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REPUBLIC OF LITHUANIA

REPUBLIC OF LITHUANIA REPUBLIC OF LITHUANIA LAW ON STOCK CORPORATIONS Chapter 1 General Principles Article

  1. Objectives of the Law The Law shall regulate the establishment, reorganization and liquidation of public and close Corporations, their management and activities, as well as the rights and obligations of their stockholders. When the text of the Law applies both to the public stock Corporations and close Corporations, they shall be referred to by the term "Corporations." Article
  2. Public Stock Corporations and Close Corporations
  3. A Corporation shall be an enterprise whose capital stock is divided into shares. It may be formed for any business or commercial activity not prohibited by the laws of the Republic of Lithuania. A Corporation shall be a legal person and shall have the right to commercial, business, financial, organizational and legal independence.
  4. A Corporation shall be a limited liability formation. It shall be liable for its obligations to the extent of its assets. The stockholders shall only be liable only for the amounts which they pay for their stock.
  5. The amount of the authorized capital of a public Corporation shall not be less than 250,000 rubles. Its stock may be sold and bought publicly on the stock exchange, and may have a limited sphere of circulation.
  6. A close Corporation must limit its stockholders to fifty, excluding the employees of the Corporation. The amount of its authorized capital shall not be limited. The stock of a close Corporation may not be sold and bought publicly or on the stock exchange.
  7. Corporations must have their corporate seat in the Republic of Lithuania.
  8. Unless the by-laws of a Corporation provide otherwise, a Corporation shall be established for a period of unlimited duration. The duration of a Corporation may be extended. Article
  9. Incorporators
  10. The incorporators of a Corporation shall be natural or legal persons who have executed the agreement on the incorporation of the Corporation, certified by a notary. The agreement shall provide for their rights and obligations in establishing the Corporation and their liability for failure to meet their obligations. The incorporators of a closed Corporation may choose not to draft an incorporation agreement, in which case, they may define their rights and obligations within the by-laws of the Corporation.
  11. Commercial banks registered in Lithuania may not found a stock Corporation, but they may found a banking corporation. State legislative and administrative bodies may not be incorporators of a private stock Corporation.
  12. A public Corporation must have at least five stockholders, a closed Corporation need have only two. Each incorporator of a Corporation must be its stockholder.
  13. The incorporators shall draw up and sign the by-laws of the Corporation and file them for registration. After the registration of the by-laws and the issuance of the license by the appropriate state bodies, the incorporators of the Corporation shall have the right to sell stock publicly.
  14. From the day of the registration of the Corporation's by-laws until the registration of the Corporation in the Register of Enterprises of the Republic of Lithuania, each incorporator as well as the Board of Directors, the managing director, and other persons specified in the by-laws shall have the right to conclude contracts on behalf of the Corporation. The Corporation shall assume liability for the contracts after the Organizational Meeting of the stockholders approves them. If the meeting does not approve the contracts, the incorporators and the members of the Board shall be jointly liable for the obligations incident to the contract, whereas the managing director and other persons specified in the by-laws shall bear individual liability for these obligations. The by-laws and the incorporation agreement may define other rules for drawing up contracts and liabilities incident to them. At an incorporator's motion the Organizational Meeting of the stockholders may transfer liabilities incident to the contracts concluded by an incorporator in his own name to the Corporation.
  15. The debts of an incorporator who cannot pay for his obligations must be paid jointly by the other incorporators if the incorporator is insolvent and the other incorporators knew of such insolvency, or should have known of it, before the registration of the by-laws of the Corporation.
  16. Stockholders shall have the right to demand that the incorporators pay jointly for the losses incurred before the registration of the Corporation due to negligence and dishonest management of the Corporation during its incorporation except in cases when the losses have been incurred through normal industrial or business risks.
  17. An incorporator, a member of the Board, and other persons may be relieved of the liability for the losses by a general meeting (the Organizational Meeting of stockholders) by 9/10 of the total number of votes. Every creditor of the Corporation shall have the right to appeal to court against the decision if he sustained losses because of this decision. Article
  18. Stockholders
  19. A stockholder shall be a natural or a legal person who has at least one stock of the Corporation acquired under law. There shall be a minimum of five stockholders in a public Corporation and two in a closed Corporation.
  20. State entities and government may participate in a Corporation with the rights of a legal person and have the same rights as the other stockholders of the Corporation. The par value of the Corporation's stock possessed by said bodies or by state (state stock) enterprises may not exceed fifty percent of the Corporation's authorized capital.
  21. Commercial banks registered in the Republic of Lithuania shall be prohibited from buying or acquiring in other ways, as well as from owning, stock of Corporations, with the exception in banking corporations. Chapter 2 Incorporation, Reorganization and Liquidation of a Stock Corporation Article
  22. Incorporation of a Corporation
  23. A stock Corporation may be founded in a closed manner (when all the stock are acquired by the incorporators) or by selling the stock to the incorporators and other persons. The incorporators of a public Corporation shall have the right to announce, according to procedures established by law, a public subscription for the stock. If a closed Corporation is being founded, public subscription shall be prohibited. Stock subscription agreements concluded in violation of this requirement shall be invalid.
  24. The first Council of Observers of the Board of the Corporation shall be elected by the Organizational Meeting of Stockholders for a term which may not exceed two business years. In the case of a closed Corporation, the Council of Observers or the Board shall be appointed by the incorporators. The powersof the auditor, the Council of Observers, and the Board shall terminate with the election (appointment) of the new auditor, the new Council of Observers, and the new Board. The first Council of Observers may be composed exclusively of persons appointed by the incorporators or elected by the General Meeting of Stockholders. Elected representatives of the employees may not be included therein.
  25. The business year of a Corporation shall be a calendar year unless the by-laws of a Corporation specify otherwise. If a Corporation has been registered after the beginning of the business year, it shall be considered that the first business year ends on the day specified in the by-laws as the last day of the business year of the Corporation. If a Corporation had been liquidated (reorganized) before the end of the business year, its last business year shall be considered to have ended on the day the liquidation (reorganization) of the Corporation is registered.
  26. The incorporators of a public stock Corporation must prepare a financial statement upon incorporation of the Corporation indicating:

(1)the incorporation expenses;
(2)non-monetary (property) contributions and the assessment thereof;
(3)the profit (revenue) received over the past two years by the enterprise (an industrial division) which the Corporation is planning to acquire.
(4)the number of stock acquired by each member of the Council of Observers, of the Board, and by each founder;
(5)granted privileges, as well as incorporation expenses liable for compensation, remuneration for the incorporation; and
(6)contracts the obligations of which the incorporators or other persons are transferring to the Corporation.
  1. The financial statement prepared on the incorporation of a public stock Corporation must be audited by the auditor of the Corporation who shall present his conclusions thereon. The financial statement may also be audited by members of the Council of Observers or the Board.
  2. The auditor shall have the right to receive all the information and explanations necessary for auditing the financial statement. If the incorporators deny him the explanations and the information, the auditor shall draw up an appropriate document and submit it for consideration to the Organizational Meeting of stockholders. The conclusions of the audit shall be filed with the local government council together with the application for the registration of the public stock Corporation. Every person with vested interests shall have the right to review a copy of the audit conclusions filed with the local government council, and to make copies of the financial statement.
  3. If not all the stock of a public stock Corporation is sold during the time prescribed for the subscription for the stock, at the request of the incorporators the local government council which has registered the by-laws or the Corporation shall reduce the amount of the authorized capital of the Corporation, but not more than by twenty-five percent. The reduced amount of the authorized capital may not be less than the minimum amount under paragraph 3 of Article 2 hereof. If during the time prescribed for the subscription for the stock all the stock have not been sold and the amount of the authorized capital has not been reduced, the Corporation may not be registered. In this case the investments of the subscribers must be returned to them within fifteen days without any deductions. All the incorporators shall be jointly liable for the refund of investments.
  4. Within sixty days of the last day of the subscription the incorporators must call a Organizational Meeting of the stockholders. If they fail to do so during said time, all the subscribers shall be relieved of their obligations to the stock Corporation and shall be entitled to full refund of their investments for the stock.
