Where only the Board is formed, it shall be formed pursuant to the procedure established for the formation of the Supervisory Board in Paragraphs 2, 3, and 5 of Article 24 of this Law. In the public company in which the state or municipality:
3. The private company, except for the company in which the state or municipality owns special shares, may decline, on the resolution of the general meeting, to form either the Supervisory Board or the Board. Where either one or both the managing bodies are not formed, their functions, rights and responsibility shall be assigned to other managing bodies. If the Supervisory Board and the Board are not formed, the head of the private company’s Administration shall be elected by the general meeting. Where only the Board is formed, its members shall be elected, re-elected and dismissed in accordance with the procedure established for the formation of the Supervisory Board in Paragraph. 2, 3 and 5 of Article 24 of this Law. In the private company in which the state or the municipality owns special shares the formation of the Board is mandatory.
4. If any of the company's managing bodies is not formed, the division of functions, rights and responsibility among the other managing bodies must be specified in the company's Articles of Association.
5. The general meeting shall have no right to charge other managing bodies to resolve the issues assigned to its competence. The general meeting shall have the right to resolve issues assigned to the competence of the Supervisory Board and the Board only when asked to do so by the said managing bodies.
6. The managing bodies of the company shall have no right to adopt a decision or perform other actions which violate the company’s Articles of Association or contradict the objects of the company specified in the Articles of Association, manifestly go beyond normal production-business risks, are clearly unprofitable (purchase of goods, services or works at prices exceeding market prices or their underselling, waste of the company’s assets) or are unmistakably ineffective from the economic point of view.
Article 19. General Meeting
1. The supreme managing body of the company shall be the general meeting. All the shareholders of the company, irrespective of the number and class of shares they hold, shall have the right to attend the company's general meeting. Members of the Board and the Supervisory Board as well as the head of the Administration, even if they are not shareholders, may also attend the general meeting without the right to vote.
2. The shareholders of a public company may attend the general meetings upon presenting statements of their securities accounts concerning shares owned by them. The right to operate securities accounts shall be vested in the brokerage companies and other economic entities specified by law (hereinafter referred to as brokerage companies).
3. Only the general meeting shall have the right to:
1) amend and supplement the Articles of Association of the company (except for the case for in Paragraph 4 of Article 30 of this Law);
2) elect the auditor, inspector, members of the Supervisory Board, in the event that the Supervisory Board is not formed - members of the Board, and if neither the Supervisory Board nor the Board is formed - elect the head of the Administration;
3) dismiss members of the Supervisory Board and the Board, the inspector (auditor), and the head of the Administration who have been elected by the general meeting. If the company is operating at a loss, the general meeting must consider the suitability for the appropriate office of the Supervisory Board or the Board members or the head of the Administration (where the Supervisory Board and the Board is not formed);
4) fix the salary of the inspector and the conditions of payment of auditor’s fees, the annual payments (bonuses) from the net profit to the members of the Board and the Supervisory Board pursuant to the provisions of Paragraph 4 of Article 47 and Article 48 of this Law;
5) approve the annual financial statements, the business report of the Board (if the Board is not formed - the head of the Administration);
6) increase the authorised capital - determine the class and amount of the newly issued shares and set the minimum issue price or reduce the authorised capital (except for the case specified in Paragraph 4 of Article 30 of this Law), exchange shares of one class or type for shares of another, adopt a resolution to issue convertible debentures;
8) appoint an expert (a group of experts) for the inspection of the incorporation of the company and management of its affairs;
10) with regard to a specific share issue, decline to grant pre-emption right to all the shareholders;
11) adopt a resolution on the distribution of the profit except for the case provided in Paragraph 7 of Article 48; and
4. The shareholders (or their proxies) attending the general meeting shall be registered by signing in the register. The register must indicate the number of votes possessed by each shareholder. The list shall be signed by the chairman and secretary of the meeting.
5. The minutes of the general meeting shall be signed within 3 working days by the chairman, secretary and at least one shareholder authorised to do so by the meeting. Shareholders with at least 1/20 of the the votes at the general meeting shall have the right to appoint their representative to sign the minutes of the general meeting. For that purpose they must file with the chairman of the meeting an application signed by the shareholders. The person authorised (appointed) to sign the minutes shall have the right to present in writing his comments or opinion regarding the facts stated in the minutes. Disputes concerning the invalidity of the minutes of the general meetings or parts of the minutes shall be settled in court. The minutes of the general meeting must be accompanied by the list of the attending shareholders, their respective powers as well as ballot-papers of the shareholders who voted by ballot in advance and documents proving that the shareholders had been notified of the convening of the general meeting. The minutes (copy) of the general meeting which adopted resolutions changing the data on the company kept with the Enterprises Register of the Republic of Lithuania must be within 15 days after the meeting filed, together with the appendices, with the registrar of the Register of Enterprises of the Republic of Lithuania. Minutes of the general meetings are official documents stored and kept in accordance with the procedure established by the Law on Archives. Falsification of the above minutes shall make a person liable under law.
Article 20. Quorum of the General Meeting and Adoption of Resolutions
1. The general meeting may adopt resolutions if the attending shareholders have more than 1/2 of all votes. The quorum is established on the basis of the shareholders register data prior to the official opening of the meeting and shall not be established anew or revised in the course of the general meeting. If the meeting does not have a quorum, a repeat meeting must be called within 15 days which meeting shall have the right to adopt resolutions on all the items of the agenda irrespective of the number of shareholders present. If the consent of shareholders of shares of a certain class is necessary for the adoption of a resolution, the decision on the consent may be adopted by the meeting of the shareholders of the respective class, provided that the meeting is attended by shareholders who hold more than a half of the shares of said class. The procedure for calling the general meeting shall be valid for convening a repeat meeting.
2. Upon familiarising themselves with the agenda and the draft resolution, shareholders with having the right to vote may inform the meeting in writing of their vote "for" or "against" with respect to each individual resolution. Such communications shall be included in the quorum of the meeting and added to the voting results.
3. Voting at the general meeting shall be open. On the issues on which at least one shareholder requests a secret vote to be taken, provided that he is supported by shareholders possessing at least 1/20 of the votes, secret voting shall be mandatory to all shareholders, except for the person representing the shares owned by the state or municipality. The person must always vote in writing on the items on the agenda of the general meeting.
4. The resolutions of the general meeting shall be adopted by a simple majority vote of the shareholders present, with the exception of the following cases:
1) the election of the Supervisory Board or the Board in accordance with the regulations set out in Paragraph 2 of Article 24;
2) the adoption of resolutions on the issues specified in Paragraph 11 of Article 10, Subparagraphs 1, 6, 7, 9, 10 and 11 of Paragraph 3 of Article 19, Paragraph 3 of Article 31, the adoption whereof require a 2/3 majority vote (since 1 May 2001 - a 3/4 majority vote); also on the resolutions of the Board specified in Paragraph 7 of Article 27;
3) the adoption of the resolution not to grant all the shareholders the pre-emption right, which resolutions requires a 3/4 majority vote in favour (the company’s Articles of Association may provide for a larger majority vote in favour);
5. The company’s Articles of Association may provide for a larger than 2/3 majority (3/4 or 4/5 of votes) required to adopt resolutions on the amendment and supplementing of the company’s Articles of Association, increase or reduction of the authorised capital, reorganisation or liquidation of the company, distribution of profit, issuing of convertible debentures. As of 1 July 1998, the newly incorporated companies must provide in their Articles of Association for an at least 3/4 majority of votes in favour required to adopt resolutions on the issues specified in Subparagraph 2 of Paragraph 4 hereof. As of 1 May 2001, the provision shall be applicable to all companies.
6. If in the cases specified in Paragraph 4 of Article 16 of this Law the shareholder is not in the position to cast his vote, the results of the voting shall be established not according to the number of votes of the attending shareholders, but according to the number of votes of shareholders who have the right to participate in deciding the issue.
