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Official translation Official translation REPUBLIC OF LITHUANIA LAW ON COOPERATIVE SOCIETIES (COOPERATIVES) 1 June 1993 No. I-164 (As amended by 18 July 2000 No. VIII-1872) Vilnius CHAPTER ONE GENERAL PART The State of Lithuania supports the cooperative movement, promotes cooperative activities, enshrines the independence of cooperative societies (cooperatives) in law. Article

  1. Purpose of the Law This Law shall regulate cooperative movement, the establishment of cooperative societies (cooperatives) and their unions (associations), the basic principles of their activities, their reorganisation, management, formation of capital, distribution of profit, and liquidation. Article
  2. Cooperation and Cooperative Societies Cooperation means the joining of efforts and resources on the basis of law with a view of attaining common goals of its members. For this purpose, cooperative societies (cooperatives) may be established. A cooperative society is an economic entity with changeable composition and capital, established on a voluntary basis by a group of natural persons or natural and legal persons for the purpose of meeting business, economic and social needs of its members, which functions on the initiative of its members and at their risk. Article
  3. Status of a Cooperative Society A cooperative society shall be a legal person which shall be permitted to engage in activities not prohibited by the laws of the Republic of Lithuania. A cooperative society shall be a limited liability economic entity liable for its obligations to the extent of its property and not liable for its members' obligations which are not related to the activities of the cooperative society. A cooperative society shall have its own name which must not be similar or identical to the name of any enterprises registered in the Republic of Lithuania. The name of the cooperative society must contain the words "kooperatinė bendrovė" (cooperative society) or "kooperatyvas" (cooperative) as well as the words specifying the character of the society activities. Disputes concerning the name of the society shall be settled in the court. A cooperative society shall have not less than 5 natural or natural and legal persons. CHAPTER TWO ESTABLISHMENT OF COOPERATIVE SOCIETIES AND THEIR RIGHTS Article
  4. Incorporators Incorporators of a cooperative society may be at least 5 persons who are citizens of the Republic of Lithuania and are 18 years of age and over, or citizens and legal persons registered in Lithuania. Article
  5. By-laws of a Society The legal basis of a cooperative society shall be this Law and the society's by-laws drawn up by the incorporators and adopted at the statutory meeting. Pursuant to this Law, cooperative societies may be established for profit-making purposes or as non-profit societies. The society's by-laws shall be signed by all the incorporators of the cooperative society. The by-laws shall be notarised. The by-laws of a cooperative society shall state: 1) the name of the cooperative society (name of the firm), the address of its registered office; 2) the objects of the cooperative society and the type of its business, economic or social activities; 3) duration of activities where the activities of limited duration are planned for the cooperative society; 4) the amount of the membership fee and member share, the procedure of payment and disposal thereof, and the procedure for assessing the non-monetary (property) member shares; 5) composition, ownership and formation of the capital (the amount of the authorised capital shall not be specified); 6) first names and surnames as well as addresses of the incorporators of the cooperative society and, in the case of legal persons, their names and addresses; 7) conditions of membership, rights and duties of the society members and their liability for the obligations of the cooperative society; 8) bodies of management and control, the procedure of their election, and their rights and duties; 9) procedure for joining a cooperative society and of withdrawal or expulsion therefrom; 10) procedure for calling meetings of members or their agents and the procedure of voting at the meetings; 11) procedure for drawing up financial statements, for the auditing and adoption thereof; 12) profit and loss distribution procedure; 13) procedure of reorganisation and liquidation of the cooperative society. The by-laws may contain other articles putting the type of activities of the cooperative society on a legal basis and specifying property and other relations of the society members and the cooperative society's relations with third persons, provided that said articles are in conformity with the laws of the Republic of Lithuania. Amendments to the society's by-laws shall become effective from the day of their re-registration. Article