  5. The Organizational Meeting of a Corporation shall have the right to adopt resolutions if it is attended by stockholders who have more than half of the total number of votes. The Organizational Meeting must also be attended by all the incorporators. If there is no quorum, another meeting shall be called which shall have the right to adopt resolutions irrespective of the number of stockholders present.
  6. The Organizational Meeting of stockholders shall have the right to:
(1)apply to the local government council for the registration of the Corporation;
(2)increase the amount of the authorized capital if the number of stock subscribed to exceeds the number of prescribed by the by-laws;
(3)reduce the amount of the authorized capital of the stock Corporation under the rules prescribed by Paragraph 7 hereof;
(4)grant privileges to the incorporators. The Organizational Meeting shall also approve the financial statement prepared upon incorporation, the contracts concluded by the incorporators, shall elect the auditor, the Council of Observers or the Board and consider other questions within the powers of the General Meeting of Stockholders.
  1. In founding a closed Corporation the incorporators must draw up the by-laws of the Corporation and register them according to law, as well as sell the corporation's stock. The incorporators of a private stock Corporation must call a General Meeting of Stockholders only in cases prescribed by law or by the incorporation agreement of such Corporation. Article
  2. By-laws of a Corporation
  3. The by-laws shall be a legal document used by the Corporation to guide its activities.
  4. The by-laws must state:
(1)the name of the Corporation;
(2)the address of the central office of the Corporation and addresses of its subsidiaries;
(3)commercial-economic activities (production, work, services);
(4)the procedure for transferring registered stock (stock certificates) to the ownership of other persons;
(5)the amount of the authorized capital and its composition according to the classes of stock;
(6)the number of shares of stock, their par value and the rights they give to the owner;
(7)rules on payment for the stock;
(8)rules on the election (appointment) of the Board, the Council of Observers, and the auditor, and their respective powers;
(9)the powers of the general meeting, the rules on when and how to call them, and their voting rules;
(10)the rules for the distribution of profit;
(11)the procedure for communicating the announcements of the Corporation;
(12)reimbursement of incorporation expenses, remuneration for the incorporation and privileges granted to the incorporators, stockholders, and third parties; and
(13)the procedure for liquidating the Corporation. The by-laws of a Corporation may also include other provisions, provided they do not conflict with the laws of the Republic of Lithuania.
  1. The rules for reimbursing incorporation expenses, remunerating for the incorporation, and granting privileges may be amended or repealed only after the incorporation expenses have been fully reimbursed, the remuneration paid and the privileges granted. If the formulation of these provisions in the by-laws is not quite clear, the provisions shall be invalid. Disputes of the incorporators, stockholders, and third parties with the Corporation over the reimbursement of incorporation expenses, remuneration for the incorporation and privileges shall be settled in court.
  2. The overall expenses incurred by the incorporation of a Corporation may not exceed 1/10 of its authorized capital. If these expenses are to be reimbursed, they must be testified by appropriate documents. Article
  3. Registration of By-laws
  4. The by-laws shall be registered with the local government council on whose territory the central office of the Corporation is located. The by-laws must be signed by all the incorporators and certified by a notary.
  5. The application for the registration of the by-laws must state:
(1)first and last names of all the incorporators of the Corporation, their occupied posts (the name of the legal person) and addresses (office); and
(2)the number of stock acquired by every founder according to class.
  1. If the local government council does not register the by- laws, the incorporators shall have the right to submit the by- laws for registration once again. The new application shall be considered by the council in the general order after the removal of the causes obstructing registration.
  2. If the by-laws are amended, they must be registered anew.
  3. The court may annul the registration of the by-laws of a Corporation if it establishes that in founding the Corporation or in acting on its behalf, the incorporators violated the laws of the Republic of Lithuania. Article
  4. Registration of the Corporation
  5. A Corporation must be registered according to the procedure established by law within six months of the registration of its by-laws. If it is not registered within six months, the Corporation shall not be considered to be incorporated and the investments in the Corporation's capital must be returned to the investors without any deductions within fifteen days of the last day fixed for its registration. A closed Corporation and its by-laws must be registered together. Upon registration a Corporation may acquire the rights of a legal person.
  6. The application for registration shall be filed with the local government by the Board of Directors or, in its absence, by the head of the Corporation, if:
(1)all the stock has been subscribed to and the first installments paid;
(2)the Organizational Meeting of stockholders has taken place, with the exception of cases prescribed by this Law; and
(3)the Board of Directors is able to distribute monies received for payment for the stock. 3. The Corporation shall be denied registration if:
(1)the incorporation procedure has been violated during its incorporation;
(2)the account of the incorporation of the Corporation contains incorrect or partial information; and
(3)the assessment of the non monetary (property) contributions does not correspond to their real value and this entails a consideration difference between the Corporation's net assets (i.e. the difference between the Corporation's assets in the balance sheet and the loan capital) and the authorized capital.
  1. When the local government denies the Corporation registration, its incorporators or the Board may repeatedly apply for registration upon removing the obstacles for registration. Article
  2. Incorporation and Registration of Subsidiaries A Corporation may establish a subsidiary which shall be subject to the same rules of incorporation and registration.
  3. The property of the subsidiary shall be assessed in the balance sheet of the Corporation and a separate balance sheet of the subsidiary. Article
  4. Liquidation of a Corporation
  5. The right to dissolve a Corporation shall belong to the General Meeting of Stockholders or a court, if:
(1)the time of the Corporation's duration specified in the by-laws has expired;
(2)the number of stockholders has diminished and is below the minimum established by law;
(3)the net assets are less than 1/2 of the authorized capital and
(4)there are other grounds for the dissolution of a Corporation established by the laws of the Republic of Lithuania. The activities of a Corporation may be terminated by other state bodies provided this is prescribed by the laws of the Republic of Lithuania.
  1. The body which decides to liquidate the Corporation must appoint its liquidators, which may be natural or legal persons. If the general meeting resolves to dissolve the Corporation, its liquidators may be specified in the by-laws. The liquidators shall file an application with the local government for the re-registration of the Corporation as a Corporation under liquidation. Upon re-registration, the Corporation's name shall include the words "public Corporation under liquidation" or "closed Corporation under liquidation", or the respective acronyms shall be used.
  2. A Corporation under liquidation may only conclude contracts which are related to its liquidation. Other contracts may be concluded only provided the conclusion thereof is prescribed by the resolution on the liquidation of the Corporation and registered in the Register.
  3. The liquidation of a Corporation shall be announced publicly no less than three times at no shorter than two-month intervals or each stockholder or auditor shall be personally notified thereof.
  4. The property of the Corporation may be divided among the stockholders only in three months after the day of the third public announcement of the liquidation of the Corporation or of the personal notification of each stockholder and creditor.
  5. In the event of disputes concerning the payment of the Corporation's debts, the property of the Corporation may not be divided among the stockholders before the dispute has been settled in court or the creditors have received warranties.
  6. After the payment of required taxes into the budget and after the discharge of liabilities to the creditors and the employees the remaining property shall be divided among the stockholders in proportion to the par value of the stock they own. If the stock of the Corporation give their holders different rights, they must be taken into consideration during the division of the property.
  7. A private stock Corporation may be reorganized into a public stock Corporation by registering its stock with the appropriate state body and by amending and re-registering its by- laws.
  8. The reorganization of Corporations shall be regulated by the Enterprise Law and other legislative acts of the Republic of Lithuania. Article
  9. Powers of the Liquidators
  10. The liquidators shall have the rights and obligations of the members of the Board. They shall represent the Corporation under liquidation in court, in its relations with the state legislative and administrative bodies, and with other natural and legal persons.
  11. The liquidators of the Corporation shall:
(1)draw up the balance sheet as of the beginning of the liquidation period (the liquidation balance sheet);
(2)complete the discharge of the obligations incident to the earlier contracts and draw up contracts within their powers;
(3)ascertain the creditors and debtors of the Corporation; and
(4)distribute the remaining assets of the Corporation among the stockholders.
  1. If the liquidation of the Corporation lasts several years, within three months of the end of each business year the liquidators shall draw up the annual balance sheet and the liquidation account. These documents shall be open for review to all the stockholders and the third person with vested interests.