Article 21. The Convening of General Meetings
1. The general meeting shall be convened on the resolution of the Board, and if the Board has not been formed - on the resolution of the Supervisory Board. If neither the Board nor the Supervisory Board has been formed in the private company, or if the number of the company’s Board members is not more than one half of their number specified in the Articles of Association, the general meeting must be convened on the decision of the head of the Administration. The general meeting must be convened on the decision of the head of the Administration if the company’s Supervisory Board or the Board fails to convene the meeting in the instances and within the time limits provided by this Law. The right of initiative to convene the general meeting shall be vested in the Supervisory Board and the shareholders with no less than 1/10 of the the votes, unless the Articles of Association provide for a smaller amount of votes as well as the institution which holds the special shares. The general meeting may be convened on the resolution of shareholders with more than 1/2 of the votes or holding the special shares if the persons who attempted to initiate the convening of the meeting did not receive a favourable decision of the company’s managing bodies.
2. The Board must convene the regular annual general meeting each year within 4 months of the end of the business year.
3. The extraordinary general meeting must be called if:
1) the amount of the company’s equity capital becomes smaller than the authorised capital specified in the Articles of Association by over 1/4;
2) the number of the Supervisory Board, Board members becomes half their number specified in the Articles of Association or less (because of the retirement or inability to continue in office);
3) the company’s inspector (auditor) resigns or is unable to continue in office without having examined the company’s annual financial accounts papers;
4. The persons who are demanding that the general meeting be convened shall submit an application to the Board indicating the reasons and objectives for calling the meeting, a draft agenda and drafts of the resolutions, also proposals as to the time and place of the meeting. If the Board fails to come to an agreement with the persons initiating the meeting on settling the issues proposed on the agenda in any other manner, it must convene the general meeting within 40 days of the filing of the application.
5. The general meeting may be called on the court decision if:
1) the meeting has not been called within 4 months of the end of the business year and a shareholder has brought the matter to court;
2) the persons who initiated the meeting refer the matter to court after failing to get a favourable decision from the Board in accordance with the procedure established by Paragraph 4 hereof; and
6. The Board must publish a notice about the convening of the general meeting in the periodicals specified in the Articles of Association or notify each shareholder by registered mail (with confirmation of delivery of such a letter) not later than 30 days prior to the day of the meeting. The Board must not later than 30 days prior to the day of the meeting send to the shareholder possessing not less than 1/20 of all votes the information specified in Paragraph 7 hereof by registered mail and/or by fax provided the shareholder has given his fax number and if he requests the information specified in Paragraph 7 hereof. When a repeat meeting is convened the shareholders must be notified in the same manner not later than 10 days prior to the meeting. The general meeting may be called without observing the above time requirements provided that all the shareholders with the right to vote or their proxies give their written consent thereto. The Board must inform the shareholders about the documents which corroborate the shareholders’ notification of the general meeting being called prior to the opening of the meeting. The documents must be appended to the minutes of the general meeting.
7. The notice about the general meeting must state:
8. The shareholders must be provided a possibility to review the documents related to the agenda of the meeting not later than 7 days before the meeting. If requisitioned in writing by a shareholder possessing at least 1/20 of all votes, the company’s Board must not later than 7 days prior to the opening of the meeting sent out to the shareholder by registered mail and/or fax (if the shareholder has given his fax number) documents related to the agenda of the general meeting.
Article 22. Agenda of the General Meeting
1. The draft agenda of the general meeting may be revised. In the event that the agenda of the meeting referred to in the notice on the calling of the meeting is revised, the shareholders must be informed of the changes in the agenda in the same manner in which notice of the general meeting is given and not later than 10 days prior to the meeting.
2. The meeting shall have no right to adopt resolutions on issues which are not on the agenda if not all shareholders who have the voting right attend the meeting.
3. On the proposal of shareholders possessing not less than 1/20 of all the votes submitted at least 15 days prior to the general meeting additional items of business and draft resolutions must be put on the agenda, while the candidates to the members of company’s managing bodies or inspectors (auditors) nominated by them (before or in the course of the meeting) must be included in the voting lists or ballots. The Articles of Association may also provide for a smaller number of votes granting the shareholders the above right.
Article 23. Invalidity of the Resolutions of a General Meeting
1. On the application of the interested persons, the resolutions of the general meeting must be declared invalid in accordance with the judicial procedure if:
1) the issue on which the resolution is adopted has not been included in the agenda of the meeting in accordance with the procedure established by law;
2) the registration documents and data changed by the resolution adopted by the meeting have not been registered in the Register of Enterprises of the Republic of Lithuania in the cases and within the period prescribed by laws;
3) the procedure of convening the meetings or drawing up the agenda, prescribed by Articles 21 and 22 of this Law, has been violated;
4) the resolution is not in compliance with the Articles of Association of the company, this Law, or other laws of the Republic of Lithuania;
5) the shareholder voted in violation of the commitments under the shareholders’ agreement (if the shareholder is the incorporator - also under the incorporation agreement), except where the shareholder’s vote did not affect the passing or rejection of the resolution; and
6) the shareholder was represented at the general meeting by a person who did not have the shareholder’s authorisation, the shareholder’s proxy overstepped his authority by his voting at the meeting, voting was held by voteless or non-voting shares, except in cases where this did not affect the quorum of the meeting or the passing or rejection of the resolution.
Article 24. Formation of the Supervisory Board
1. The number of members of the Supervisory Board shall be prescribed by the Articles of Association of the company; the number must be no less than 3 and no more than 15.
2. The Supervisory Board shall be elected by the general meeting. During the election of the Supervisory Board each shareholder shall have the number of votes which is equal to the number of votes carried by the shares held by him as established pursuant to Article 16 of this Law multiplied by the number of members of the Supervisory Board subject for election. The shareholder shall distribute the votes at his discretion, giving them for one or several candidates. Candidates who receive the greatest number of votes shall be elected. The number of candidates must be equal to the number of the Supervisory Board members subject for election plus one.
3. The Supervisory Board shall be elected for the term not exceeding 4 years. A member of the Supervisory Board may be released from his duties or re-elected for another term of office. The term of office of the Supervisory Board shall commence with the closing of the meeting at which it was elected. The Chairman of the Supervisory Board shall be elected by the members of the Supervisory Board.
4. Only legally capable natural persons may serve as members of the Supervisory Board. Each candidate for the Supervisory Board must inform the shareholders where he is employed and what post he holds. A person who is a member of the Board, head of the Administration of the company, or a person who, pursuant to the laws of the Republic of Lithuania, has no right to perform these duties may not be a member of the Supervisory Board.
5. The general meeting shall have the right to remove from office the entire Supervisory Board in corpore or its individual members. If, during the removal from office, at least one shareholder votes against the removal of individual members, the entire Supervisory Board must be re-elected upon the removal of a member.
6. The Supervisory Board shall have the right to appoint its own member to serve on the Board for a term not exceeding 6 months, if the number of the Board members is less than that prescribed by the Articles of Association. If the same member of the Supervisory Board is appointed to temporarily serve on the Board, the overall duration of his service on the Board may not exceed 12 months in 4 successive years. While serving on the Board, a member of the Supervisory Board may not perform the duties of a member of the Supervisory Board.
7. The Supervisory Board shall have no right to delegate or transfer its functions to other persons or the managing bodies of the company.
8. A member of the Supervisory Board may resign from his office prior to the expiry of his term upon giving a written notice thereof to the Supervisory Board at least 14 calendar days in advance.
Article 25. Powers of the Supervisory Board
1. The Supervisory Board shall:
1) appoint or dismiss members of the Board. If the company is operating at a loss, the Supervisory Board must consider the suitability of the Board members for their office;
2) at the request of the Board decide on the issue concerning the termination of the employment contract with a member of the Supervisory Board employed in the company;
3) analyse the work of the Board, the use of financial resources, the organisation of production and management, the profitability of capital, remuneration for work, the correctness of depreciation deductions, the prospects of financial position;
5) make proposals and comments to the general meeting on the annual financial statements of the company, the draft of the profit distribution, and the report of the Board to the general meeting;
6) represent the company in court proceedings when disputes between the company and its Board, or a member of the Board, or the head of the Administration or the company representative are examined;
7) submit proposals to the Board to revoke the resolutions adopted by it if they are not in conformity with the laws of the Republic of Lithuania or the Articles of Association of the company; and
2. The Supervisory Board shall have the right to appoint an expert (or group of experts) or ask a government financial institution to check and assess the Company's accounting. The Articles of Association of the company may specify a sum of money which may be paid to experts in remuneration for their work.