  6. Registration A cooperative society shall be registered with the higher level local government in accordance with the procedure established by the Law of the Republic of Lithuania on the Register of Enterprises. The amount of the authorised capital shall not be subject to registration in the Register of Enterprises. The following documents shall be filed for registration: 1) application for registration; 2) a copy of the minutes of the statutory meeting and the cooperative society incorporation agreement (required for the newly established cooperative societies); 3) the society's by-laws; 4) a document certifying payment of registration fee; 5) authorisation (licence) to engage in commercial-economic activities, ecological passport-licence, if prescribed by the laws of the Republic of Lithuania. The following shall be stated in the incorporation agreement: 1) incorporators (name, surname, names of legal persons); 2) name of the cooperative society; 3) rights and duties of the incorporators during the establishment of cooperative societies and liability for default on obligations; 4) the amount of the member share contributed by each incorporator; 5) compensation of incorporation costs and remuneration for the incorporation; 6) procedure of settling disputes between the incorporators. The incorporation agreement shall be signed by all incorporators or the persons authorised by them. The agreement must be notarised. The cooperative society incorporation agreement shall be a public document. From the day of its registration the cooperative society shall acquire the rights of a legal persons. Local government must register the cooperative society within a month from the filing of the documents. If registration is refused, grounds therefor must be specified. Refusal to register a cooperative society may be appealed to the court in the manner established by the laws of the Republic of Lithuania. Article
  7. Rights of a Cooperative Society A cooperative society shall have the right : 1) to engage in activities provided for in its bylaws; 2) keep accounts with the banks of the Republic of Lithuania and foreign banks; 3) manage the property belonging to it, use it and dispose of it according to the laws of the Republic of Lithuania; 4) form unions (associations) of cooperative societies; 5) enter into contracts and assume property liabilities; 6) fix prices , rates and tariffs for its products, work and services; 7) borrow under agreement from the funds of its members according to the procedure laid down in the by-laws of the cooperative society. The annual interest rate fixed on the day of conclusion of the loan agreement may not be higher than the average rate of the last quarter's interest on the securities of the Government of the Republic of Lithuania. The total amount of loans from the members may not exceed at the same time the society's own capital; 8) determine its organisational structure, set up branches and other structural subdivisions, as well as establish enterprises operating according to the laws of the Republic of Lithuania; 9) offer its property in payment for its debts to the State, local government or State social insurance fund budgets in the manner established by the Government. A cooperative society may also have other rights which do not contradict the laws of the Republic of Lithuania. Disputes between a cooperative society and its members or third persons shall be considered according to the procedure established by the laws of the Republic of Lithuania. CHAPTER THREE MEMBERS OF A COOPERATIVE SOCIETY Article
  8. Members Foreign legal or natural persons who are legally capable under the laws of the Republic of Lithuania, also citizens of the Republic of Lithuania who are 16 years of age and over as well as legal persons registered in the Republic of Lithuania may be members of a cooperative society. The rights and duties of the members shall be determined in the by-laws of the cooperative society. The applicant shall file an application with the board/manager of the cooperative society. Members shall be admitted according to the procedure laid down in the by-laws of the cooperative society. Members of the cooperative society shall be registered in the register of members, stating the address, date of joining the society or withdrawal from it, the amount of the member share and of the property newly created through the use thereof and belonging to the member (if the by-laws so provide) as well as the change in the amount of the member share. A legal person shall be represented in the cooperative society by person authorised by the legal person (agent). Article
  9. Termination of Membership Membership in the cooperative society shall be terminated: 1) upon the member's withdrawal; 2) upon the member's death; 3) after the member is recognised legally incapable; 4) upon the member's expulsion; 5) after the winding up of the legal person - member of the cooperative society or upon the reorganisation of its activities whereafter they no longer correspond to the purposes of the cooperative society; 6) upon the liquidation of the cooperative society. Article
  10. Withdrawal and Expulsion from the Cooperative Society Every member of a cooperative society shall have the right to withdraw from the cooperative society upon notifying thereof in writing. The conditions and procedure of withdrawing shall be established in the by-laws. The settlement of accounts of the cooperative society with the former members may be postponed until the approval of the financial statements of the upcoming business year. In such case the former member shall remain bound by property relations to the cooperative society until the end of the upcoming business year. A member may be expelled from the cooperative society if he fails to fulfil the duties of a member or violates the by-laws or the laws of the Republic of Lithuania and thereby causes damage to the cooperative society. The resolution on the expulsion of a member from a cooperative society shall be adopted by the meeting of the members (agents) in accordance with the procedure established by this Law. If the expelled member disagrees with the resolution, he shall have the right to apply to the court within three months from the adoption of the resolution. The cooperative society shall return to the members who withdrew or were expelled from the cooperative society their respective member shares and the amount of property newly created through the use thereof (if the said amount is assigned to the members) and shall also pay out to them the share of the profit distributed for the business year, due to them. Membership fee shall not be refunded. The heirs of a deceased member or the guardians of a member recognised as being legally incapable, provided the said persons are not members of the cooperative society and do not join the society in the manner established by the by-laws, shall be returned the member share and the amount of the newly created property as well as a share of the profit distributed for the business year in the same manner as the members who withdrew or were expelled from the cooperative society. Article