  2. The liquidators shall have a joint liability to the Corporation and the third persons for the losses incurred through the fault of the liquidator. If a liquidator acts in an individual capacity, he shall bear individual liability for the losses.
  3. Stockholders who own stock the total par value of which is over 1/10 of the authorized capital shall have the right to change, with a good reason, one or several liquidators by taking the matter to court.
  4. The liquidators of the Corporation, their powers and the alterations of their powers shall be registered in the Register. Chapter 3 Rights and Obligations of the Corporations and Stockholders Article
  5. Corporate Rights and Obligations
  6. Every Corporation must have a name (the name of the firm) which must include the words "stock Corporation" (the respective acronyms) or "closed Corporation" (the respective acronyms). A Corporation shall be prohibited from having a name identical with or similar to the name of another enterprise registered in the Republic of Lithuania, which would handicap the normal work of these economic units. Disputes over the name of a firm shall be settled in court.
  7. A Corporation may:
(1)have accounts in banks registered in the Republic of Lithuania and other states, its own seal which can be altered and used at the Corporation's discretion;
(2)buy or acquire in other ways property, which may be sold, hired, mortgaged and controlled in any way the Corporation considers to be necessary;
(3)buy or acquire in any other way, as well as issue, transfer, exchange, mortgage, or use in any way investment and credit securities. If the acquisition of the stock and the exercise of the rights incident to them reduces competition among Corporations (enterprises) or competition in the appropriate economic field, the state body of anti-monopoly control shall have the right to restrict the number of stock of another Corporation (enterprise) acquired or possessed by said Corporation;
(4)engage in economic and commercial activities in the Republic of Lithuania and in foreign countries;
(5)make donations for the purposes of charity, culture, health service, science, education, physical education and sport, as well as for relief in cases of natural disaster or other emergency;
(6)make contracts, incur liabilities, lend and borrow money at such rates of interest as are established by agreement;
(7)charge prices, rates and tariffs for its products, services or other goods, with the exception of cases when the prices and other rates are regulated by the state;
(8)establish and carry out supplemental pension, benefit, stock purchase, profit sharing, incentive and privilege plans;
(9)elect (appoint) members of the Board and of the Council of Observers, hire and dismiss employees, define their rights and duties, and fix their wages;
(10)adopt and amend its by-laws; and
(11)found other enterprises, be a partner or manager of other enterprises, form associations, amalgamation, consortiums with other enterprises and retire from them on the basis of agreements.
  1. If the Corporation acquires controlling interest in another Corporation (enterprise), the latter shall become a controlled Corporation. Controlling interest shall consist of stock which give their holder more than fifty percent of votes in the general meeting. The controlled Corporation shall be an affiliated Corporation, and the controlling Corporation shall be the holding Corporation. The affiliated Corporation may not acquire the stock of the holding Corporation.
  2. A Corporation planning to acquire the controlling interest of another stock Corporation must notify the latter of this intention in writing not later than thirty days prior to the beginning of the accumulation of its stock. The stock Corporation whose stock have been acquired may demand in court the restriction of the personal non-property rights of the new owner incident to these stock. Article
  3. Rights and Duties of the Stockholders
  4. The property and non-property rights of the stockholders shall be defined by this and other laws of the Republic of Lithuania as well as by the by- laws of the Corporation.
  5. The stockholders shall have no other payment liabilities to the Corporation except for the liability to pay in the established order the issuance price of all the stock subscribed for. The resolution of the general meeting or the Board obliging all or some of the stockholders to make additional monetary investments shall be invalid if at least one of them does not agree with this resolution.
  6. If a Corporation is dissolved and lacks funds to discharge its liabilities, stockholders who have not paid for their stock may be required to pay for them in the order established by the by-laws or by the subscription agreement.
  7. A stock shall not be divisible into smaller parts. If a stock is owned by several persons, all its owners shall be considered to be a single stockholder. The rights given by the stock shall be exercised by one of the owners. All the owners of a stock shall be jointly responsible for the stockholders' liabilities. Article
  8. Property Rights of the Stockholders
  9. A stockholder shall have the following property rights:
(1)to receive part of the Corporation's profits (dividend);
(2)to receive part of the property of the Corporation under liquidation;
(3)to receive stock without payment if the authorized capital is increased from the funds of the Corporation.
(4)to have a priority in acquiring newly issued stock unless the Corporation's by-laws or the subscription agreement provide otherwise;
(5)to bequeath all or part of his stock to one or several persons;
(6)to sell or transfer in any other way all or part of his stock in other persons; and
(7)to have other property rights provided by the by-laws of the Corporation.
  1. Stockholders shall have no right to recover their investments from the Corporation except in cases provided by this Law or by the by-laws of the Corporation. Article
  2. Personal Non-property Rights of the Stockholders
  3. Stockholders shall have the following personal non- property rights:
(1)to attend the meetings of stockholders as voting members, unless this Law or the by-laws provide otherwise;
(2)to receive information on the economic-commercial activities of the Corporation;
(3)to appeal in court against the resolutions of a general meeting or of the Board; and
(4)other personal non-property rights provided by the by- laws.
  1. If all the voting stock of the Corporation are of the same par value, each share of stock shall have one vote at the meetings of the stockholders.
  2. The by-laws of the Corporation may prescribe the maximum number of votes a stockholder may have, as well as to deprive some of the shares of stock of the right to vote.
  3. A stockholder shall have no right to take part in the voting at the general meeting on issues specified in Paragraph 3 of Article 8 or in part 18 of Paragraph 2 of Article 9, in the resolution of which the stockholder is interest directly.
  4. If the voting stock is of different par value, a 100- ruble-share shall give one vote to its holder. The number of votes given by other shares of stock shall be equal to their par value divided by
  5. The by-laws of the Corporation may prescribe for other rules on the number of votes, but the number of votes given by a share of stock must be proportionate to its par value.
  6. Only fully-paid stock shall give their holders voting rights at the general meetings with the exception of the Organizational Meeting and other meetings of a newly-found Corporation which take place prior to the expiration of the term for paying for the first issue of stock. If a stockholder does not observe the established terms of payment, he shall have no right to vote before he pays his debts.
  7. At the request of the stockholder the Corporation must present to him for inspection or copying the annual balance sheet, the reports of the Board on the activity of the Corporation, the subscription ledger, and the minutes of the meetings. Other documents of the Corporation may be presented for the stockholder's inspection if they do not contain secrets, the divulgence of which would cause the Corporation to incur material losses. Denial of information for any other reason shall be prohibited. At the stockholder's request, the denial to present papers for inspection must be presented in writing. Disputes over the stockholder's right to information shall be settled in court.
  8. Those stockholders whose holdings have a total par value of no less than 1/10 of the authorized capital shall have the right to demand the appointment of an expert (a group of experts) to manage the affairs of the Corporation and to inspect the accounting papers. If the expert (the group of experts) proves that the facts indicated in the stockholders application are true, the Corporation must refund the inspection expenses. Article
  9. Proxy
  10. A stockholder shall have the right to appoint another natural person or a credit institution to vote for him at his proxy at the general meeting or perform other legal acts in his name. The authorization to act as proxy must be certified by a notary. Members of the Board of Directors or of the Council of Observers and the auditor cannot act as proxies for the stockholder of their Corporation.
  11. The rights and duties of the proxy to represent a stockholder shall come into force on the date specified in the proxy. The proxy must be delivered to the Board or the person responsible for the counting of votes at the general meeting.
  12. The representative's actions performed after the death of the stockholder, or after his recognition as legally incapable or when his whereabouts are not known, shall be lawful and give rights and duties to the stockholder or his heirs irrespective or whether the representative knew about the expiration of the proxy. This rule does not apply when the company knew or should have known about the expiration of the representative's proxy. Chapter 4 Management of the Corporation Article
  13. Managing Bodies
  14. The managing bodies of a Corporation shall include the General Meeting of Stockholders, the Council of the Observers, and the Board of Directors. A Corporation shall have the right to hire its management and the head of its management (president, director, general director).
  15. If a Corporation has fifty, or less than fifty stockholders, and the number of its employees does not exceed 200, a Council of Observers need not be formed.
