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Official translation Official translation REPUBLIC OF LITHUANIA COOPERATIVE LAW 1 June 1993 No. I-164 Vilnius CHAPTER

  1. GENERAL REGULATIONS The State of Lithuania supports the cooperative movement, promotes cooperative activities, legitimises the independence of cooperative societies (cooperatives). Article
  2. Objectives of the Law This Law shall regulate cooperative movement, the establishment of cooperative societies (cooperatives) and their unions (associations), the basic principles of their activities, their reorganisation, management, formation of capital, distribution of profit, and liquidation. Article
  3. Cooperation and Cooperative Societies Cooperation is the joining of efforts and resources on the basis of law for the implementation of common aims of its members. For this purpose, cooperative societies (cooperatives) may be established. A cooperative society is an economic entity with changeable composition and capital established on a voluntary basis by a group of natural persons or natural and legal persons for the purpose of satisfying business, economic and social needs of its members and functioning on their initiative and at their risk. Article
  4. The Status of a Cooperative Society A cooperative society is a legal person and may engage in activities which are not prohibited by the laws of the Republic of Lithuania. A cooperative society shall be an economic entity of limited liability liable for its obligations to the extent of its property and not liable for the obligations of its members which are not related to the activities of the cooperative society. A cooperative society has its own name which must not be similar or identical with any enterprises registered in the Republic of Lithuania. The name of the cooperative society must contain the words "kooperatine bendrove" (cooperative society) or "kooperatyvas" (cooperative) as well as the words specifying the character of the society activities. Disputes concerning the name of the society shall be settled in court. A cooperative society must have no less than 5 natural or natural and legal persons. The number of legal persons in a cooperative society may not exceed 1/2 of all the society members. CHAPTER
  5. ESTABLISHMENT OF COOPERATIVE SOCIETIES AND THEIR RIGHTS Article
  6. Founders No less than 5 persons who are citizens of the Republic of Lithuania and are 18 years of age and over, or citizens and legal persons registered in Lithuania may be founders of a cooperative society. Article
  7. Society Bylaws The legal basis of a cooperative society shall be this Law and the society bylaws drafted by the founders and adopted at the organisation meeting. In accordance with this Law, cooperative societies may be organised for profit-making purposes or as non- profit societies. The society bylaws shall be signed by all the founders of the cooperative society. The bylaws shall be authenticated by a notary. The bylaws of the cooperative society must state: 1) the name of the cooperative society (name of the firm), the address of its principal office; 2) the purpose of the cooperative society and the character of its business, economic or social activities; 3) duration period of activities in the event that society activities of a limited duration are planned; 4) the amount of the membership fee and share investment, the procedure of payment and disposal thereof, and the procedure for assessing the non-monetary (property) share investments; 5) composition, ownership and formation of capital (the amount of the authorised capital shall not be specified); 6) first names and surnames as well as addresses of the cooperative society founders and, in the case of legal persons, their names and addresses; 7) conditions of membership, rights and duties of the society members and their liability for the obligations of the cooperative society; 8) bodies of management and control, the procedure of their election, and their rights and duties; 9) procedure for joining a cooperative society, and of withdrawal or expulsion therefrom; 10) procedure for calling meetings of members or their proxies and the voting procedure; 11) procedure for forming, auditing and adopting the system of accounting; 12) procedure for distributing profit and losses; and 13) procedure for liquidating a cooperative society. The bylaws may contain other articles which legitimise the character of activities of the cooperative society and establish property and other relations of the members as well as the relations of the cooperative society with third persons, provided that said articles are in conformity with the laws of the Republic of Lithuania. Amendments and supplements to the society bylaws shall enter into force from the day of their re-registration. Article
  8. Registration A cooperative society shall be registered with the higher level local government in accordance with the procedure established by the Republic of Lithuania Law on the Register of Enterprises. The amount of the authorised capital shall not be registered in the Register of Enterprises. The following documents shall be filed for registration: 1) application for registration; 2) a copy of the record of the organisation meeting and the act on the founding of the cooperative society (required for newly established cooperative societies); 3) the society bylaws; 4) a document certifying to the payment of registration fee; and 5) a licence to engage in commercial-economic activities, ecological certificate-licence, if prescribed by the laws of the Republic of Lithuania. The cooperative society shall acquire the rights of a legal person from the day of its registration. Local government must register the cooperative society within a month from the filing of the documents. In the event that registration is refused, grounds therefor must be specified. Refusal to register a cooperative society may be appealed in court in the manner established by the laws of the Republic of Lithuania. Article