  11. Rights and Duties of a Cooperative Society Member A member of a cooperative society shall have the right to: 1) elect and be elected to the bodies of management and control; 2) have one vote during the voting regardless of the amount of the contributed member share; 3) work in the cooperative society under employment contract; 4) receive a portion of profit distributed to the members in proportion to the volume of turnover (transactions) with the cooperative society, use the society property and have priority in making use of the services provided by the cooperative society on easy terms in the manner established in the society by-laws; 5) receive a portion of profit (dividend) proportionate to his member share and, where the property is assigned to the members, to the amount of the newly created property; 6) receive a portion of property of the society in liquidation in accordance with the procedure established in the by-laws; 7) obtain information on the activities of the cooperative society, its economic condition and property; 8) be a member of several cooperative societies, unless the by-laws of the cooperative society provide otherwise; 9) lend funds to a cooperative society under an agreement according to the procedure established by the by-laws. The annual interest rate fixed on the day of conclusion of the loan agreement may not be higher than the average rate of the last quarter's interest on the securities of the Government of the Republic of Lithuania. The total amount of loans received in the cooperative society from the members at the same time may not exceed the amount of its own capital. 10) withdraw from a cooperative society. Other rights of a member shall be established in the bylaws of a cooperative society. A member of a cooperative society must adhere to the bylaws, perform the obligations of the cooperative society and implement the resolutions of the management and control bodies, take part in the activities of the cooperative society. A member of a cooperative society shall be liable for the society's obligations assumed prior to his joining the society, which were brought to his knowledge when he was joining the cooperative society. A member of a cooperative society shall be liable only to the extent of his member share (property owned by him in the cooperative society). The bylaws may also establish a larger extent of a member's liability, but not in excess of a double amount of the member share, and in insurance and credit cooperative societies -- up to a fivefold amount of his member share contributed (property owned in the society). Article
  12. Capital The capital of a cooperative society shall consist of the own and borrowed funds. Own funds shall be formed from membership fees, member shares investments, profit received from business activities and other sources of income not prohibited by law. The capital of a cooperative society may not be formed by issuing shares of the said society. The capital of a cooperative society, with the exception of member shares, may be indivisible or assigned (the whole or a part of it) to the members of the society. Own funds shall constitute fixed and reserve capital. Fixed capital shall be used for business activities of a society and for the acquisition of assets. On the decision of the meeting of the members (agents), the reserve capital shall be used for extraordinary expenditure and for covering losses as well as for the training of the society members and personnel.. The minimum amount of the society's own capital shall not be regulated by laws, however, it must be sufficient for the development of activities provided in the bylaws. Deductions to the capital reserve fund shall be mandatory for cooperative societies deriving profit. The amount of deductions into the reserve fund and the procedure for its formation shall be established by the by-laws. Article
  13. Cooperative Society Member Share The cooperative society member share may be a cash contribution, intellectual contribution, securities or any other property contribution, with the exception of land. The amount of the member share, the procedure of payment thereof and liability for the violation of the procedure as well as the procedure of evaluation of non-monetary (in kind) member share shall be established in the by-laws. Property to which the cooperative society member's rights of disposal have been restricted may not be contributed as member share. Land may be leased for a cooperative society by its members only for use. Members of a cooperative society may be assigned only a portion of the property newly created in the cooperative society during their membership period, proportionate to the amount of their member share and property owned. A member share and the portion of property owned by him shall be registered in the accounting records, and the member shall be issued a certificate evidencing his membership and the amount of property owned by him in the cooperative society. Members of a cooperative society shall dispose of their member shares and the portion of property owned according to the procedure established in the by-laws. Article