  16. On the decision of the general meeting, a closed Corporation need not have a Board of Directors. The functions of the Board shall be transferred to the management and the General Meeting of Stockholders. Article
  17. General Meeting of Stockholders
  18. The supreme managerial powers of a Corporation shall be vested in the general meeting of its stockholders. All the stockholders of the Corporation irrespective of the number of shares of stock they hold shall have the right to attend the General Meeting. Members of the Board and of the Council of Observers, who are not stockholders, may also attend the General Meeting but they shall have no voting right.
  19. The General Meeting shall have the right to:
(1)amend the by-laws of the Corporation;
(2)elect the auditor, members of the Council of Observers, as well as members of the Board, if this Law contains a provision there for;
(3)recall the Board and the members of the Council of Observers elected by the stockholders, and the auditor;
(4)fix the salary of the auditor, the annual payments from the profit to the members of the Board and the Council of Observers;
(5)approve the annual balance, adopt a resolution on the distribution of the profit;
(6)increase or reduce the authorized capital;
(7)dissolve or reorganize the Corporation;
(8)appoint an expert (a group of experts) for the incorporation of the Corporation, on the inspection of the management of its affairs;
(9)approve the assessment of non-monetary (property) acquisitions;
(10)at the request of the Board, consider issues usually delegated to the Board, which pertain to the activity of the Corporation; and
(11)resolve other issues within the scope of its powers. The General Meeting of a close Corporation may delegate the consideration of issues within its powers, with the exception of issues under parts 1, 2, 3, 4, 7, 8 and 10 hereof, to the Board.
  1. The stockholders (or their proxies) attending the General Meeting shall be registered. The registration list must indicate the number of votes possessed by each stockholder. The list must be signed by the chairman and secretary of the meeting.
  2. The minutes of the General Meeting shall be signed by the chairman and a least one stockholder authorized to do so by the meeting. The list of the members of the General Meeting must be appended to the minutes. Article
  3. Quorum of the General Meetings and Adoption of Resolutions
  4. The general meeting may adopt resolutions if the attending stockholders have more than 1/2 of the total number of votes. If the meeting does not have a quorum, another meeting must be called within 15 days. The second meeting shall have the right to adopt resolutions on all the items of the agenda irrespective of the number of stockholders present. If the consent of stockholders possessing a certain class of stock is necessary for the adoption of a resolution, the decision thereon may be adopted by the meeting of the holders of the stock of the respective class, attended by stockholders who possess more than a half of the stock of said class.
  5. Upon acquainting themselves with the agenda, stockholders possessing the right to vote at the general meeting may inform the meeting of their vote in writing. Such communications shall be included in the quorum of the meeting.
  6. The resolutions of the meeting shall be adopted by a majority vote, with the exception of cases specified by parts 1, 3, 6, 7 of Paragraph 2 of Article 18, which require a 2/3 vote for adopting a resolution. Article
  7. Calling a General Meeting
  8. A General Meeting shall be called by the Board. The right to call a meeting shall also belong to the Council of Observers and to the stockholders who hold stock the par value of which is not less than 1/10 of the authorized capital unless the by-laws prescribe a smaller portion of the authorized capital.
  9. The Board must call a regular annual meeting within three months of the end of the business year.
  10. A special meeting shall be called if:
(1)the net assets of the Corporation are 1/2 of the authorized capital;
(2)the Corporation is recognized to be insolvent; and
(3)it is relevant to the protection of the interests of the Corporation and its members. The by-laws may also prescribe other reasons for calling a special meeting.
  1. The persons who are demanding that a general meeting be called shall submit an application to the Board indicating the reasons and objectives for calling a meeting, a draft agenda, and proposals as to the time and place of the meeting. The Board must give a written answer to the application within 10 days.
  2. A General Meeting may be called on a court ruling if:
(1)A meeting has not been called within three months of the end of the business year and a stockholder has brought the matter to court;
(2)the promoters of the meeting have referred the matter to court after they failed to get an answer from the Board in accordance with the procedure established by Paragraph 4 hereof when they consider the answer to be unsatisfactory; and
(3)the matter has been brought to court by creditors because a special meeting has not been called pursuant to parts 1 and 2 of Paragraph 3 hereof.
  1. The General Meeting must be announced according to the procedure established by the by-laws not later than thirty days before the meeting. In case the meeting is called a second-time, the stockholders must be informed of it not later than ten days before the meeting. A General Meeting may be called without observing these requirements if all the stockholders entitled to vote or their representatives agree to it.
  2. The notice about a General Meeting must state:
(1)the name and the official address of the Corporation;
(2)the place and the date of the meeting; and
(3)the draft agenda.
  1. Not later than seven days before the meeting the stockholders must have a possibility for reviewing the documents related to the agenda of the meeting.
  2. The by-laws may provide that the holders of bearer stock must deposit it with the Corporation before the meeting. Instead of the bearer stock they may deposit a certificate issued by a credit institution or a lawyer, certifying that the person specified in the certificate is the owner of such stock that is deposited with the issuer of the certificate. The stock or the certificate must be deposited with the stock Corporation no later than ten days prior to the meeting. The by-laws of a Corporation may also prescribe that the stockholders notify the Board about their attendance of the meeting no later than 3 days prior to the meeting. Article
  3. Agenda of a General Meeting
  4. The Board must draw up the draft agenda of a General Meeting and present it to the stockholders no later than ten days before the meeting.
  5. The meeting shall have no right to consider items of business that are not on the agenda if not all the stockholders having the voting right are present at the meeting.
  6. Stockholders the par value of whose stock is not less than 1/20 of the authorized capital, shall have the right to demand the inclusion of additional items of business in the agenda. This group of stockholders shall also have the right to nominate candidates to the Council of Observers or the Board, and a candidate to the auditor's post if the Board has been informed about it within fifteen days of the announcement of the General Meeting. The by-laws may prescribe a smaller par value of the stock which gives the stockholders this right.
  7. The agenda of a meeting which failed to take place shall be valid at the meeting called for a second time. Article
  8. Invalidity of the Resolutions of a General Meeting
  9. At the declaration of the stockholders, the members of the Board, the Council of Observers, and the head of the management of the Corporation, a court may declare the resolutions of a general meeting invalid if:
(1)the question on which the resolution has been adopted was not duly included in the agenda of the meeting;
(2)in cases prescribed by law the resolution has not been registered in the Corporation register;
(3)the order of calling a meeting, prescribed by Article 20 of this Law, has been violated, with the exception of cases when the meeting has been attended by all the stockholders entitled to vote; and
(4)the resolution runs counter to the by-laws of the Corporation, this law, or other laws of the Republic of Lithuania.
  1. A stockholder, who attended the meeting, shall have no right to appeal in court against the resolution adopted at the meeting on an item of business outside the agenda or against the improper procedure for calling the meeting if he did not express his dissent at the meeting or if his dissent was not recorded in the minutes of the meeting.
  2. A resolution of a general meeting may be appealed against in court within thirty days of the date when the person learned or should have learned about its adoption. The court may rule a resolution of a general meeting invalid within three years of the day of its adoption. Article
  3. Formation of the Council of Observers
  4. The number of Observers shall be prescribed by the by- laws of the Corporation; it must be divisible by three, not less than three and not larger than fifteen.
  5. 2/3 of the observers shall be elected at the general meeting, 1/3 shall be elected at the meeting of the employees of the Corporation. This rule shall not apply to a closed Corporation with less than 200 employees.
  6. The term of office of the Council of Observers shall not exceed four years. An observer may be released from his duties or re-elected for another term of office. The term of office of the Council of Observers shall start with the end of the meeting which has elected it.
  7. Only natural persons that are legally capable may serve as observers. A person who is a member of more than five other councils of observers of enterprises registered in the Republic of Lithuania or who is a member of the Board, or the managing director of the same Corporation, or a person who has been deprived of the right to perform these duties by law, may not serve on the Council of Observers.
  8. The Council of Observers shall have the right to appoint its own member to serve on the Board of Directors for a term which may not exceed six months. If the same observer is appointed to serve on the Board for another term, the overall duration of his service on the Board may not exceed twelve unbroken months in four years. While serving on the Board, a member of the Council of Observers may not perform the duties of an observer.
  9. The Council of Observers shall have no right to delegate or transfer its functions to other persons or the managing bodies of the Corporation.
