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THE REPUBLIC OF LITHUANIA

THE REPUBLIC OF LITHUANIA THE REPUBLIC OF LITHUANIA LAW ON PARTNERSHIPS Chapter 1 General Provisions Article

  1. Objectives of the Law This law shall regulate the establishment, reorganization and liquidation of general partnerships (GP) and limited partnerships (LP), their operation and activity, rights and duties of the partners, and the formation and distribution of capital. When the text of this law applies both to a general partnership and a limited partnership, the word "partnership" shall be used. Article
  2. Partnership
  3. A partnership is an enterprise established on the basis of a partnership agreement by several natural or legal persons, and also by natural and legal persons by combining their property under a plan of co-ownership with the aim of conducting joint economic-commercial and other activity not prohibited by law under a common enterprise name.
  4. A partnership must have at least 2 and no more than 20 members. Bodies of state power and government, and state enterprises and state stock enterprises may not be members of a partnership with the exception of cases when the enterprises are members of syndicates established as general partnerships. (Amended 21 September 1993)
  5. A partnership shall not be a legal person. Article
  6. A General Partnership
  7. A GP is an enterprise with unlimited liability, whose partnership property cannot be separated from the property of the individual partners.
  8. All partners of a GP are jointly liable for the obligations of the GP by way of all their individual property.The GP is not liable for the obligations of its partners when such obligations are incurred through activity not related to the activity of the GP. Article 4.Limited Partnership
  9. A LP is an association of general and limited partners functioning under a common name of the firm.A limited partnership must have as members at least one general and at least one limited partner.
  10. The property of the LP can be separated from the property of the individual limited partners, but cannot be separated from the property of the individual general partners.
  11. The general members of the LP are jointly liable by way of all their property for the obligations of the LP, whereas limited partners are liable only for contributions actually made, and for any unpaid contributions which have as yet to be made to the LP, as per the partnership agreement.The agreement to carry on a business or occupation jointly may also prescribe other liabilities of the limited partners.The LP is not liable for the obligations of its partners when such obligations are incurred by activity not related to the activity of the LP. Article 5.The Name of the Partnership
  12. The partnership has its own name (name of the firm).The name of the GP must contain the name of at least one of its partners.The name of the LP must contain the name of at least one of its general partners and the term "Limited" or its abbreviation "Ltd".The name of the partnership may contain full names or only surnames of the partners.
  13. The partnership shall not have a name (name of the firm), similar to or identical with any enterprises registered in the Republic of Lithuania, because this could interfere with the normal economic activities of these enterprises.Disputes over the name of a partnership shall be resolved in court. Article 6.The Partnership's Rights and Obligations
  14. The partnership shall have the right to:

(1)carry on, in its name, economic-commercial activity, as provided in the partnership agreement, within the limits of the territory of the Republic of Lithuania and beyond the boundaries of the Republic;
(2)have accounts with banking institutions that are registered in the Republic of Lithuania and in other countries, and also its own seal;
(3)have its subdivisions, subsidiaries and representative offices in the Republic of Lithuania and beyond its boundaries;
(4)buy or acquire property, which may be sold, rented, mortgaged and disposed of in any way;
(5)in the cases provided for in the partnership agreement, conclude contracts, assume obligations, lend (only sums of ownership capital) and borrow money on interest established by agreement; (Amended 9 November 1993)
(6)charge prices, rates and tariffs for its products, services or other goods, except in cases where prices and other normative rates are controlled by the State; and
(7)liquidate or reorganize the partnership in accordance with the procedure established by the partnership agreement.
  1. The partnership may also have other property and personal non-property rights and obligations not stipulated in this Law, provided they do not contradict the laws of the Republic of Lithuania and the partnership agreement.
  2. The partnership shall not be permitted to issue securities.
  3. In its economic-commercial activity the partnership must observe the laws of the Republic of Lithuania and the partnership agreement.
  4. All liabilities of the partnership shall be satisfied first out of partnership property.In the event the partnership property proves insufficient for the payment of said liabilities, property of the individual general partners may be applied to satisfy the unsatisfied amount in accordance with the norms regulating joint liabilities prescribed by the Civil Code of the Republic of Lithuania. With respect to the limited partners, only amounts up to the amount of their unpaid contributions due to be made in accordance with the agreement may be applied, in proportion to said contributions for the payment of partnership liabilities.