3. At the request of the Supervisory Board the Administration of the company and the Board must present documents concerning the activities of the company and create conditions for inspecting the company's assets. Members of the Supervisory Board must preserve the confidentiality of the company's secrets divulged to them in the course of their duties.
4. Members of the Supervisory Board shall have equal rights. During voting each member shall have one vote. In the event of a tie the chairman shall have the casting vote.
5. If a member of the Supervisory Board is unable to attend the meeting, he may take a written vote "for" or "against" the resolution which is being voted on provided that he has familiarised himself with the draft resolution.
6. If the meeting of the Supervisory Board is attended by more than a half of its members, the meeting may adopt resolutions by a simple majority vote of those present, with the exception of resolutions on removing members of the Board from office. In this case resolutions shall be adopted by a 2/3 vote of those present.
7. The Supervisory Board must meet at least once quarterly. Its regular meetings shall be called following the schedule by the chairman of the Supervisory Board or, in his absence, by the vice chairman. They shall call extraordinary meetings at the request of no less than 1/3 of the members of the Supervisory Board. The procedure for calling meetings shall be established in the work regulations of the Supervisory Board.
8. Members of the Supervisory Board shall be liable in the manner established by law for concealing violations of the company's business activities, inadequate control of business activities, if that provided conditions for the Board or the Administration to ignore the laws of the Republic of Lithuania or the Articles of Association of the company.
Article 26. Formation of the Board
1. The number of the Board members, which may not be less than 3, shall be established by the company’s Articles of Association. The Board is a collegiate body whose activities are directed by its chairman.
2. Only legally capable natural persons may be appointed or elected as members of the Board. Each candidate for the Board members must notify the Supervisory Board of his place of employment and duties. The following persons may not be appointed or elected as members of the Board:
1) members of the Supervisory Board of the same company or its holding company registered in the Republic of Lithuania, with the exception of the case provided for in Paragraph 6 of Article 24 of this Law; and
3. The Board and its chairman shall be appointed by the Supervisory Board for a term not exceeding 4 years; in its absence, the Board members shall be elected by the general meeting. The institution holding special shares shall appoint one Board member. There is no limitation on the number of terms of office a member of the Board may serve.
4. By notifying the Board in writing at least 14 calendar days in advance, a member of the Board may resign from his post before the expiry of his term of office.
5. If the general meeting fails to approve the report on the company’s activities, the Board must resign and within a 40-day period convene the extraordinary general meeting (if the company has no Supervisory Board) in order to elect a new Board.
6. The general meeting may remunerate (pay bonuses to) members of the Board for their work on the Board only out of the net profit, taking into account the provisions of Paragraph 4 of Article 47 and Article 48 of this Law. The members of the Board shall receive a salary if they have entered into an employment contract with the company.
Article 27. Powers and Liabilities of the Board
1. The procedure of work of the Board shall be established in the work regulations adopted by the Board. The Board may represent the company in court, arbitration bodies and other institutions. The powers of the Board and its members shall be established by the Articles of Association of the company.
2. The Board shall consider and approve:
2) posts in which persons are employed only by holding competitions as well as candidates for said posts;
3) the candidates for the post of the head of Administration, his deputies (directors) and their respective salaries; and
3. The Board shall analyse and approve the material submitted by the Administration and the inspector (auditor) on:
1) the strategy of production, technical, research, design and experimental work as well as other business activities;
5) quarterly and annual results of business activities, the company's draft financial statement, income and expenditure estimates, draft of the distribution of profit, stock-taking data and other records of valuables; and
4. The Board must timely hold general meetings, draw up their agenda, present to the shareholders the company's annual financial statements, the draft of the distribution of profit, report on the activities of the company and other required information for considering the items on the agenda.
5. The Board must invite the head of the company's Administration to every meeting and provide him with possibilities to familiarise himself with the information concerning the items on the agenda.
6. The Board shall be prohibited from restricting the inspector's powers or from interfering with his work in any other way.
7. A resolution of the general meeting adopted by an at least 2/3 vote of those present shall be required for the decisions of the Board concerning the sale, transfer, lease or mortgage of, or pledge or guarantee of the fulfilment of other entities’ liabilities by a portion of the company's long-term assets accounting for over 1/20 of the company's authorised capital value. The total value per business year of such transactions concluded without the consent of the general meeting may not exceed 1/20 of the company's authorised capital value
8. The chairman and members of the Board must jointly compensate for the losses incurred by the company by reason of the resolutions of the Board adopted in violation of the company's Articles of Association, this Law and other laws of the Republic of Lithuania. Exempted from the obligation to compensate for the losses shall be persons who voted against the resolution or did not attend the meeting at which the resolution was adopted, provided that they present a written protest to the presiding officer within 7 days after they learnt or ought to have learnt about the resolution. The resignation of a member of the Board or his removal from office shall not exempt him from the obligation to compensate for the losses incurred through his fault. A member of the Board may be exempted from the obligation to compensate for the losses inflicted by him through the performance of his duties provided that he acted in accordance with the company’s documents and other information the accuracy whereof was beyond reasonable doubt, or if he acted within the limits of normal production-business risks. Disputes concerning the compensation of losses shall be settled in court.
9. Unless authorised by the Supervisory Board or, in case the Supervisory Board is not formed, by the general meeting, the chairman of the Board or any other Board member or the head of the Administration may not set up another enterprise to engage in similar activities (whose turnover according to the economic activities classifier accounts for not less than 1/20 of the company’s turnover), also own, use by the right of ownership shares (share of ownership) which account for more than 1/3 of the authorised capital and dispose thereof, serve on the Board or as head of the Administration of any other enterprise doing similar business, or be a Board member or the head of the Administration of an enterprise which carries on the company’s production or services process and the sale of products. If the Board member or the Board chairman or the head of the Administration fails to comply with the above requirement:
1) he must within 30 days of coming into effect of this Law inform the company’s Board or the general meeting in writing of his activities in another enterprise;
2) he must resign from the company’s managing bodies and transfer to the company the income he received in his name from transactions entered into in another enterprise;
3) each shareholder shall have the right, within 90 of the day he learns or should have learnt of the violations committed by the member or chairman of the Board or the head of the Administration, to demand that the recovery of damages sustained by the company be sought through the courts or that everything receivable by the person under contracts with the enterprise be surrendered to the company. If civil action for damages is brought against the chairman of the Board, the member of Board or the head of the Administration for failure to comply with the requirements laid down in Subparagraphs 1 or 2 hereof, the person representing the shares owned by the state or municipality must requisition convening the extraordinary general meeting and vote for the dismissal of the said person from office.
10. If the rights of the shareholders established in this Law and in the company's Articles of Association were enforced by instituting legal proceedings, the members of the Board shall jointly refund the legal expenses and compensate for the damages incurred by the shareholders because of the disregard of their rights.
11. The right of initiative to convene the Board meeting shall be vested in the chairman of the Board, the member appointed by the institution representing the special shares, as well as in the members of the Board provided that more than a half of the Board members approve thereof. The resolutions adopted by the Board shall be valid if voted in favour of by at least a half of the Board members. The member of the Board appointed by the institution representing the special shares shall have the right of veto when voting on issues regulated by the laws of the Republic of Lithuania. When other issues are put to the vote, the Board member appointed by the institution representing the special shares shall not be entitled to vote. A member of the Board shall not be entitled to vote when the Board meeting is taking a decision on his pecuniary liability issues or the personal matters of his work in the company.