  10. The general meeting may remunerate the observers for their work only out of the profit of the Corporation. Article
  11. Powers of the Council of Observers
  12. The Council of Observers shall:
(1)appoint the members of the Board of Directors or relieve them of their posts;
(2)at the request of the Board consider the dismissal of a member of the Council of Observers employed in the Corporation from his post;
(3)observe and analyze the work of the Board, the utilization of financial resourses, the organization of production and management, the profitability of capital, remuneration for work, the correctness of depreciation expenses, the evaluation of financial prospects;
(4)check the books of account and other instruments of the Corporation;
(5)make proposals at the general meeting and comments on the annual balance of the Corporation, the profit distribution, the account report of the Board to the meeting;
(6)represent the Corporation in court proceedings considering disputes between the Corporation and its Board, a member of its Board, the managing director or a representative of the Corporation; and
(7)consider other issues specified in the by-laws of the Corporation or in the decisions adopted by the general meeting.
  1. The Council of Observers shall have the right to appoint an expert (or group of experts) or ask a state financial institution to check and assess the financial account book of the Corporation. The by-laws of the Corporation may specify a sum of money to be paid to experts in remuneration of their work.
  2. At the request of the Council of Observers the management of the Corporation and the Board must present documents on the activity of the Corporation and create conditions for reviewing the Corporation's financial resources. The observers must not divulge the commercial secrets of the Corporation which have become known to them in the execution of their duties.
  3. Members of the Council of Observers shall have equal rights. Each member shall have only one vote. A tie vote shall be decided by the chairman's vote.
  4. If a member of the Council of Observers cannot attend a meeting of the council, he may inform the council as to the nature of his vote in writing after he has familiarized himself with the proposed draft resolutions.
  5. If the meeting of the Council of Observers is attended by more than half of its members, the meeting may adopt resolutions by a majority vote of those attending, except on recalling members of the Board, in which case resolutions must be adopted by a 2/3 vote of those present. A resolution adopted by the Council of Observers may be referred to a general meeting for reconsideration by a group of observers which includes no less than 1/3 of the total number of observers.
  6. The Council of Observers must meet once in a half year. Its regular meetings shall be called by the chairman of the council or, in his absence, by the vice chairman at the established time and according to procedures prescribed by the by-laws. Special meetings of the Council of Observers shall be called at the request of no less than 1/3 of the members of the Council of Observers. Article
  7. Formation of the Board of Directors
  8. The number of directors, which may not be less than three, as well as the powers of the Board and its separate members shall be established by the by-laws of the Corporation.
  9. Only legally capable natural persons may be appointed members of the Board. The following persons may not be appointed members of the Board:
(1)members of the Council of Observers of the same Corporation or its holding Corporation registered in the Republic of Lithuania, with the exception of the case prescribed by Paragraph 5 of the Article 23 of this Law;
(2)a person who serves as a director of more than three Corporations (enterprises) registered in the Republic of Lithuania; and
(3)a person who has been deprived of this right by law. The by-laws of a Corporation may prescribe additional requirements to a member of the Board.
  1. The Board of Directors and its chairman shall be appointed by the Council of Observers or, in its absence, by the general meeting for a term of office which may not exceed four years. There is no limitation on the number of terms of office a director may serve.
  2. By submitting a written application a member of the Board may resign from his post at any time. The resignation shall come into force from the day when the application is filed unless another date is specified in the application.
  3. Contracts of a Corporation concluded by a member of the Board or the managing director in his own discretion may not be declared invalid simply because according to the Corporation's by-laws or the rules governing the work of the Board of Directors he had no right to conclude said contracts, with the exception of cases when the counter-party knew or should have known that he was concluding an unlawful contract.
  4. For their work the members of the Board may be paid by the general meeting only out of the profit of the Corporation. The members of the Board shall receive a salary if they have entered into an employment contract with the Corporation. Article
  5. Powers of the Board of Directors
  6. Directors must act as a Board. The Board of Directors shall direct and manage the commercial and business activity of the Corporation based on the laws of the Republic of Lithuania, the by-laws of the Corporation, the resolution of general meeting and the Council of Observers, and the rules regulating the work on the Board. The Board may represent the Corporation in court, arbitration court and other institutions.
  7. The Board may delegate part of its functions specified in the by-laws to the management of the Corporation.
  8. The Board shall adopt resolutions by a majority vote if its meeting is attended by more than a half of its members. Members of the Board shall have equal voting rights. A tie vote shall be decided by the chairman's vote.
  9. The work of the Board shall be regulated by the rules adopted by the Board. The by-laws of the Corporation may provide for the approval of these rules by the general meeting or the Council of Observers.
  10. The Board shall be responsible for calling regular general meetings, for proposing draft agendas of the meetings, for the presentation of the annual balance sheet of the Corporation to the stockholders, of the profit distribution project, of the account report on the activity of the Corporation and other information pertaining to the agenda of the meeting.
  11. The Board shall perform its functions during a term specified by the by-laws until a new Board is appointed and begins its work. Article
  12. Liabilities of Members of the Board
  13. The members of the Board shall be jointly liable for the losses incurred to the Corporation by reason of the resolutions adopted by the Board in violation of the by-laws of the Corporation or this Law. Any member of the Board who voted against such a resolution shall be relieved of liability for the losses if his dissent is entered in the minutes of the meeting of the Board. A member of the Board who did not attend the meeting shall be relieved of liability for the resolution if he handed in his written dissention to the chairman of the meeting within seven days after he learned or should have learned about this resolution.
  14. Without permission of the Council of Observers or, in its absence, of the Board, a member of the Board shall have no right to own an enterprise in the same line of business as the Corporation, to serve on the Board or as the managing director of another enterprise engaged in a similar commercial and economic business. If, in violation of this provision, a member of the Board has entered into a contract, the Corporation shall have the right, within three months of the day it learned about the conclusion of this contract, to demand in court the transference of all the rights and liabilities pursuant to the contract to the Corporation.
  15. If there is at least one member of the Board who is personally interested in the contract drawn up on behalf of the Corporation the contract may be concluded only with the permission of the Council of Observers or, in its absence, of the Board. Contracts, signed in violation of this requirement, shall create, change or annul the liabilities of the Corporation only upon the approval of the Council of Observers or the Board.
  16. The resignation or dismissal of a member of the Board shall not relieve him of the liability for the damage incurred to the Corporation through his fault. A member of the Board may be relieved of liability for the damage incurred to the Corporation only under the provisions of Paragraph 8 of Article 13 of this Law.
  17. A member of the Board may be relieved of liability for damages which he incurred to the Corporation in the performance of his duties if he proceeded from such instruments and information that gave no ground for doubt, of if he exercised reasonable business judgment. Article
  18. Auditor of the Corporation
  19. A public Corporation must have at least one auditor who shall be elected by the general meeting for a term specified by the by-laws and not exceeding four years. The auditor's post may be occupied by a legally capable natural person, possessing a diploma certifying his proper professional qualifications, or a legal person.
  20. The auditor's post may not be occupied by a member of the Council of Observers, the Corporation's Board, by its managing directors, and its chief fiscal officer (accountant).
  21. The auditor must:
(1)review the annual balance of the Corporation and other financial books and documents which serve as the basis for the general meeting to adopt resolutions;
(2)to report all the violations discovered to the immediate general meeting or the Council of Observers.
  1. The auditor shall have the right to inspect any aspect of the Corporation's activities at behest of the general meeting, the Council of Observers or the Board.
  2. The auditor of the holding Corporation shall have the right to audit an affiliated Corporation. Article
  3. Officers of the Management
  4. The officers of the management of the Corporation shall be the officers of the Corporation's principal corporate offices, the officers of the services of the central management as well as the heads and the deputy heads of the divisions.
  5. The officers shall implement the resolutions of the Board and of the general meeting, manage the operational commercial and business affairs of the Corporation and attend to other business within the limits of their powers.
  6. The Board of the Corporation shall have the right to choose the officers of the management, to establish their duties and powers and to establish their salaries, unless the by-laws provide otherwise.