  5. Actions against the partnership or its members must be brought within the time period prescribed by the Civil Code of the Republic of Lithuania.When the partnership is terminated, and also when a partner retires (or is expelled) from the partnership, an action against the partnership or its members must be brought within 3 years following the date of the termination of the partnership, or the amendment of the partnership agreement, or the renewal of registration of the partnership by the local government. Chapter 2 Formation of the Partnership Article 7.Partnership Agreement
  6. The basis for the formation and activity of the partnership shall be the partnership agreement, which may be concluded by natural persons with legal capacity as well as by legal persons. The partnership agreement shall state:
(1)the name of the partnership (the name of the firm);
(2)the character of the business;
(3)the name and place of residence of the legal persons that are general or limited partners of the partnership;
(4)the name and address of the enterprises that are general or limited partners of the partnership;
(5)rights and duties of the general and limited partners;
(6)the interests of the general and limited partners in the partnershipproperty, as expressed in fractions or percentages, as well as theamount of cash, property, or services originally contributed by each partner, the assessed value of the contributed property, and the procedure by which contributions shall be made to the partnership;
(7)rules regulating the evaluation of the activity of the general partners and their remuneration;
(8)order of withdrawing partnership money for personal needs;
(9)rules regulating the distribution of profits and losses;
(10)conditions under which the general and limited partners return or are removed from, and new partners are admitted to, the partnership, as well as the terms by which the rules shall be amended;
(11)rules for the operation of the partnership, as well as the terms by which the rules shall be amended;
(12)full name, place of residence and powers of those persons authorized to represent the partnership and to manage its affairs;
(13)procedure for adopting decisions (voting);
(14)issues on which decisions shall be adopted only be a unanimous vote ofall the partners; and
(15)procedure for partnership reorganization and liquidation.
  1. Other provisions may also be included in the partnership agreement, provided they do not contradict this Law and other laws of the Republic of Lithuania.
  2. The partnership agreement shall be signed by each member of the partnership.The agreement shall be certified by a notary.The notary shall certify as many copies of the agreement as there are members of the partnership, as well as whatever number of copies is required for registering the partnership.
  3. The partnership shall be considered founded as of the date of its registration.
  4. When a new member is admitted as a general partner of the partnership in the place of a general partner who is expelled or has retired, a new partnership agreement shall be prepared and certified by a notary.When a new limited partner is admitted in the place of a limited partner who is removed or has retired, the partnership agreement shall be amended.The amendments to the agreement shall be certified by a notary and shall enter into force as of the date of their registration.
  5. The partnership agreement may be declared invalid only in a judicial proceeding, and provided there are grounds for invalidating the transactions of the partnership, as proscribed by the Civil Code of the Republic of Lithuania.
  6. When the partnership agreement is declared invalid, transactions with a third party shall be held valid, to the extent that such transactions are not invalid under the Civil Code of the Republic of Lithuania. Article 8.Registration of the Partnership
  7. The procedure for registering a partnership shall be regulated by this Law, the Law on Enterprises, and the Law on the Register of Enterprises of the Republic of Lithuania.
  8. The partnership may begin its commercial-economic activity only after it has been registered. Chapter 3 Assets of Partnership Article 9.Composition of the Assets of the Partnership
  9. The assets of the partnership shall consist of proprietary capital and loan capital.
  10. No minimum amount of proprietary capital shall be required.
  11. An accounting of the partnership property must be made on a balance sheet. Article
  12. Partners' Contributions
  13. Partners may contribute cash, property, products of intellectual activity, and any other property in which the partners have property rights.Contributions cannot be made in securities, or in other property, if the disposition rights thereof are restricted under the laws of the Republic of Lithuania.
  14. Non-monetary contributions shall be assessed, based on the consent of all the members of the partnership.
  15. In accordance with a decision adopted unanimously by the general partners, the date on which the contributions of the limited partners should be made, may be postponed.
  16. In accordance with a decision adopted unanimously by the general and limited partners, a partner may convey his contribution to another partner or to a third person, in the event of the latter's admission to the partnership.