Article 28. The Company Inspector and Auditor
1. The company’s accounting and financial statements must be inspected and audited at the close of the business year and prior to the general meeting. The inspection or audit shall be performed by the inspector or the auditor. The inspector’s or auditor's post may be held by a legally capable natural person, possessing a qualifications certificate, or an enterprise which provides accounting or auditing services. The inspector (auditor) shall be elected by the general meeting for a term specified in the Articles of Association but not exceeding 4 years. An employee of the company, or a member of the Supervisory Board or the Board, or a shareholder who holds more than 10% of shares in the company may not be elected inspector (auditor).
2. The inspector shall control the company's financial activities. The inspector’s procedure of work shall be established in his work regulations approved by the general meeting.
3. The inspector must:
1) inspect the annual financial statements of the company and other books and records of the company;
2) perform any inspections of the company on the instruction of the general meeting or the Supervisory Board or the Board; and
5. The Administration and the Board of the company must present to the inspector (auditor) the books and records requested by him.
6. For his work the company shall pay the inspector (auditor) a salary. The amount of the salary and the conditions of payment thereof shall be determined by the general meeting.
7. The inspector must keep the company's secrets learnt by him in the course of inspection confidential.
8. The inspector of the company shall be liable under law for unsatisfactory control of the company's activities and concealment of deficiencies in its activities.
Article 29. The Administration
1. Business activities of the company shall be organised and performed by the Administration. The regulations of the Administration's work shall be approved by the Board.
2. The Administration shall work in compliance with the laws of the Republic of Lithuania, the company’s Articles of Association, work regulations, regulations of the divisions and the staff, resolutions of the Board and decisions of the head of the Administration.
3. The company must have the head of the Administration and chief financier (accountant). The head of the Administration may not concurrently occupy the post of the chief financier (accountant).
4. The activities of the Administration shall be managed by the head of the Administration (President, General Director, Director). The functions of the head of the Administration may be performed by a natural person provided he is employed under the employment contract, also a natural person possessing a patent to provide management services, or a personal enterprise provided that the management contract has been concluded with any one of them (the natural person possessing the patent or the personal enterprise). The management contract shall be concluded between the company and the enterprise which is charged to provide the company with management services or the natural person possessing the patent to provide management services. The personal enterprise shall have the right to provide management services provided its income from the activity accounts for at least 60% of the income of the personal enterprise received within a business year.
5. The head of the Administration shall be appointed and released from office by the Board of the company. The Board may organise a competition for the selection of the head of the Administration.
6. The procedure of wage and bonus payment to the head of the Administration shall be established by the Board in the management or employment contract. The management or employment contract with the head of the Administration shall be concluded by the person authorised by the Board. Remuneration for work of the head of the Administration, who is a member of the company Board, also the procedure of bonus payment shall be established by the Supervisory Board.
7. A person who is prohibited under the laws of the Republic of Lithuania from acting as the head of the Administration may not be appointed to the post. The head of the Administration may not be the manager or auditor of another enterprise. In the event he holds such a post, he must resign from it within one month after the appointment.
8. The Board of the company or the general meeting may terminate the employment contract with the head of the Administration pursuant to the provisions of Subparagraph 3 of Paragraph 3 of Article 19 of this Law or Paragraph 5 hereof according to the procedure established in the Law on Employment Contract or in the contract of management. Pending the termination of the contract, the company Board may restrict the powers of the head of the Administration. The company Board must within 2 working days notify the registrar of the register of enterprises in writing of the restriction of powers of the head of the Administration and time period thereof.
9. The chief financier (accountant) shall be appointed, his remuneration shall be fixed and employment contract shall be concluded with him by the Board of the company. Other officers of the Administration shall be employed and the employment contract shall be concluded with them by the head of the Administration.
10. The head of the Administration shall have the right to conclude transactions of the company in accordance with the Articles of Association, resolutions of the Board and work regulations. The Articles of Association may establish spheres of activities wherein the deputies of the head of the Administration shall have the right to act independently and to conclude the company's transactions. Unless the head of the Administration is a member of the Board, he shall participate in the meetings of the company Board without the right to vote.
11. If the head of the Administration or a person authorised by him entered into a transaction or performed other illegal actions which exceeded the normal production-business risks and thereby inflicted damage on the company (including loss of profit) or by reason thereof the persons derive direct or indirect benefit at the cost of the company or other shareholders of the company, the company shareholder or shareholders shall have the rights to sue for damages (including the loss of profit).
Article 30. The Capital Structure
1. The company's capital shall consist of its equity capital and borrowed capital. The equity capital shall be formed out of the share issue price and the profit of the company. The borrowed capital shall be formed by offering issued debentures, taking loans and by borrowing funds in any other way.
2. The Company's equity capital shall consist of:
3. The company's equity capital may not be less than 3/4 of the authorised capital specified in the Articles of Association. If the company’s equity capital becomes less than the specified amount of its authorised capital, the Board must within 4 months of the day of drawing up the annual or quarterly financial statement rectify the situation in accordance with its powers or convene the extraordinary general meeting to consider the decrease of the authorised capital. The general meeting must reduce the company’s authorised capital by cancelling the shares or reducing the par value by the amount whereby the authorised capital exceeds the equity capital.
4. If the general meeting fails to fulfil the requirements of Paragraph 3 hereof and to adopt a resolution to decrease the authorised capital and accordingly amend the Articles of Association, or refuses to consider the issue, the Board (in case it is not formed - the head of the Administration) must appeal to court within 15 days after the general meeting but not later than within 5 months of the drawing up of the annual or quarterly financial statement requesting invalidation of the resolution of the general meeting not to reduce the company’s authorised capital (or the refusal to consider the issue). After the court declares the resolution of the general meeting invalid, the company Board (if the Board is not formed - the head of the Administration) must adopt the resolution to reduce the company’s authorised capital and amend the Articles of Association accordingly.
Article 31. Reserves and their Composition
1. The revaluation reserve - the amount of increase in the value of long-term tangible and financial assets obtained upon the asset revaluation. The revaluation reserve shall be reduced when the revalued assets are sold, written off or transferred to the state or municipality. The revaluation reserve may not be used to reduce losses. The revaluation reserve may be applied to increase the authorised capital in accordance with the procedure established in Article 42.
2. Mandatory reserve shall be formed out of deductions from net profit in accordance with the procedure established in Paragraph 5 of Article 48 and shall be used to cover the losses. In case of reduction of the authorised capital the mandatory reserve may be reduced retaining the ratio specified in Paragraph 5 of Article 48 of this Law. The difference in the amount of the mandatory reserve during the decrease of the authorised capital shall be attributed to the profit or loss of the current year to be appropriated.
3. Other reserves shall consist of the distributable an undistributable reserves. Undistributable reserves shall be formed in accordance with the procedure established by law and the company’s Articles of Association for specific purposes by transferring a share of the net profit of the accounting period. The undistributable reserves shall be formed, reduced and abolished by the resolution of the general meeting by an at least 2/3 majority vote. Reducing or abolishing the undistributable reserves the authorised capital shall be increased by the amount and the par value of shares shall be increased in proportion to the par value of shares held by the shareholders or new shares shall be issued.
The distributable reserves shall be formed and used only in accordance with the procedure established in the Company’s Articles of Association. The authorised capital may be increased out of these reserves, at the same time increasing proportionately the par value of shares held by the shareholders or issuing new shares.
Article 32. Shares
1.Shares are the investment financial securities evidencing the participation of their holders in the company's capital and entitling them to property and non-property rights. Shares in private companies may be represented by certificates (documents printed in compliance with the requirements established for securities) or uncertificated (represented by entries in securities accounts). A private company may use certificates. The shares of public companies must be uncertificated.
2. The par value of a share must be quoted in litas (without indicating the centas - one hundredth of a litas). The issue price of a share may not be less than its par value.