  7. Every Corporation must have a managing director and the chief fiscal officer (accountant). A person may serve as the managing director only of one Corporation (enterprise) registered in the Republic of Lithuania. The managing director of the Corporation may not occupy concurrently the post of the chief official officer (accountant).
  8. Unless the by-laws prohibit, members of the Board shall have the right to occupy any post in the Corporation.
  9. If a management officer derives personal profit dishonestly at the expense of the Corporation, the latter shall have the right to sue him for the reimbursement of the amount in this way. Chapter 5 Capital of the Corporation Article
  10. Composition of Capital
  11. A Corporation may have ownership capital and loan capital. The Corporation-ownership capital shall be formed out the investment of the stockholders, revenue from its bonds and the profit of the Corporation.
  12. The Corporation's ownership capital shall consist of:
(1)authorized capital;
(2)capital reserve fund;
(3)profit reserve fund; and
(4)profit.
  1. The net assets of the Corporation may not be less than the authorized capital. If the Corporation issues new stock and increases its authorized capital, the authorized capital, before all the stock is fully paid, shall be considered to be the sum of the original authorized capital and the payments for the stock. If the net assets become less than the authorized capital, the Board must rectify the situation by taking measures within its powers or call a special general meeting to consider the reduction of the authorized capital. Article
  2. Reserve Funds
  3. The mandatory reserve (mandatory profit reserve) fund shall be formed out of annual profit deductions according to the procedure established by Paragraph 4 of Article 47 and shall be used to cover losses.
  4. The capital reserve fund shall be formed out of non- profit funds derived from the difference between the price of the new issuance of stock and bonds and their par value.
  5. The profit, which has been re-invested in the Corporation or other enterprises and which has not been paid out in dividends or used in any other way, shall be accumulated in the profit reserve fund.
  6. If the capital reserve and the mandatory profit reserve funds account for less than 1/10 of the authorized capital, they can be used exclusively for covering the losses of the Corporation and only in case these losses cannot be covered out of the profit or the profit reserve fund. Article
  7. Stock
  8. A share of stock shall be a security certifying the participation of its holder in the capital of a Corporation and entitling him to property and personal non-proprietary rights. A closed Corporation may issue no stock to the stockholders, and instead of them it may issue stock certificates which are not considered to be securities. The stock certificate shall specify the number of stock owned by the certificate holders and other necessary requisites. If no shares of stock (stock certificates) are issued, the by-laws, the stock book (ledger), and the account documents of a private stock Corporation must specify the shares of stock of the authorized capital owned by each stockholder.
  9. The par value of a stock (stock certificate) must be 100 rubles or any other amount divisible by
  11. The stock (stock certificate) must specify:
(1)the word "Stock" or "Share of Stock (Stock Certificate) of a Private Stock Corporation";
(2)the name of the Corporation and its central office;
(3)par value of the stock;
(4)number;
(5)date of issuance;
(6)additional rights incident to preference stock or restrictions of the voting right if they are prescribed by the by-laws;
(7)the name of the holder of the stock; and
(8)signature of the chairman of the Board and the chairman of the Council of Observers or the facsimiles of their signatures.
  1. Stock may belong to different classes according to the rights of their holders. All the stock of the same class must be of the same par value and must give equal right to their holders.
  2. Stock may belong to the following classes:
(1)registered or bearer stock;
(2)ordinary or preference stock.
  1. A closed Corporation may issue only registered stock (stock certificates), the order of transfer thereof must be prescribed by the by-laws. They shall not be registered with any state body and no public subscription for them may be held.
  2. Stock (stock certificates) may be issued after the registration of the Corporation or of the increase of its authorized capital, also after the issuance of the stock has been fully paid for.
  3. The circulation of the stock of a Corporation in the process of being liquidated shall be allowed until the expiration of the term fixed for the settling of accounts with the stockholders. A Corporation shall be prohibited from issuing stock which can be exchanged for bonds, as well as other classes of stock not prescribed by this Law.
  4. The stock of a public Corporation must be registered with the appropriate state bodies. Article
  5. Provisional Certificate of a Stockholder
  6. After the registration of a Corporation or the increase of its authorized capital, persons who have subscribed for the stock and have paid the first installments, shall be issued provisional certificates of a stockholder. A provisional stockholder certificate is a terminal investment security with all the requisites of a registered stock. This certificate shall specify the sum of money paid for one or several stock subscribed for and the date of the expiration of its validity.
  7. The provisional stockholder's certificate shall be exchanged for a stock when the person who has subscribed for the stock has paid its full price by the stated date. The Board shall have the right to extend the validity of the provisional stockholder's certificate.
  8. The provisional stockholder's certificate shall give the holder the right to vote at a general meeting in conformity with Article 15 of this Law.
  9. The holder of a provisional stockholder's certificate shall have all the property rights incident to registered stock. Article
  10. Registered and Bearer Stock
  11. The owner of registered stock shall be a natural or legal person whose name shall be specified on the stock and in the stock ledger of the Corporation. The stock ledger of the Corporation must record pertinent information about the stockholder.
  12. The by-laws may provide that the owner of a registered stock may sell or transfer in some other way the stock to another person only with the permission of the Board.
  13. The permission or the prohibition to transfer stock must be communicated in writing to the stockholder within fifteen days after he has filed his application. The transfer of a registered stock to another person must be recorded on the stock and the stock ledger. While registering the new holder of a registered stock, the Corporation is not bound to check the legality of his acquisition of the stock.
  14. The holder of bearer stock shall be the person who possesses the stock. Bearer stock shall be transferred to other persons without registration. Their transfers shall not be regulated by the Corporation's by-laws. Article
  15. Ordinary and Preference Stock
  16. Ordinary stock belong to the basic class of the Corporation's stock. The par value of the preference stock may not exceed 1/3 of the authorized capital.
  17. The holders of preference stock shall have a preference over the holders of ordinary stock in the payment of dividends and in the distribution of corporate assets upon dissolution of the Corporation. The holders of common stock shall have the right to acquire new stock issued when the authorized capital is increased from the profit reserve fund. If the authorized capital is increased from the capital reserve fund, the holders of both preference and ordinary stock shall have equal rights to acquire the new stock.
  18. It shall be prohibited to establish in the by-laws of the Corporation or in the subscription agreement the amount of dividends to which the holders of ordinary stock are entitled.
  19. The Corporation may not issue preference stock if the additional rights or voting restrictions incident to them and the rules for changing the rights (annulling privileges) are not defined in its by-laws.
  20. If the profit is not enough to pay the dividends specified on the preference stock, all the preference stock with different dividend norms shall receive dividends of a proportionally smaller amount.
  21. Dividends on preference stock may be cumulative or non- cumulative, in which case the amount of dividends shall be established in advance.
  22. The holder of cumulative preference stock shall be guaranteed the right to the dividends of the amount specified on the stock. If the profit is insufficient to pay all the dividends, the unpaid sum must be transferred to the following business year.
  23. The unpaid dividend or part of unpaid dividend on non- cumulative preference stock may not be transferred to the following business year.
  24. Before converting cumulative preference stock to ordinary stock, the Corporation must settle accounts with the holders of preference stock or give a pledge to pay the debt in the following business year.
  25. The by-laws may provide that the holders of preference stock have no voting rights. If in two consecutive business years the Corporation fails to pay the full amount of dividends to the holders of cumulative preference stock not possessing voting rights, such stockholders shall acquire the voting right. The stockholders shall retain this right until the end of the business year in which the full amount of their dividends has been paid to them. Article
  26. Stock of the Employees
  27. The employee stock shall be stock sold or transferred in some other way to the employees of the Corporation under privilege. The stock of employees shall be registered.
  28. The sphere of circulation of employee stock may be restricted by the by-laws of the Corporation, but the restriction may not cover a period longer than three years after the day of the issuance of the stock. It must also be stipulated that the holder of an employee stock has no right to transfer in any way the stock to another person who has no right to acquire this kind of stock. With the expiration of the term of this restriction the stock shall lose the status of an employee stock.
  29. The issuance price of an employee stock may be below par value, if the difference is covered out of the Corporation's profit, reserve capital, or profit reserve funds, from deductions from the employee's salary which at his request are accumulated in a special fund. It is prohibited to compel an employee to buy the Corporation's stock and to deduct payments from his salary for stock for which he has not subscribed.