  9. Rights of a Cooperative Society A cooperative society shall have the right to: 1) engage in activities provided for in its bylaws; 2) keep accounts in the banks of the Republic of Lithuania and foreign banks; 3) manage the property belonging to it, utilise and dispose of it in pursuance of the laws of the Republic of Lithuania; 4) form unions (associations) of cooperative societies; 5) conclude contracts and assume property liabilities; 6) fix charges, rates and tariffs for its products, work and services, with the exception of those charges, rates and tariffs which are regulated by the State; and 7) determine its organisational structure, establish branches and other structural subdivisions, as well as enterprises operating in pursuance of the laws of the Republic of Lithuania. A cooperative society may have other rights which do not contradict the laws of the Republic of Lithuania. Disputes between a cooperative society and its members or third persons shall be considered in accordance with the procedure established by laws of the Republic of Lithuania. CHAPTER
  10. MEMBERS OF A COOPERATIVE SOCIETY Article
  11. Members Permanent residents of the Republic of Lithuania who are 16 years of age and over as well as legal persons registered in the Republic of Lithuania may be members of a cooperative society. Members of cooperative societies the objective whereof is catering for the needs of young people (in the sphere of sports, organisation of leisure, technical-intellectual creative activities, catering for school children) may also be persons who are younger than 16 years of age provided that their parents (legal guardians) have granted permission thereto. The rights and duties of such members shall be specified in the bylaws of the cooperative society. A person joining a cooperative society shall lodge an application with the society Board ( manager). The members of a cooperative society shall be registered in the register of members wherein the name and surname of a member and his residence address, or, in the case of legal persons, their name and address, and the date of joining the society or withdrawing therefrom, the amount of the share investment and of the property newly created by utilising the share investment as well as changes therein shall be recorded. A legal person shall be represented in a cooperative society by a person authorised by him (authorised representative). Article
  12. Termination of Membership Membership in the cooperative society shall be terminated: 1) on the member's withdrawal; 2) on the member's death; 3) on the member being recognised legally incapable; 4) on the member's expulsion; 5) on the abolition of the legal person -- member of the cooperative society or on the reorganisation of its activities whereafter they longer correspond to the purposes of the cooperative society; and 6) on the liquidation of the cooperative society. Article
  13. Withdrawal and Expulsion from the Cooperative Society Every member of a cooperative society shall have the right to withdraw from the cooperative society upon notifying thereof in writing. The conditions and procedure of withdrawing shall be established in the bylaws. The settlement of accounts of the cooperative society with the former members may be postponed until the approval of the accounts of the upcoming business year. In such case the former member shall remain bound by property relations to the cooperative society till the end of the upcoming business year. A member may be expelled from the cooperative society if he fails to fulfil the duties of a member or violates the bylaws or the laws of the Republic of Lithuania and thereby inflicts losses on the cooperative society. The resolution concerning the expulsion of a member from a cooperative society shall be adopted by the meeting of members (authorised representatives) in accordance with the procedure established by law. In the event that the expelled member disagrees with the resolution, he shall have the right to appeal to court within three months from the adoption thereof. The cooperative society shall return to the members who withdrew or were expelled from the cooperative society their respective share investments and the amount of property newly created by utilising said share investments (provided that the newly created property is allocated to the members) and shall also pay out to them the share of the distributed profit due to them for the business year. Membership fee shall not be returned. To the heirs of a deceased member or to the guardians of a member declared legally incapable, provided that said persons are not members of the cooperative society and do not join the society in accordance with the procedure established in the bylaws, the share investment and the amount of the newly created property as well as the share of the profit distributed for the business year shall be returned in the same manner as to the members who withdrew or were expelled from the cooperative society. Article