3. Shares are classified into the following types:
4. The shares of a private company may only be registered shares and may be transferred according to the procedure established in the Articles of Association. These shares shall not be registered with the Securities Commission. The issue of shares of public companies must be registered with the Securities Commission and a joint account must be opened with the Central Securities Depository of Lithuania for the share issue.
5. Uncertificated shares shall be represented by entries in securities accounts which are either operated by the issuing company or brokerage firm in the name of shareholders. Each shareholder of a public company shall have the right to choose where to keep the securities account -- in the public company the shares of which he holds or in the brokerage firm. The provisions of Paragraphs 2, 5 and 6 of Article 39 shall not apply to uncertificated shares.
6. Entries in securities accounts shall evidence the ownership of uncertificated shares. Transfer of uncertificated shares shall be debited to the securities account of the transferor and credited to the securities account of the transferee. Upon entering into transaction relative to the transfer of shares, the parties to the contract must present to their agents who operate their securities accounts the contract which must contain the information specified in Subparagraphs 2-5 of Paragraph 8 hereof.
7. The company or a brokerage firm in which securities account of a shareholder is opened, must issue upon the shareholder’s request the statement of account indicating the number of shares and other information relative to the shares recorded in the account.
8. A share represented by a certificate must specify:
8) the signatures of the chairman of the Board and the chairman of the Supervisory Board or the facsimiles of their signatures.
The information that must be provided in securities accounts relative to uncertificated shares shall be established by standard acts regulating the securities and their circulation accounting. The certificate may be issued for any number of shares, indicating the share numbers.
9. Shares of one type are classified according to the rights that they carry. The rights carried by different classes of shares must be specified in the Articles of Association of the company. The par value of all shares of one class must be identical.
10. Shares may be issued after the registration of the company or after the increase of its authorised capital, and after they have been fully paid for at the issue price.
11. The company shall be prohibited from issuing shares which may be exchanged for debentures. Convertible debentures (which may be exchanged for shares) may be issued only in the case specified in Paragraph 3 of Article 43 of this Law. It shall be prohibited to issue shares of the types other than those prescribed by this Law.
Article 33. Partly Paid Shares
1. A person who has subscribed for shares shall have no right to transfer his shares to other persons prior to the registration of the company or prior to the increase of its authorised capital and until the shares have been fully paid for.
2. Partly paid certificated shares shall be marked by provisional statements from the shareholders’ list (shareholders register) which must specify the shareholder, the number of shares subscribed for by him and the amount paid in for the shares or the value of his property contribution, the balance required in order to have the shares fully paid up and the deadline for payments. Upon the payment of the full share issue price, the must be replaced by certificated shares (certificates).
3. Entries in the securities accounts of shareholders, representing partly paid uncertificated shares shall state the amount paid, the amount still due and the deadline for payments. This data shall also be specified in the statement of securities account of a shareholder issued to the shareholder.
Article 34. Registered and Bearer Shares
1.The owner (shareholder) of a certificate representing registered share shall be a natural or legal person whose name is indicated on the share and in the share register of the company. The share register must state the following information about the shareholder: full name of the person or company, address (registered office), the number of shares held and their par value.
2. Registered certificated shares shall be transferred to other persons by making a relevant record - endorsement on the share (certificate). As to the form of endorsement and the identification of the owner of registered shares, provisions set forth in Articles 12, 13 and 16 of the Law on the Bills of Exchange of the Republic of Lithuania shall apply.
3. The owner of an uncertificated registered share is a natural or legal person in whose name the securities account has been opened. Registered shares of a shareholder shall be recorded in this account.
4. Public companies shall have the right to get, according to the procedure established by standard acts regulating the securities and their circulation, information from brokerage firms about registered shares of that company, recorded in the securities accounts operated by them, the shareholders register and other information relative thereto.
5. The owner of a bearer share is a natural or legal person in whose name securities account has been opened. In this account, bearer shares of a shareholder are recorded. Public companies shall have no right to demand from brokerage firms to disclose the owners of bearer shares and other information relative thereto.
6. Registered shares of a public company may be exchanged for bearer shares or vice versa, if the general meeting so decides by at least 2/3 of votes and if it has amended the Articles of Association accordingly.
7. The Articles of Association of a private company may establish that the holder of the company’s shares may sell or otherwise transfer part of his shares into the ownership of another person only with the consent of the Board. The Board may refuse to give consent to the transfer of shares only if the transfer of a part of shares would increase the number of shareholders to a greater number than prescribed by Paragraph 4 of Article 2 of this Law. The shareholder must be notified about the consent or refusal within 15 days from the receipt of his application (within 40 days, if the Board has not been formed and, pursuant to the Articles of Association of the private company, the granting of consent to the transfer of share is within the powers of the general meeting). Public companies shall be prohibited from restricting the right of shareholders to sell or otherwise transfer their shares into the ownership of another person provided it is done according to the procedure established by this Law.
Article 35. Ordinary and Preference Shares
1.Ordinary shares constitute the main part of the company's shares. The par value of the preference shares may not exceed 1/3 of the authorised capital. All ordinary shares must be of equal par value.
2. The property rights of the ordinary share holders to dividend and a portion of assets of the company in liquidation may be realised only after the satisfaction of claims of the holders of preference shares. Only the holders of ordinary shares shall have the right to new shares which are issued when the company’s authorised capital is increased with the company’s distributable and undistributable reserves. If the authorised capital is increased out of share premium or revaluation reserve, the holders of both preference and ordinary shares shall have the right of pre-emption. Exchange (conversion) of ordinary shares for preference shares shall be prohibited.
3.It shall be prohibited to fix in the Articles of Association of the company or in the subscription agreement the rate of dividend to which the holders of ordinary shares are entitled.
4.The property and non-property rights carried by preference shares, as well as the procedure for changing the rights must be established prior to their sale and must be recorded in the Articles of Association of the company. The amount of dividend shall be established as a percentage of the par value of the share. The specific (fixed) amount of the dividend on preference shares as a percentage of the par value of the share must be prescribed in the company’s Articles of Association. The dividend on preference shares may not exceed the larger of the following figures: the triple amount of the last quarter’s average interest rate of the Republic of Lithuania Government securities or the double amount of the dividend on ordinary shares, valid on the day of the general meeting which adopted the company’s Articles of Association or their amendments, establishing the property and nonproperty rights carried by the preference shares.
5. If the profit is not sufficient for the payment of the dividend specified on the preference shares, all the preference shares with different dividend rates shall receive the dividend of a proportionately smaller amount.
6.The dividend on preference shares may be cumulative or non-cumulative. This must be established in the Articles of Association prior to the sale of shares.
7.The holder of cumulative preference shares shall be guaranteed the right to the rate of dividend specified on the shares. If the profit is not sufficient for the payment of all dividend, the unpaid sum must be carried over to the next business year.
8. The unpaid dividend or part of unpaid dividend on non-cumulative preference shares may not be transferred to the following business year.
9.Before exchanging (converting) cumulative preference shares for ordinary shares, the company must settle accounts with the holders of preference shares or commit itself to pay the debt in the next business year.
10. The Articles of Association may establish that the preference shareholders have no voting rights. If in two consecutive business years the company fails to pay the full amount of dividend to the holders of cumulative voteless preference shares, such shareholders shall acquire the voting right. The shareholders shall retain this right until the end of the business year in which the full amount of their dividend has been paid to them.
Article 36. Employee Shares
1. The employee shares shall be the registered shares sold on preferential terms or otherwise transferred to the employees of the company. Such shares may be issued only after all shares subscribed for at the moment of incorporation have been fully paid for.
2. The sphere of circulation of employee shares may be restricted by the Articles of Association of the company, but the restriction may not cover a period longer than three years after the day of the issue of shares. It must also be established that the holder of an employee share has no right to transfer in any way the shares to another person who has no right to acquire such shares. Upon the expiry of the term of this restriction, the share shall lose the status of an employee share.
3. The issue price of an employee share may be below its par value, if the difference is covered out of the deductions from the employee's wages, which at his request are accumulated in a special fund. It shall be prohibited to compel an employee to buy the company's shares and to make deductions from his wages for the payment for shares for which he has not subscribed.