  30. The heirs of a deceased employee shall have the right to retain his employee stock or demand that the Corporation buy these stock at the current price or exchange them for non- employee stock. Article
  31. Bonds
  32. A bond of a stock Corporation is a terminal credit security giving its holder the right to receive annual interest as well as other rights specified on the bond. Bonds shall be repayable on maturity and bear a fixed nominal rate of interest. Yearly interest shall not be paid if the bond contains a corresponding stipulation and if its issuance price is below par value.
  33. Stock Corporations whose authorized capital is not fully paid shall be prohibited from issuing bonds, with the exception of cases when they are circulated exclusively among the employees and the stockholders of the Corporation.
  34. The decision to issue bonds may be adopted by a general meeting by majority vote, or by the Board if this is provided for in the by-laws.
  35. A public stock Corporation must buy out its bonds by the date specified in the by-laws. The holder of a bond shall have equal rights with the other creditors of the Corporation.
  36. Closed Corporations shall be prohibited from issuing bonds. Article
  37. Invalidity of Securities Issued by a Corporation
  38. Stock and provisional stockholder's certificates shall be invalid if:
(1)they do not have at least one of the prerequisites specified by Paragraph 3 of Article 32;
(2)they were issued without the registration of the Corporation or of the increase of its authorized capital;
(3)they are issued by stock Corporations and not registered with the appropriate state offices or their registration has been annulled; and
(4)stock (stock certificates) were issued without paying their issuance price.
  1. If a Corporation changes its name, reduces the par value of its stock or the rights of the holders of preference stock, it must within three months exchange the stock and the provisional stockholder's certificates held by the stockholders or write the appropriate stipulations on them. If the stockholders fail to present timely their stock (stock certificates) or provisional stockholder's certificates for exchange, said stock (stock certificates) and provisional stockholder's certificates shall become invalid.
  2. Invalidity of stock must be publicly announced by the Corporation.
  3. The invalidity of stock shall not reduce the authorized capital of the Corporation, unless a general meeting decides otherwise.
  4. If the securities of a Corporation are damaged and not suitable for circulation but are identifiable, at the holder's request the Corporation must replace the security. Expenses incurred thereby must be covered by the holders of the security.
  5. Lost or destroyed securities shall be replaced by the Corporation according to the procedure established by the laws of the Republic of Lithuania. Article
  6. Subscription for Stock
  7. Subscription for stock is an agreement between the Corporation and a natural or legal person by which one party binds itself to present a certain number of new stock and the other party binds itself to pay the full issuance price for the stock subscribed for.
  8. The subscription agreement of a public stock Corporation must state:
(1)the name of the Corporation;
(2)the date of the registration of the general meeting's resolution to increase the authorized capital, the date of the re-registration of the Corporation's by-laws and of the issuance of the stock with the appropriate state offices;
(3)the amount of authorized capital of the newly-founded Corporation or the increase of the authorized capital;
(4)the par value and the issuance price of the stock, the number of stock of each class issued and the rights they give;
(5)the term for the subscription for the stock;
(6)the rules for paying for the stock;
(7)the procedure for the distribution of stock in case of over-subscription;
(8)the first and last names of the subscriber and his address; and
(9)the number of stock subscribed for according to class. The Board shall be responsible for drawing up the draft subscription agreement, its announcement and the correctness of the information. If the subscriber has supplied false or incomplete information specified in Paragraphs 8 and 9 hereof, the stock Corporation may unilaterally terminate the subscription agreement and return the contributions. 3. At the request of the stockholder, the Corporation must return his contributions if:
(1)the authorized capital is increased in violation of this Law;
(2)the Board supplied false or incomplete information under sub-section 1 to 7 of Paragraph 2 of this Article in the subscription agreement.
  1. The subscriber may not relinquish his liabilities to the Corporation and the Corporation may not declare a person's subscription invalid upon the registration of the Corporation or of the increase of its authorized capital.
  2. The stockholder's priority right to acquire the Corporation's newly-issued stock shall give him a possibility of subscribing for stock the par value of which is proportionate to the total par value of the stock he holds. The period of time for exercising this right may be not less than thirty days. Article
  3. Payment for Stock
  4. Payment for stock is payment for their issuance in price money or in non-monetary (property) contributions by the stockholder. Only the assets which are objects of ownership right may be paid as nonmonetary (property) contributions.
  5. The stock issued by a newly-founded Corporation must be paid in full within the time specified by the by-laws or the subscription agreement but not later than in two years after the registration of the Corporation. The time in which new stock must be paid for may not be longer than one year after the registration of the increase of the authorized capital.
  6. If the stock are paid for in money, on subscription the stockholder must pay no less than 1/4 of the par value of the stock. The person who fails to pay the reqired sum upon subscription shall be considered as not to have concluded the subscription agreement. When the issuance price of the stock is paid for in non-monetary (property) contributions, payment in installments shall be prohibited.
  7. The non-monetary (property) contributions shall be assessed by the auditors of the Corporation or by another person appointed by the Board (the incorporators) or by the committee formed by them. On assessing the non-monetary (property) contributions, the expenses of their assessment and transfer may be taken into account. The stock shall be considered fully paid after the general meeting approves the assessment of the non- monetary (property) contributions.
  8. If the time for the payment for the stock is not fixed in the subscription agreement, the Board shall establish the time (stages) of installments (partial installments). The time for the payment of installments shall be communicated to the stockholders or announced publicly not less than three times; the first time no later then two months before the last day of payment, and the third time no later than ten days before the last day of payment.
  9. If a stockholder fails to timely pay the installments for the stock subscribed for, the Corporation shall have the right to:
(1)sell the stock subscribed for by the debtor by auction or to sell them at the current price after thirty days from the deadline for the payment for the stock. If the stock are sold for a smaller price than the debt of the subscriber to the Corporation, the Corporation shall have the right to demand that he pay the difference. If the stock are sold for a bigger price the difference must be returned o the subscriber;
(2)demand that the stockholder pay annual ten percent interest on the unpaid amount, unless the by-laws or the subscription agreement provide otherwise, and recover the unpaid amounts through court. Article
  1. Increase of the Authorized Capital
  2. A Corporation may increase its authorized capital on the resolution of a general meeting adopted by 2/3 vote, as well as by issuing new stock or by increasing the par value of the issued stock. The Corporation may issue new stock to be purchased for money only if its authorized capital (the issuance price of the stock of the last issue) is fully paid for.
  3. Applications for the registration of the increase of the authorized capital shall be filed with the local government upon the subscription for all the stock and the payment of initial installments.
  4. The amended by-laws and the increase of the authorized capital may be registered together.
  5. The authorized capital shall be considered increased only after its registration. When the Corporation is denied the registration of the increase of its authorized capital it may file another application for registration after it has removed all the obstacles for the registration of the increase of its authorized capital. Disputes over the registration of the increase of the authorized capital. Disputes over the registration of the increase of the authorized capital shall be resolved in court.
  6. If the increase of the authorized capital is not registered within six months after the registration of its by- laws, the increase of the authorized capital shall not be recognized. In this case all the contributions must be returned.
  7. The resolution of issue preference stock of a new class may be adopted if it is supported by a 2/3 vote of the attending holders of preference stock, including the holders of stock without voting stock. Article
  8. Increase of the Authorized capital by Additional Contributions of the Stockholders
  9. A Corporation may increase its authorized capital only by issuing new stock.
  10. An insolvent Corporation shall be prohibited from circulating its new stock publicly. It may offer these stock for sale only to its own stockholders.
  11. The by-laws of a Corporation may provide that the Board may also increase the authorized capital by issuing new stock for additional contributions. This right shall be given to the Board for a period of time no longer than four years, at the expiration of which it may be again conferred on the Board by the general meeting.
  12. The Corporation's authorized capital may be increased by issuing new stock which may be exchanged for convertible bonds. Article
  13. Increase of the Authorized capital out of Corporation Funds
  14. On the decision of the general meeting, the authorized capital may be increased out of the profit reserves or capital reserve funds by issuing new stock which shall be transferred to the stockholders without payment, or by increasing the par value of the stock issued earlier.