  14. Distribution of Profit The distribution of the after-tax net profit earned by a cooperative society during a business year must be approved not alter than within 4 months of the end of the business year. Net profit shall be distributed in the following manner : 1)deductions to capital reserve fund shall be made; 2) a part of the profit proportionate to the volume of the turnover (operations) with the cooperative society shall be paid out to its members according to the procedure established by the by-laws; 3) dividends shall be paid to the members of the cooperative society in proportion to their member shares and, where the property is assigned to the members, the property owned by them. The undistributed profit shall be used according to the procedure established in the by-laws; The dividend on the member share must be limited; the maximum amount of the dividend shall be specified in the bylaws. Balance profit shall be subject to tax according to the procedure established in the by-laws, whereas the part of profit paid out to the members in proportion to the volume of turnover (operations) with the cooperative society and the dividend on the member share shall be exempt from taxation. CHAPTER FOUR MANAGEMENT AND CONTROL Article
  15. Managing Bodies The managing bodies shall be the members' meeting and the board or the manager. Citizens of the Republic of Lithuania who are 18 years of age and over may be members of the board of a cooperative society and its internal auditing commission. In a cooperative society whose membership exceeds 100, the members' meeting may be replaced by the meeting of agents. The procedure for electing agents shall be established in the by-laws of a cooperative society. Article
  16. Meeting of Members (Agents) The meeting of members ( authorised representatives) shall be the supreme managing body of a cooperative society, which shall: 1) admit or expel members of a cooperative society and execute legal formalities required for the withdrawal from a cooperative society. The meeting may assign the above functions (except for the expulsion) to the board (manager); 2) amend and supplement the by-laws of a cooperative society; 3) elect or remove the board (manager), the board chairman, the internal audit commission (internal auditor) and their members; 4) evaluate the work of the board (manager) and the internal audit commission (internal auditor), approve annual financial statements and the programme of business activities ; 5) approve distribution of the profit (losses); 6) establish the procedure of remuneration for work in a cooperative society; 7) decide the issues relating to the joining of unions (associations) by a cooperative society, withdrawal from them, establishment of their structural subdivisions and enterprises, termination of their activities, as well as other organisational issues; 8) adopt a decision to liquidate or reorganise a cooperative society; 9) resolve other issues relating to the activities of a cooperative society. The meeting of members (agents) may charge the board to settle the issues specified in subparagraphs 6 and 7 of paragraph 1 of this Article, except for the issues of establishment of enterprises and termination of activities. The meeting of members ( agents) shall be convened by the board once a year not later than within 3 months of the end of a business year. Unscheduled meetings shall be convened by the board (the manager) on its (his) own initiative or at the request of the internal audit commission (internal auditor) or at the request of not less than 1/4 of the members (agents) of a cooperative society. The meeting of members may adopt resolutions if it is attended by at least 1/2 of all members. The meeting of authorised members may adopt resolutions if it is attended by at least 2/3 of the agents. If the meeting is not attended by the specified number of members (agents), a repeat meeting shall be called. Resolutions may be adopted at such a meeting if it is attended by at least 1/3 of the members or 1/2 of the agents. Resolutions at the meetings shall be adopted by a simple majority vote, except in cases specified in subparagraphs 2 and 8 of Article 16 of this Law and in cases of expulsion of the members, where resolutions shall be adopted by at least 2/3 of the votes. Voting at the meeting shall be by open ballot, except in the cases where voting by secret ballot is prescribed by this Law or the by-laws of the cooperative society or when this is requested by at least 1/10 of the members (agents) of a cooperative society attending the meeting. Members of the board and internal audit commission shall be elected by secret ballot. Article
  17. Board or Manager of a Cooperative Society The board shall be a collegial managing body directing the activities of the cooperative society in the period between the meetings of members (agents). In the cooperative societies with the membership of at least 100, the manager may be elected instead of the board. The board shall direct the activities of the cooperative society, manage its affairs, represent the cooperative society in the court or other institutions. The board or the manager shall be elected by the meeting of members (agents) for a term not exceeding 3 years. Pending the election of the board, the affairs of the cooperative society shall be managed by the incorporators. The number of the board members and the powers of its members and chairman shall be specified in the by-laws of the cooperative society and the resolutions of the meetings of the members (agents). The meeting of the members (agents) shall have