  17. When a partner fails to make his entire contribution by the time fixed in the partnership agreement, he may be subject to liability for interest on the unpaid contribution at the rate specified by the partnership agreement, or the partner may be expelled from the partnership if the partnership agreement contains a provision therefor.
  18. The contribution of the general partner may not be directly applied to pay personal liabilities, as demanded by individual creditors.If the property of the general partner proves insufficient for the payment of his individual debts, his creditors shall have the right to petition a court to terminate the partnership and to separate the personal property of said partner from the property of the partnership.In a given case, other partners, in order to preserve the partnership, may transfer to the partner-debtor his interest in the partnership property, as assessed on the balance sheet drawn up on the day the partner-debtor leaves the partnership. Article
  19. Distribution of Partnership Income
  20. At the close of the business year, a balance sheet of the partnership shall be drawn up, and the income of the partnership shall be divided among the partners in proportion to their interests.In establishing the share of income due to a general partner, the fact of his not having made his full contribution shall not be taken into account.The share of income due to a limited partner shall be established in proportion to the contribution actually made by the limited partner.The share of income derived from original contributions may remain in the partnership, but in proportion to the actual contributions.The partnership agreement may also prescribe other rules for the distribution of income.The order of the distribution of partnership income shall be established by a unanimous decision of the general partners.
  21. The business year of a partnership shall be the calendar year.
  22. A general or a limited partner shall have the right to have access to his share of partnership income 2 months after the book distribution of the income. Chapter 4 Rights and Duties of Partners Article
  23. Rights and Duties of Partners
  24. The general and limited partners shall have property and personal non- property rights, as determined by the partnership agreement, this Law, and other laws of the Republic of Lithuania.
  25. Each general partner shall have the right to represent the partnership, unless the partnership agreement prescribes otherwise.Limited partners shall not have the right to represent the partnership.If a limited partner, in contravention of this provision, concludes a contract, he shall be jointly liable with the general partner, provided this is prescribed in the partnership agreement.A contract concluded in the name of the partnership by any partners shall confer on the partnership rights and obligations only to the extent that the conclusion of such contracts is prescribed in the partnership agreement, or when liability for said contract is assumed by all the general members of the partnership by a unanimously adopted decision.In cases provided under the partnership agreement, the partnership may be represented by a third-party under contract, who is not an actual partner.His powers shall be established pursuant to an authorization certified by a notary.
  26. The general partner may manage and dispose of his property until other partners or creditors, in order to secure impending property liabilities, contest this in the manner established by law.
  27. Any partners shall have the right to demand the partnership agreement be amended or supplemented.
  28. General and limited partners shall have the right to gain access to the balance sheet of the partnership, and to the profit and loss statements, and to verify whether they actually reflect the original documents.When upon inspection the data in the balance sheet are found not to reflect the actual state of profits and losses, they shall have the right to demand that an auditing commission be formed to review the balance sheet and other statements regarding profits and losses.
  29. Each partner shall have the right to solve jointly with the other partners all issues related to the management of the partnership property, the use and disposal thereof, as well as other issues of partnership activity.Upon adopting a decision, each general partner shall be entitled to one vote irrespective of his interest in the joint partnership property.Decisions shall be adopted by a majority vote, unless another rule is prescribed in this Law or in the partnership agreement.In cases prescribed by this Law or the partnership agreement the limited partners shall also be entitled to vote in the adoptionof DECISIONS partners shall not be entitled to vote, if the decision on his expulsion or retirement from the partnership is put to the vote.
  30. A general partner shall have the right to an action in court regarding the liquidation of the partnership, if other partners either ignore their duties prescribed by the partnership agreement, or are not capable of performing them.A limited partner may on the same grounds institute an action in court requesting to be discharged from the partnership.Such actions may be instituted and a court order in favor of the claimant maybe issued only at the close of the business year.On the issuance of the order in favor of the claimant, the losses incurred by him shall be compensated by the partners who ignored or were not capable of performing their duties.
  31. The general partners shall have no right to conclude contracts with the partnership, if they are members thereof.The limited partners may conclude such contracts, however, liabilities incurred by such contracts shall be satisfied only after liabilities to all other creditors of the partnership have been satisfied. Article
  32. Prohibition to Conduct a Similar Business in another Enterprise
  33. Without the consent of all the general partners, a general partner shall have no right to own an enterprise conducting a similar business, or to be a general partner of another partnership conducting a similar business.