  15. The general meeting shall adopt the decision to increase the authorized capital based on the Corporation's balance sheet drawn up not earlier than ten days before the meeting.
  16. It shall be prohibited to increase the authorized capital out of the capital reserve and profit reserve funds before the Corporation covers the losses recorded in the balance sheet.
  17. The balance sheet must be attached to the application for the registration of the Corporation's authorized capital out of its funds.
  18. When the Corporation is increasing its authorized capital out of the capital reserve and profit reserve funds, a stockholder shall have the right to receive, withoutpayment, new stock the number of which must be proportionate to the total par value of stock in his possession, unless the by-laws or this Law provide otherwise.
  19. When the Corporation increases its authorized capital out of capital reserve and profit reserve funds, the contributions of the holders of stock not paid in full shall increase in proportion to the amount paid of the price of issuance of their stock.
  20. Upon the registration of the increase of the authorized capital, the Board shall inform the stockholders, in the order established by the by-laws, about the procedure of the acquisition of the new stock. If a stockholder does not communicate his wish to acquisition of the new stock. If a stockholder does not communicate his wish to acquire the new stock within a year of the announcement day, the Corporation may dispose of them at its own discretion.
  21. The new stock shall give their holders equal rights with the holders of other stock of the same class to reseive dividends for the business year in which the new stock were issued, unless the by-laws of the Corporation provide otherwise. Article
  22. Reduction of the Authorized Capital
  23. The authorized capital may be reduced by a resolution of the general meeting adopted by a 2/3 vote. When the Corporation has issued stock of different categories, the general meeting may reduce the authorized capital if this resolution is supported by a 2/3 vote of each category of stockholders (including the holders of stock without voting rights) present at the meeting.
  24. The authorized capital may be reduced in order to:
(1)to pay the Corporation's free resources to the stockholders; and
(2)to eliminate the difference between the Corporation's net assets and the amount of the authorized capital which has been caused by losses. 3. The authorized capital may be reduced only in the following ways:
(1)by decreasing the par value of the stock; or
(2)by canceling the stock. While reducing its authorized capital, the Corporation must first cancel its own stock.
  1. The decision to reduce the authorized capital must be announced publicly three times at intervals not shorter than days, or each stockholder and creditor must be personally notified thereof.
  2. While reducing its authorized capital the Corporation must give additional guarantees for its liabilities to each creditor who demands them.
  3. The application for the registration of the reduction of the authorized capital shall be filed with the local government no earlier than six months after the first public announcement and thirty days after the third public announcement or no earlier than three months after the notification of all the stockholders and creditors and after giving additional guarantees to the creditors at the request. This rule shall not apply if the authorized capital is reduced by canceling the Corporation's stock acquired by purchasing said out of net profit or the profit reserve fund, or by acquiring them without payment. If the local government has grounds for denying the registration of the reduction of the authorized capital, the Corporation, after taking into consideration the objections, may file another application. The authorized capital shall be considered to be reduced only after its registration.
  4. Time amended by-laws of the Corporation and the reduction of the authorized capital of the Corporation may be registered simultaneously.
  5. If the stockholders fail to timely present stock for redemption and cancellation to the Corporation's Board, the Board shall declare said stock invalid.
  6. Upon the reduction of its Corporation may return to stockholders their contributions fully or in part, or relieve the stockholders from paying the unpaid contributions (to increase the value of their paid-in contributions). After the reduction of the authorized capital, the stockholders must be paid only in money, unless the by-laws of the Corporation or the subscription provide for other procedures. Article
  7. The Right of a Corporation to Purchase its own Stock
  8. A stock Corporation shall be prohibited from purchasing its own stock, except when:
(1)it seeks to avoid excessive losses due to the decrease of the price of the stock:
(2)it plans to sell to the employees of the Corporation and their subsidiary Corporations no later than within the first six months after their acquisition; and
(3)the Corporation's authorized capital has been reduced in accordance with the procedure established by this Law.
  1. The Corporations shall buy its own stock on a decision of the general meeting. The par value of the stock of a stock Corporation purchased for purposes outlined in sub-section 1 and 2 of Paragraph 1 hereof, and the par value of the other stock possessed by the Corporation may not exceed 1/10 of the authorized capital.
  2. In all cases, except when the authorized capital is reduced, a Corporation shall be prohibited from purchasing its own stock out of the authorized capital or the mandatory reserve fund.
  3. The stock purchased by the Corporation in violation of the rules outlined in Paragraph 1 and 3 hereof must be sold within twelve days of their acquisition. If these stock are not sold by the fixed time, on the decision of the state office which has registered these stock, the stock shall be canceled and authorized capital of the Corporation reduced.
  4. The Corporation which is purchasing its own stock shall not be entitled to the non-property rights incident to these stock. CHAPTER 6 Finances and distribution of profit Article
  5. Financial Resources of a Corporation
  6. The financial resources of a Corporations shall be formed from internal and external sources. Internal sources may include depreciation charges and profit, external sources include contributions for stock, revenue from bonds, loans and other similar sources.
  7. The Corporation's Board shall define the method for calculating the depreciation charges and the norms for the recovery of the physical an moral depreciation of its fixed assets as well as for financing major repairs. These norms may not be less than the depreciation charges established by the state. The part of the fixed assets which has been written of prematurely (before it has been fully depreciated) shall be attributable to the losses of the Corporation.
  8. On the decision of the general meeting or the Board, adopted at the instruction of the general meeting, the whole amount or a portion of the revenue received from the difference between the issuance price of the Corporation's stock and bonds and their par value may be attributed to profit. If such a decision has not been taken by the general meeting or the Board said revenue shall be attributed to the capital reserve fund and will be exempt from taxation.
  9. Before a Corporation pays the required taxes into the budget, it shall have no right to use its profit for other purposes. Article
  10. Distribution of Profit
  11. The profit of a Corporation must be distributed no later than within the first three months after the end of the business year and the only after the approval of the annual balance. The resolution on the distribution of profit must state:
(1)the net profit;
(2)mandatory payments out of profit;
(3)dividends;
(4)deductions to the reserve funds;
(5)annual payments to the members of the Board and the Council of Observers;
(6)the use of profit for the payment of bonuses for the employees and the other purposes; and
(7)net surplus.
  1. In distributing the profit the general meeting shall have the right to include therein a portion of the profit or capital reserve funds.
  2. Bonuses to employees and advance payments to the member of the Board and the Council of Observers may be paid every quarter if the current results of the Corporation's commercial and business activity promise a sufficient amount of profit.
  3. If the amounts of the mandatory reserve fund and the capital reserve fund are less than 1/10 of the authorized capital, deductions to the mandatory reserve fund shall be obligated and may not be less than 1/20 of net profit. Article
  4. Dividends
  5. A dividend is the part of the profit a stockholder receives, which is proportionate to the par value of his stock. The by-laws of a Corporation may provide that the dividends be established by agreement. If a stock is not fully paid, the stockholder's dividend shall be reduced in proportion to the unpaid amount of the price of the stock. The by-laws may provide that the dividend on fully paid stock must be reduced if the last installment of their price was paid in the business year for which the dividend is paid.
  6. Dividends announced by the general meeting shall become the Corporation;s liabilities to its stockholders. The stockholders shall have the tight, as a creditor of the Corporation, to demand the payment of his dividend. The Corporation shall have the right to recover the dividend paid out to a stockholder if the stockholder knew or should have known that the dividend announced was unlawful.
  7. The general meeting shall be prohibited from announcing or paying dividends if the Corporation is insolvent or if after the payment of dividends it would become insolvent. If the balance of the Corporation shows losses, the general meeting shall have no right either to announce or pay dividends before the losses are recovered or before the authorized capital is reduced because of the losses.
  8. At the end of the business year the Board shall have no right to pay out portion of the dividend before the approval of the annual balance if this is prescribed in the by-laws. Advance payments may not exceed 1/2 of the dividends paid for the previous year and 1/2 of the dividends which the Corporation intends to pay.
  9. Dividends may be paid in money. If the stockholder does not object dividends may be paid in material assets, the Corporation's stock, or other securities. Vytautas Landsbergis President Supreme Council Republic of Lithuania 30 July 1990 No. I-425

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