the right to remove the board chairman (manager) and individual members prior to the expiration of their term of office. After the expiration of the term of office, the board shall exercise its powers until the election of a new board. Members and chairman of the board (manager) may resign at any time. Resignation procedure shall be laid down in the by-laws of a cooperative society. The board shall adopt its resolutions at the sitting which shall be valid if attended by at least 2/3 of all the members of the board. Resolutions shall be adopted by a majority vote. Members and chairman of the board (manager) must compensate for the losses sustained by a cooperative society by reason of the resolutions of the board adopted in violation of the by-laws of the cooperative society or laws of the Republic of Lithuania. The resignation or removal of the members or chairman of the board (manager) shall not release him from compensation for the losses inflicted through his fault. Article
  18. Control of Activities The activities of a cooperative society shall be controlled by the internal audit commission ( auditor), which shall be elected at the members' meeting for a term not exceeding 3 years. On the decision of the meeting of members ( agents), provisional control commissions may be formed. Cooperative society board members or persons related to the board members by blood or by marriage may not be members of the internal audit commission (internal auditors). Internal audit commission (internal auditor) shall: 1) audit business-financial activities of the cooperative society, its accounting documents and financial statements; 2) report all violations established in the activities of the cooperative society to the meeting of members (agents), the board (manager); 3) at the end of the business year, present to the meeting of the members (agents) its/his opinion on the annual financial statements and financial position of the cooperative society. The meeting of members (agents), the board (manager), internal audit commission (auditor) may invite experts and/or independent auditor to take part in the auditing. State institutions shall have the right to inspect the activities of the cooperative society in the manner prescribed by laws. CHAPTER FIVE REORGANISATION/LIQUIDATION OF A COOPERATIVE SOCIETY Article
  19. Reorganisation of a Cooperative Society Reorganisation means reconstruction of a cooperative society as a legal person without going into liquidation. Cooperative societies founded in the course of reorganisation and continuing their operations thereafter shall be successors to all rights and obligations of the reorganised cooperative societies. Cooperative societies may reorganised in the following ways: 1) by merger; 2) by division. Reorganisation of cooperative societies by merger shall be carried out by: 1) joining the cooperative societies (one or several) which cease their existence as separate legal entities to the cooperative society which continues its business; 2) combining cooperative societies which terminate their existence as legal entities to form a newly created cooperative society. Reorganisation of cooperative societies by way of division shall be carried out by: 1) parcelling out the cooperative society which terminates its activities to other cooperative societies which continue their business; 2) organising new cooperative societies from the cooperative society which terminates its activities; 3) unbundling from a cooperative society which continues its business a peripheral part of the business and joining it to another cooperative society or organising a new cooperative society from the unbundled part. The cooperative society which is being reorganised must draft a reorganisation plan which shall state: 1) the name, seat of every cooperative society under reorganisation; 2) appraisal of assets of every cooperative society under reorganisation; 3) assumption of obligations, 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 registration, in the manner prescribed by law, of the by-laws of the cooperative societies which will be operating after the reorganisation and the deadline for assuming the said obligations; 4) criteria and rules of assignment of the members of cooperative societies connected with reorganisation and their member shares to cooperative societies which will be operating after the reorganisation; 5) property and non-property rights of members after the reorganisation of the cooperative society, the time limits of acquisition of the rights; 6) anticipated economic results of cooperative societies which will be operating after the reorganisation; 7) the rights accorded to the managing bodies and internal auditors of cooperative societies during the period of reorganisation. By-laws of each cooperative society that will be operating after the reorganisation shall be drafted together with the reorganisation plan. Each cooperative society must make a public announcement of the intended reorganisation not later the thirty days before the meeting of the members (agents), having the issue of reorganisation on its agenda. During the said period each member shall have the right to examine the reorganisation plan, performance results of the cooperative societies under reorganisation and make copies of the above documents. The resolution on the approval of the reorganisation plan and the drafted by-laws shall be adopted by at least 2/3 of votes. A cooperative society against which bankruptcy proceedings have been instituted or extrajudicial bankruptcy process has been initiated may be reorganised according to the procedure laid down in the Enterprise Bankruptcy Law of the Republic of Lithuania . A public announcement of the reorganisation of a cooperative society must be given twice with a month's interval in between. Each creditor shall be given a written notice before the first announcement of reorganisation. The by-laws of the cooperative societies operating after the reorganisation shall be registered after the first meeting of the members (agents). Article