  34. If, upon joining the partnership as a general partner, the person conceals the fact, that he owns an enterprise conducting a similar business, or that he is a general partner of another partnership conducting a similar business, or if, being a general partner of the partnership, he acquires, without the consent thereof, an enterprise conducting a similar business, or joins another partnership conducting a similar business, the partnership shall have the right to demand, within 3 months from the receipt of notice of such violation, that the losses incurred thereby be compensated, or that the contracts made by the partner be recognized as concluded in the name of the partnership, and the income received thereby be transferred to the account thereof. Article
  35. Termination of Membership
  36. Termination of membership shall be caused:
(1)by the death of a partner;
(2)By the declaration that a partner is legally incompetent;
(3)By the retirement of a partner from the partnership; and
(4)By the removal of a partner from the partnership.
  1. The general or the limited partner may retire from the partnership, if he has become bankrupt and cannot, for this reason, take part in the partnership if all the general partners consent thereto.The partnership agreement may also prescribe other conditions for withdrawal from the partnership.
  2. Within 3 months from the receipt of notice of the withdrawal from the partnership (the return of the interest) from the partner who has become bankrupt, or from the trustee of the partner declared legally incompetent or from the heir of a deceased limited partner, the partnership shall pay out of the partnership property the value of such partner's interest as of the date of the filing of the notice of withdrawal.
  3. The withdrawing partner, or the trustee of the partner declared legally incapable, or the heir of the deceased partner must inform other partners, or, in cases specified in the partnership agreement, the partnership representative, of his intent in respect of the application of the interest.The partnership must inform the withdrawing partner (the trustee of the heir) of the losses he is liable for in the event of his immediate withdrawal, and of the term at the expiration of which, such losses may be avoided.If the withdrawing partner (the trustee, or the heir) consents to withdraw his interest by the term fixed by the partnership, he shall receive the share of income due to him for the period.If the retiring partner (the trustee, or the heir) refuses to give his consent to said proposal, the losses incurred on the partnership thereby shall be recovered out of his interest.
  4. For the transactions begun prior to the withdrawal (legal incapacity or death) of the partner, but not then finished, the liabilities of the partnership to the withdrawing partner (the trustee, or the heir) shall be satisfied only after full completion of said transaction.Claims against the withdrawing partner (the trustee, or the heir) in respect of the obligations of the partnership incurred, while he was a partner, may be made within 3 years from his withdrawal or removal from the partnership.
  5. The withdrawing partner (the trustee or the heir) shall be paid the value of his interest in the partnership not later than 4 months from the receipt of notice of withdrawal (for the return of the interest), unless another term has been agreed upon.
  6. Property to the withdrawing partner (the trustee or the heir) shall be returned:
(1)By paying his interest in cash; or
(2)By returning his interest in kind, if the property can be separated.
  1. A general partner, who has become bankrupt, may be removed from the partnership.
  2. A general partner, who has become bankrupt, may be removed from the partnership. 10.The property of the removed partner shall be returned to him in the same order and at the same time as to a withdrawing partner. Article
  3. Rights of Heirs of the Deceased Partner
  4. The heirs of the deceased partner shall be entitled to inherit in the partnership.The inherited property shall be returned to the heirs in the same order and at the same time as a withdrawing partner.
  5. On the death of a general or limited partner one of his heirs may become a partner in the partnership, provided this is prescribed by the partnership agreement.Upon joining the partnership, the heir shall take over all the rights and obligations of the deceased partner.In this case, the partnership agreement shall be amended.If the heir of the deceased general partner becomes a limited partner, or if the heir of the limited partner becomes a general partner, a new partnership agreement shall be made and the partnership shall be reregistered.
  6. If the heir of the deceased general partner submits his written refusal to join the partnership as a general partner, the partnership shall be terminated, and the heir shall be returned the inherited property less the partnership liquidation losses. Chapter 5 Partnership Accounting and Control of Partnership Affairs Article
  7. Partnership Accounting
  8. The partnership shall establish its own order of partnership accounting that must be in conformity with the legal norms regulating the issue.The partnership shall be have the right to keep the information as to its commercial activities secret.