Article 37. Shares of Agricultural Producers
1. Shares of agricultural producers shall be the shares sold on preferential terms in accordance with the procedure established by the Government of the Republic of Lithuania which have been acquired by agricultural producers (suppliers of raw materials or users of services), as well as their cooperative societies (cooperatives). These shares shall be ordinary registered shares.
2. The shares purchased in accordance with the above procedure shall acquire the status of agricultural producers’ shares as from the day of their purchase, except in cases when such shares were by 21 July 1994 sold or otherwise transferred to persons who are not agricultural producers.
3. The sphere of circulation of agricultural producers' shares shall be restricted. The holders of the above shares shall have the right to sell or otherwise transfer them only to agricultural producers and their cooperative societies (cooperatives) in accordance with the procedure established by the Government of the Republic of Lithuania The status of agricultural producers' shares may not be changed.
Article 371. Special Shares
1. Special shares shall be ordinary registered shares granting the state or the municipality additional nonproperty rights. The special share status may be accorded, on the resolution of the general meeting, to any share (shares) owned by the state or the municipality (upon the waiver by the state or the municipality of certain nonproperty rights granted to them by the general meeting by a 2/3 (3/4) vote in favour). In such event over 1/2 of the shares owned by the state or the municipality must be offered for sale and the company’s basic activity must correspond to at least one sphere of activities specified in the laws regulating transport, energy, oil, communications and public utilities sectors. In addition to the special shares, the state or the municipality may also own ordinary registered shares carrying less than 1/3 (1/4) of the votes.
2. The general meeting may grant the property and nonproperty rights carried by the special shares to the shares of those companies whose basic activity corresponds to the activity of transport, oil, communications and public utilities sectors regulated by law.
3. Property and nonproperty rights of the special shares must be established in the company’s Articles of Association. The expiry of validity of the nonproperty rights carried by the special shares of each sector of economy specified in this Article shall be determined by the Seimas on the proposal of the Government. The company’s Articles of Association must provide for the holders of the special shares the right to:
1) veto the resolutions of the general meeting if the issues under consideration are related to the transfer (in one or several stages) of the company’s shares carrying over 1/2 of the votes, if the restriction on the transfer of shares is provided for in the contract of share sale or in the shareholders’ agreement or when the issues are related to the special share status, suspension of the company’s activity, reorganisation or liquidation of the company, also other issues which may be provided for in the laws regulating the transport, energy, oil, communications and public utilities sectors or in the shareholders’ agreements;
Article 38. Debentures
1. A debenture of a public company is a term credit security giving its holder the right to receive annual interest as well as other rights specified on the debenture or in the resolution to issue debentures. On maturity, debenture shall give its holder the right to receive the sum of money from a public company equal to the par value of a debenture. Annual interest shall not be paid to the holder of a debenture provided that this is stated on the debenture (in the resolution to issue debentures). Debentures may be uncertificated, in which case they shall be represented by entries in the securities accounts of their holders. Accounting of debentures and their circulation shall be carried out according to the provisions set forth in Paragraphs 5-8 of Article 32 and Paragraphs 2 and 4 of Article 34 hereof.
2. Public companies the authorised capital of which is not fully paid up shall be prohibited from issuing debentures, except in the case when they are offered exclusively to the employees and shareholders of these companies. The par value of debentures issued by a public company may not exceed fully paid up authorised capital and when there are guarantees of the third party -- may not exceed the sum of the fully paid up authorised capital and the amount of the guarantees.
3.The resolution to issue debentures may be adopted by the general meeting by a simple majority vote, or by the Board if this is provided in the Articles of Association.
4. A public company must redeem its debentures by the date and on the terms specified in their subscription agreement. Debenture holders shall have equal rights with the other creditors of a public company.
Article 39. Invalidity of Securities Issued by the Company
1. Shares shall be invalid and shall not carry any property or nonproperty rights if:
2. If the company has changed its name, exchanged one type of shares for the other type of shares, reduced the par value of its shares or the rights of preference shareholders, it must also, within 4 months, exchange the shares held by the shareholders and the provisional shareholders' certificates or make appropriate inscriptions on them. If within 3 months after public announcement or written notice the shareholders fail to present to the company Board their shares or provisional shareholders' certificates, provisional shareholders' certificates shall become invalid, whereas the shares shall be deposited.
4. The invalidity of shares shall not bring about the reduction of the company’s authorised capital, unless the general meeting decides otherwise.
5.If the security issued by the company is damaged and not suitable for circulation, but is, however, identifiable, the company must replace it at the holder's request. Expenses incurred thereby must be covered by the holders of such securities.
Article 40. Subscription for Shares
1.Subscription for shares is an agreement between the company and a natural or legal person whereby one party commits itself to allot a certain number of new shares and the other party binds itself to pay the full issue price of the shares subscribed for. The share subscription agreement and the incorporation agreement of a private company may be one document.
2. The subscription agreement of the company must state:
2) the amount of authorised capital of the newly-incorporated company or the increase of the authorised capital;
3) the date of the general meeting at which the resolution to increase the authorised capital has been passed;
4) the date and registration number of the share issue and of the company's Articles of Association;
5) the par value and the issue price of the shares, the number of shares of each class issued and the rights they carry;
9) the full name of a subscriber (the name of the legal person) and his address (registered office) ; and
10) the number of shares subscribed for according to their classes.
The incorporator and, upon the registration of the company, the Board shall be responsible for the drawing up of the draft subscription agreement, the announcement and correctness of the information. If the subscriber gives inaccurate or incomplete data specified in Paragraphs 9 and 10 hereof, the public company may unilaterally terminate the subscription agreement and return the contributions.
3. At the subscriber”s request, the company (when the company is being incorporated - its incorporators) must, within 15 days from the written request, return his contributions without any deductions if:
4. The subscriber may not relinquish his liabilities to the company and the company may not declare a person's subscription invalid after the Company has been registered or its authorised capital has been increased.
5. The shareholder's pre-emption right shall give him a possibility to subscribe for shares the par value whereof is proportionate to the total par value of the shares held by him. The period of time for exercising this right may not be less than 30 days. Public company shareholders shall have the right to assign to other persons, in the manner prescribed by the Securities Commission, the pre-emption right to acquire new shares of the company. The private company shareholders shall have the right to assign the pre-emption right pursuant to the requirements of Paragraph 7 of Article 34 of this Law.
Article 41. Payment for Shares
1. Payment for shares means the payment of the share issue price in cash or in non-pecuniary (property) contributions by the shareholders. Only the assets which are the objects of the property law and which may be rated economically may be used as non-pecuniary (property) contributions. Works and services may not be used as contributions.
2. The shares issued by the company must be fully paid up within the period specified in the subscription agreement, but not later than within 1 year after the signing of the agreement. The subscription agreement must indicate the dates for the payment for shares, including the date for the payment of the first instalment.
3.The initial instalments in cash may not be less than 1/4 of the issue price of shares. They shall be paid to the cummulative
account the funds of which may be used only after the registration of the Company, at the date established in the subscription agreement. Non-pecuniary (property) contributions for the subscribed for shares shall be paid on the dates prescribed by the share subscription agreement. If the balance of the issue price is paid in non-pecuniary (property) contributions and these contributions are paid by instalments, the issue price shall be considered as fully paid up only after the last instalment is valued and approved according to the established procedure.
If the initial instalments for shares of other issues (except for the first issue) are not paid in cash, the total issue price must be covered by property instalments within the time period prescribed for the payment of initial instalments.
4. The non-pecuniary (property) contributions shall be valued by the inspector of the company or by an independent external auditor or commission of experts, appointed by the Board (the incorporators). The shares shall be deemed as fully paid up only after the general meeting approves the valuation of the non-pecuniary (property) contributions.