  20. Liquidation of Cooperative Society and Liquidation Procedure A cooperative society shall be liquidated: 1) on the resolution of the meeting of members (agents); 2) upon the expiry of the time period set for the activities in the by-laws; 3) when the remaining number of members is less than the number prescribed by law; 4) after the cooperative society is declared insolvent by the court decision; 5) on the decision of the court for legal violations specified by the laws of the Republic of Lithuania. The procedure of liquidation of a cooperative society shall be laid down by this Law, other laws of the Republic of Lithuania and the by-laws of the cooperative society. The institution which adopts the decision on the termination of activities of the cooperative society shall appoint the liquidators or charge the board of the cooperative society(manager) to appoint them. After the appointment of the liquidators the cooperative society shall acquire the status of the cooperative society in liquidation. The board (manager) of the cooperative society shall lose its/his powers. The functions of the board shall be taken over by the liquidators who shall: 1) change the registration of the cooperative society registering it as a cooperative society in liquidation; 2) twice, with a month's interval in between, make a public announcement in the press about the liquidation of the cooperative society or notify each member of the cooperative and creditor thereof; 3) represent the cooperative society in liquidation in the court, in the relations with the institutions of state government and administration and other legal and natural persons; 4) during the liquidation period draw up the balance sheets of the cooperative society; 5) complete the discharge of obligations, including payment of debts to the state social insurance fund budget and amounts due as well as penalties and default interest, as calculated by the tax administrator's officers and other state institutions, not later than within six months from the day of announcement of the liquidation, under the contracts concluded by the cooperative society and enter into new contracts which do not conflict with the laws regulating the activities of the cooperative society in liquidation; 6) within six months from the announcement of the liquidation accept and award creditors' claims, collect debts; 7) in case of disputed obligations, allot an appropriate amount from the assets of the cooperative society for the discharge thereof and pay it to the deposit account of the notary's office; 8) satisfy the creditors' demands. After the lapse of six months from the announcement of the liquidation, distribute the remaining property among the cooperative society members in the manner prescribed by the by-laws, having regard to the member shares and the amount of property owned by them (where the property has been assigned). In the event of disputes between the members of the cooperative society about the distribution of the remaining property, the liquidators shall suspend the distribution. Disputes between the members and the members' disputes with the liquidators shall be settled at the members' (agents') meeting or in the court, if the meeting fails to settle the disputes; 9) during the liquidation period submit performance reports to the meeting of the cooperative society members (agents) within the time limits set by the meeting. Upon completion of the liquidation, the liquidators shall submit the final report. The liquidators shall be jointly and severally liable to the cooperative society and third persons for the losses inflicted through the liquidators' fault. Where the liquidator acts as a separate entity, he shall be severally liable for the losses. Documents of the liquidated cooperative society shall be kept in the manner specified by the Government of the Republic of Lithuania. Former members of the cooperative society and their heirs shall have the right of access to these documents and shall be entitled to obtain their copies. CHAPTER SIX UNIONS (ASSOCIATIONS) OF COOPERATIVE SOCIETIES Article
  21. Establishment and Activities of Unions (Associations) Cooperative societies may form unions (associations) for the fulfilment of the tasks provided for in their bylaws. Other legal persons (companies, societies, associations, etc) may also be members of the unions (associations), if their membership is in conformity with the objectives of the unions (associations) of cooperative societies. A union ( association) of cooperative societies may be composed of two or more legal persons. Unions (associations) of cooperative societies shall function according to their by-laws adopted by the congresses, conferences or meetings of their delegates (agents). A union (association) shall be deemed established when it is registered according to the established procedure. Cooperative societies and their unions (associations) may take part in the activities of international cooperative organisations and engage in other international activities. CHAPTER SEVEN FINAL PART Article
  22. Entry into Force of the Law The Law shall become effective as of 1 July
  23. I promulgate this Law passed by the Seimas of the Republic of Lithuania. PRESIDENT OF THE REPUBLIC ALGIRDAS BRAZAUSKAS

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