  9. It shall be prohibited to demand from the partnership other accounting, than that prescribed by the laws of the Republic of Lithuania. Article
  10. Control of Partnership Affairs Auditing of partnership affairs may be done only by the partners or, in cases specified by the laws of the Republic of Lithuania, by financial, legal, and investigative agencies.If by their actions the officers of said agencies violate the rights of the partnership, or impede its normal functioning and inflict damage thereby, the partnership shall have the right to bring an action in court to recover the damage. Chapter 6 Dissolution of Partnership Article
  11. Dissolution of Partnership
  12. The dissolution of the partnership shall be caused:
(1)By the termination of the definite term specified in the partnership agreement;
(2)By the unanimous decision of all the general partners of the partnership;
(3)By the bankruptcy of the partnership;
(4)By the decision of State bodies to annul the registration of the partnership for the offenses specified by law;
(5)By the issuance of a court order in favor of the local government concerning the dissolution of the partnership, if the latter, disregarding given notice, persists in willfully violating the laws of the Republic of Lithuania;
(6)By the issuance of a court order in favor of the general partner with respect to his demand made on the grounds provided in paragraph 7 of Article 12 of this Law;
(7)By the death of a general partner, unless the partnership agreement provides otherwise.On the death of a limited partner the partnership shall not be dissolved; and
(8)By other circumstances prescribed in the partnership agreement.
  1. The dissolution of the partnership must be registered. Article
  2. Liquidation of Partnership
  3. The procedure for the liquidation of the partnership shall be regulated by this Law, other laws of the Republic of Lithuania, and by the partnership agreement.
  4. If the partnership is liquidated on the termination of the definite term specified in the partnership agreement, or by the decision of the partners to dissolve the partnership, the partners shall have the right to choose the liquidators from the general partners.In other cases of liquidation the liquidators shall be appointed by court or by the meeting of creditors. (Amended 28 September 1993)
  5. On the appointment of the liquidators, the partnership shall acquire the status of an enterprise that is being liquidated.The representatives of the partnership shall be deprived of their powers, and their functions shall be assumed by the liquidators. Article
  6. Rights and Duties of Liquidators
  7. At the beginning and by the close of the period of liquidation, the liquidators must draw up the balance sheets of the partnership.
  8. The liquidators shall wind up the affairs of the partnership, ascertain the creditors and debtors of the partnership, and, as necessary, sell by auction the partnership property that remains after all the liabilities have been satisfied, and discharge the liabilities to creditors. Article
  9. Distribution of Property of Enterprise That is Being Liquidated
  10. Upon the payment of the liabilities of the partnership to its creditors, the liquidator shall distribute the remaining property among the partners.In the order of priority, accounts shall first be settled with the limited partners.Those limited partners, who have actually made the agreed contributions, shall have said contributions returned to them.The remaining property shall be distributed by the liquidators among the general partners, and among those limited partners, who have not paid the entire amount of the agreed contributions, in proportion to their respective interests in the partnership.The general partners shall be liable for the compensation of the losses sustained by the partnership in proportion to their interests in the partnership, and the limited partners shall be liable therefor in proportion to the amount of the unpaid contributions.
  11. If disputable liabilities are revealed in the process of liquidations, a corresponding sum shall be withdrawn from the partnership property for the payment thereof; said sum shall be included on the deposit account of the notarial office.
  12. In the event of a dispute between the partners concerning the distribution of the property, that has remained after the payment of the liabilities of the partnership to its creditor, the liquidators shall suspend the distribution of property.Disputes between the partners of the liquidating partnership, as well as disputes between the partners and liquidator shall be resolved in court.
  13. Upon satisfying property liabilities owing to creditors, the former partners may, under the supervision of the liquidators, agree upon a different procedure of the distribution of property that remains thereafter.
  14. The general partners shall, jointly with the liquidators, draw up and register the act on the liquidation of the partnership.
  15. Upon the liquidation of a bankrupt partnership its property shall be distributed according to the procedure established by the Republic of Lithuania Law on Enterprise Bankruptcy. (Amended 28 September 1993)
  16. The documents of the liquidated partnership shall be deposited with the local government for the period of 10 years.The former partners and their heirs shall have the right to be granted access to the deposited documents and to receive copies thereof. Vytautas Landsbergis President Supreme Council Republic of Lithuania Vilnius 16 October 1990 No. I-676

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