5. If a shareholder fails to pay the installments for the subscribed shares when due, the company shall have the right to:
1) within 30 days after the expiry of the deadline for the payment for shares, sell the shares subscribed for by the debtor by auction or to sell them at a fair price (rate). If the shares are sold for a lower price than the subscriber's debt to the company, the company shall have the right to demand that he pay the balance. If the shares are sold at a higher price, the difference must be returned to the subscriber;
Article 42. Increase of the Authorised Capital
1. The authorised capital of the company shall be increased provided that a general meeting by an at least 2/3 vote resolves to issue new shares or to increase the par value of the issued shares and to amend the Articles of Association accordingly. The company may issue new shares or increase their par value only after its authorised capital is fully paid (at the last issue price).
2. Amendments to the Articles of Association relative to the increase of the authorised capital shall be registered according to the procedure established by the Law on the Register of Enterprises after all the shares have been subscribed for and the first instalments have been collected. If not all shares are subscribed for during the subscription period, the Articles of Association shall be amended and the amount of the authorised capital shall be changed by the resolution of the general meeting. In this case the increase of the authorised capital may not exceed the par value of the subscribed for shares.
3. The authorised capital shall be considered as increased only upon registration of the amendments of the Articles of Association in the Register of Enterprises of the Republic of Lithuania.
4. If within 12 months from the day of the general meeting which passed the resolution to increase the authorised capital, amendments to the Articles of Association relative to the increase of the authorised capital are not registered in the Register of Enterprises of the Republic of Lithuania, the increase of authorised capital shall not be recognised. In this case all the contributions must be returned.
Article 43. Increase of the Authorized Capital by Additional Contributions
1. The company may increase its authorised capital by additional contributions of its shareholders and other persons only by issuing new shares. When the company is increasing its capital by additional contributions, the state, municipality or state social insurance may acquire its shares at issue price equal to the par value of the share by making a set-off, in the manner prescribed by the Government, against the company’s arrears to the state, municipal and state social insurance fund budgets, provided that the company’s authorised capital does not exceed its equity capital and the company’s balance sheet does not show losses. If the company has received funds from the state or municipal budget for the funding of the company’s investment programmes, the company’s authorised capital must be increased by issuing new shares which are transferred to the state or the municipality.
2. An insolvent public company shall be prohibited from increasing its authorised capital by additional contributions by means of public offering. The company may offer these shares only to its shareholders and employees.
3. If a public company has issued convertible debentures, its authorised capital may be increased by issuing new shares (of the par value specified in the resolution concerning the issue of convertible debentures), for which convertible debenture holders could exchange their debentures. When convertible debentures are being issued, the shareholders must be granted pre-emption rights to acquire these debentures in proportion to the number of shares held by them in the public company, unless its Articles of Association provide otherwise.
4. If a decision to increase the authorised capital out of additional contributions is taken in a company in which the state or the municipality owns shares carrying 2/3 (3/4) of the votes or over 1/2 or 1/3 (1/4) of the votes and subsequent to the implementation of the decision the share of the state or municipality in the company’s authorised capital could decrease and the shares owned by the state or municipality would accordingly carry less than 2/3 (3/4) of the votes or not in excess of 1/2 or 1/3 (1/4) of the votes, the company’s authorised capital may be increased by additional contributions only according to the procedure established by the Law on the Privatisation of State-owned and Municipal Property, unless other laws provide otherwise.
Article 44. Increase of the Authorized Capital out of the Funds of the Company
1. The authorised capital of the company may be increased by the resolution of a general meeting out of the retained profit, share premium or reserves by issuing new shares which are transferred to the shareholders without payment, or by increasing the par value of the previously issued shares.
2. The general meeting shall pass a resolution to increase the authorised capital on the basis of the financial statement drawn up not earlier than 30 days prior the meeting.
3. It shall be prohibited to increase the authorised capital of the company out of the retained profit, share premium or reserves until the losses shown in the financial statements are covered.
4. Upon increasing the authorised capital out of the company's funds, the amendments to the Articles of Association shall be registered according to the procedure established in the Law on the Register of Enterprises. Alongside with other documents, the balance sheet of the company shall be filed with the registrar. 5. When the company is increasing its authorised capital out of the retained profit, share premium or reserves, the shareholders shall be entitled to free new shares, the number of which must be proportionate to the total par value of shares owned by them, except for the cases specified in Paragraph 2 of Article 35 of this Law and Paragraph 6 hereof. The shares shall be allotted according to the shareholders’ list as of the day of the meeting and the par value of shares owned on that day.
6. When, implementing the decision of the general meeting or the court to rectify the violations committed in the course of authorised capital formation or increase, the company increases the authorised capital out of the retained profit, share premium (the amount in excess of the par value) or reserves, the shareholders, whose property rights were violated, shall have the pre-emption right to free new shares in proportion to the shares owned by them. The general meeting may adopt a resolution to rectify the violations committed in the course of the authorised capital formation or increase by re-allotting shares if the shareholders who after the committed violations owned more shares or owned shares of higher par value than was due to them, on the day of the general meeting (when the resolution to rectify the violations is passed) own a not smaller amount of shares or own shares of not lower par value than is necessary to rectify the violations and provided that the shareholders give a written consent to such a decision.
7. Upon the registration of the increased authorised capital, the Board shall, according to the procedure established in the Articles of Association, notify the shareholders of the procedure for the acquisition of the new shares. If the shareholders do not communicate their wish to acquire new shares within 6 months from the receipt of such notice, the company may dispose of them according to the procedure established by the general meeting. If the shares are uncertificated, the new shares shall credited to the securities accounts.
Article 45. Reduction of the Authorised Capital
1. The authorised capital may be reduced by a resolution of the general meeting adopted by a 2/3 vote in favour. When the company issues shares of different classes, the general meeting may reduce the authorised capital if this resolution is supported by holders of different classes of shares (including voteless shares) by a 2/3 vote of shareholders of that class attending the meeting.
2. The authorised capital may be reduced in order to:
1) pay available funds of the company to all the shareholders in proportion to the par value of the shares owned by them ;
2) eliminate the difference between the company's equity capital and authorised capital, brought about by losses;
4) transfer the property for arrears in payments into the state, municipal or state social insurance fund budgets (in the amount by which the transferred property has been assessed to be below the book value of the property as shown in the company’s balance sheet); (Article45, Paragraph 2, Subparagraph 4 shall be in effect until 31 December 2000);
5) rectify, in the manner prescribed by the Government, the errors committed in the course of the authorised capital formation and increase (provided that the shareholders who have the number of their shares reduced give their written consent thereto), also to transfer into state or municipal ownership production and engineering infrastructure facilities, social objects, buildings (their parts) so that the state or municipality could fulfil their functions. In this case the number of shares owned by the state or municipality shall be accordingly reduced, except where state or municipality possessing over 1/2 of the votes after the authorised capital reduction would possess 1/2 or less than 1/2 of the votes. (Article45, Paragraph 2, Subparagraph 5 shall be in effect until 31 December 2000)
3. The authorised capital may be reduced only in the following ways:
4. When reducing the authorised capital the company must in the first place cancel its shares. The par value of all shares or the number of shares shall be reduced proportionately to all shareholders, except in cases provided for in this Article, Paragraph 2, Subparagraph 3 (unless the court decides otherwise) and in Subparagraph 5.
5. The resolution to reduce the authorised capital must be announced publicly 3 times at intervals not shorter than 30 days, or by notifying each shareholder and creditor.
6. While reducing its authorised capital, the company must give additional guarantees for its liabilities to each creditor who requests them.
7. Amendments to the Articles of Association of the company relative to the reduction of its authorised capital shall be registered according to the procedure established by the Law on the Register of Enterprises: not earlier than 6 months after the first and 30 days after the third public announcement or not earlier than 3 months after the notification of shareholders and creditors and after the provision of additional guarantees to those creditors who so requested. The above rules shall not apply if the authorised capital is reduced by cancelling the company's shares acquired by purchasing said shares out of the net profit or the retained profit, or by acquiring them without payment. The authorised capital shall be considered to be reduced only upon registration of the amendments to the Article of Association in the Register of Enterprises of the Republic of Lithuania.
8. If the shareholders fail to timely deliver their shares to the Board for withdrawal from circulation and cancellation, the company’s Board shall publicly declare said shares invalid.
9. Upon the reduction of its authorised capital, the company may return to the shareholders their contributions fully or in part, or relieve the shareholders from paying the unpaid contributions (a portion of the unpaid contributions) for the subscribed shares (increase the value of their paid-in contributions). Upon the reduction of the authorised capital, the shareholders may be paid only in cash, unless the Articles of Association of the company or the subscription agreement provide otherwise, except in cases where the resolutions are passed in accordance with item 4 of paragraph 2 hereof.
Article 46. The Right of the Company to Buy up its own Shares
1. A public company shall be prohibited from buying up its own shares except when:
2) the company's authorised capital has been reduced in accordance with the procedure established by this Law; and
2. The company shall buy up its own shares by the resolution of the general meeting. The par value of the shares of a public company purchased for the purpose specified in subparagraph 1 of Paragraph 1 hereof, and the par value of its other shares held by the company may not exceed 1/10 of the authorised capital.
3. The company may acquire its own shares out of the authorised capital only in the event of the reduction of its authorised capital.
4. If the shares of a public company have been acquired in violation of the provisions of this Article, they shall be cancelled and the authorised capital shall be reduced by the resolution of the government institution which registers the shares.
5. A public company which has bought up its own shares shall not be entitled to the non-property rights carried by these shares.
Article 47. Financial Resources of the Company
1. The financial resources of the company shall be formed from the internal and external sources. Internal sources may include depreciation charges and profit, external sources may include contributions for shares, proceeds from debentures, grants and subsidies, borrowed funds and other comparable funds.
2. The company's Board shall determine the method for calculating the depreciation charges and their rates for the recovery of depreciation of its fixed assets as well as for covering maintenance expenses. These rates shall be established taking into account the changes in the efficiency of the company's assets and may not exceed maximum economic rates established by the Government of the Republic of Lithuania. The part of the fixed assets which has been written off prematurely (before it has been fully depreciated) shall be attributable to the losses of the company.
Article 48. Distribution of Profit
1. The profit of the company received upon deducting all taxes must be distributed not later than within 4 months after the close of the business year when the annual financial statement is being approved at the general meeting. The resolution concerning the distribution of net profit must state:
5) shareholders’ contributions in respect of losses (if the shareholders decide to cover all or part of the distributable losses);
7) appropriation of profit to undistributable reserve, distributable reserve, or other reserves provided for by laws;;
9) other cases of profit appropriation: annual payments to the Board and Supervisory Board members (bonuses), use of profit to pay bonuses to the employees and for other purposes; and
2. When distributing distributable profit (loss), the general meeting shall have the right to include therein retained profit (loss) at the beginning of the business year, net profit or loss of the business year, transfers from reserves, taking into account provisions of other Articles of this Law, shareholders’ contributions in respect of losses.
3. The sum allocated for the payment of annual share of profit (bonuses) to the members of the Board and the Supervisory Board, bonuses to employees and for other purposes (Subparagraph 9 of Paragraph 1 hereof) may not exceed 1/5 of the net profit and the share of profit set aside for the above purposes may not exceed the share set aside for the payment of dividends.
4. Bonuses to employees paid from the profit may be paid in advance every quarter, if the current economic performances allow to anticipate sufficient profit. Advance payment of bonuses to the Supervisory Board and members of the Board shall be prohibited. 5. If the aggregate sum of the mandatory reserve and share premium is less than 1/10 of the authorised capital, deductions to the compulsory reserve shall be mandatory and may not be less than 1/20 of the distributable profit.
6. It shall be prohibited to pay dividends, annual share of profit (bonuses) to members of the Board and Supervisory Board, bonuses to the employees or to otherwise distribute the profit, if the agricultural producers are not paid for the produce sold within the set time period.
7. If, within the period set in Paragraph 1 hereof, the general meeting refuses to distribute the profit or fails to pass a resolution in respect of the profit distribution, the company’s Board (if its is not present - the head of the Administration) must within 30 days after the meeting distribute the profit according to the following rules:
1) the share of profit used to acquire long-term tangible assets and financial property in the business year for which the profit is distributed shall be attributed to the mandatory reserve, distributable or undiostributable reserves;
Article 49. Dividends
1. The dividend is the share of the profit paid to the shareholder, which is proportionate to the par value of the shares held by him. If a share is not fully paid, the shareholder's dividend shall be reduced in proportion to the unpaid amount of the share price. The Articles of Association may establish that the dividend on fully paid share must be reduced if the last instalment of their price was paid in the business year for which the dividend is paid.
2. Dividends declared by the general meeting shall be the company's liability to its shareholders. The shareholder shall have the right to claim payment of the dividend as the company’s creditor. The company shall have the right to recover the dividend paid out to the shareholder if the shareholder knew or is supposed to have known that the declared dividend was unlawful.
3. The general meeting shall be prohibited from declaring and paying dividends if the company is insolvent or if it would become insolvent after the payment of dividends. If the company’s balance sheet shows losses, the general meeting shall have no right to declare and pay dividends until the losses are covered or until the authorised capital is reduced for the above reason. The decisions concerning the covering of losses or reduction of the authorised capital by the amount of the losses and declaration and payment of the dividends may be taken at one and the same meeting. The dividends may be paid out to the shareholders only after the covering of losses or reduction of the authorised capital by the amount of the losses.
4. The company must pay dividends not later than within 3 months from the day of taking the decision in respect of the profit distribution except for the case provided for in Paragraph 3 hereof. Advance payment of dividends shall be prohibited.
5. The company shall pay dividends in cash. If the shareholder does not object, dividends may be paid put to him in the company's shares or other securities.
Article 50
1. Public and private companies must amend their Articles of Association according to this Law and have them registered according to the procedure established by the Law on the Register of Enterprises within 12 months of the date of the enactment of this Law. In the companies in which judicial or exrajudicial bankruptcy procedure is applied the time period specified above shall be calculated from the day of termination of the bankruptcy proceedings or the completion of the extrajudicial bankruptcy procedure.
2. Public and private companies, including companies reorganised from other types of enterprises in the manner prescribed by Paragraph 3 hereof, whose authorised capital is less than the minimum amount established by this Law, must increase their authorised capital accordingly within 2 years after the promulgation of this Law. Companies which fail to meet this requirement must be reorganised or liquidated according to the procedure established by the laws of the Republic of Lithuania.
3. State-owned and state stock enterprises, with the exception of those state-owned enterprises which the Government of the Republic of Lithuania does not intend to either corporatise or privatise prior to 2000, as well as individual (personal) enterprises with the rights of legal person must be reorganised into companies according to the procedure established by the Government of the Republic of Lithuania and registered in the Register of Enterprises of the Republic of Lithuania within 12 months from the enactment of this Law. For enterprises which are subject to privatisation under the Law on the Initial Privatisation of State Property, the above-specified time period shall be counted from the day of completion of their privatisation, whereas for enterprises to which judicial or extrajudicial bankruptcy procedure is applied - from the termination of bankruptcy proceedings or completion of the extrajudicial bankruptcy procedure. The Government of the Republic of Lithuania must prepare and submit by 1 November 1994 the list of such enterprises (indicating their authorised capital) to the Seimas for approval, as well as prepare a draft law on state-owned and municipal enterprises.
4. The total value of shares of a commercial (joint stock) bank, registered in the Republic of Lithuania, in other companies, with the exception of commercial (joint stock) banks and companies directly servicing banks, may not exceed 10% of the bank's fixed capital registered with the Bank of Lithuania.
6. The Government of the Republic of Lithuania must prepare and submit to the Seimas by 1 June 1995 drafts of laws which would provide for the liability for the violation of the time limits set in Paragraphs 1 and 3 hereof for the registration of the amendments of the enterprises' Articles of Associations and for the reorganisation of enterprises.