  14. Rights and Duties of a Cooperative Society Member A member of the cooperative society shall have the right to: 1) elect and be elected to the bodies of management and control; 2) have one vote during the voting regardless of the amount of the contributed share investment; 3) work in the cooperative society under employment contract; 4) receive a portion of the profit distributed to the members proportionate to the volume of turnover (transactions) with the cooperative society, to use the society property and to have priority in making use of the services rendered by the cooperative society on easy terms in the manner established in the society bylaws; 5) receive a portion of profit (dividend) proportionate to his share investment and to the amount of the newly created property; 6) receive a portion of property of the liquidated society in accordance with the procedure established in the bylaws; 7) obtain information on the activities of the cooperative society, its economic condition and property; 8) be a member of several cooperative societies; and 9) withdraw from the cooperative society. Other rights of a member shall be established in the bylaws of a cooperative society. A member of a cooperative society must adhere to the bylaws, fulfill the obligations of the cooperative society and the resolutions of the management and control bodies, take part in the activities of the cooperative society. A member of a cooperative society shall be liable for the society's obligations assumed prior to his joining the society, wherewith the new member shall have the right to familiarise himself upon joining the cooperative society. A member of a cooperative society shall be liable only to the extent of the amount of his share investment (property owned by him in the cooperative society). The bylaws may also prescribe a greater amount of liability but not greater than two times the amount of the share investment, and in the case of insurance and credit cooperative societies -- up to five times of the amount of the share investment (property owned). Article
  15. Capital The capital of a cooperative society shall consist of internal and borrowed funds. Internal funds shall be formed from membership fees, share investments, profit received from business activities and other resources of income not prohibited by law. The capital of a cooperative society cannot be formed by issuing shares of said society. The capital of a cooperative society, with the exception of share investments, may be indivisible or assigned ( the whole or part of it) to the members of a society. Internal funds shall comprise fixed and reserve capital. Fixed capital shall be used for business activities of a society or for the acquisition of assets. On the decision of the meeting of the members (authorised representatives), the reserve capital shall be used for anticipated future expenditure and for covering other losses as well as for the training of members and personnel of a cooperative society. The minimum amount of internal funds shall not be established by laws, but it must be sufficient for the development of activities provided for in the bylaws. Deductions to the capital reserve fund shall be mandatory for cooperative societies deriving profit. The reserve fund ratio and the procedure for its formation shall be established by laws. Article
  16. A Share Investment of a Member of a Cooperative Society The share investment of a member of a cooperative society may be either cash, intellectual or in kind. The property to which proprietary rights of a member of a cooperative society are limited may not be a share investment. Members of a cooperative society may lease land to their cooperative society only for utilisation. A member's share investment and the portion of property owned by him/her shall be registered in accounting records, and the member shall be issued a certificate evidencing his membership and the amount of property owned by him within a cooperative society. The members of a cooperative society shall dispose of their share investments and the portion of property owned according to the procedure established in the bylaws. Article
  17. Distribution of Profit The distribution of profit of a cooperative society must be approved at the meeting of members ( authorised representatives) within 3 months of the end of a business year. Balance profit, after deducting mandatory payments, shall be distributed in the following manner : 1) shall be deducted to reserve capital ; 2) part of profit shall be paid to the members in proportion to the volume of the turnover ( operations) with a cooperative society according to the procedure established in the bylaws; 3) dividends paid to the members in proportion to their shares and the property owned by them. The undistributed profit shall be utilised according to the procedure established in the bylaws; Share dividend must be limited; the maximum amount of the share dividend shall be established in the bylaws. Balance profit shall be taxed according to the procedure established in the bylaws whereas part of profit paid to the members in proportion to the volume of turnover (operations) with the cooperative society, and share dividend shall be exempt from taxation. CHAPTER
  18. MANAGEMENT AND CONTROL Article
  19. Governing Bodies The governing bodies shall consist of a meeting of members and the Board or the manager. Citizens of the Republic of Lithuania who are 18 years of age and over may be members of a Board of a cooperative society and audit commission. In a cooperative society whose membership exceeds 100, the meeting of members may be replaced by the meeting of authorised representatives. Procedure for electing authorised representatives shall be established in the bylaws of a cooperative society. Article
  20. The Meeting of Members (Authorised Representatives) The meeting of members ( authorised representatives) shall be the supreme governing body of a cooperative society which shall: 1) accept or expel members of a cooperative society and legitimize the withdrawal from a cooperative society. The meeting may obligate the Board (manager) to perform this function ( except the expulsion of a member). 2) amend or supplement the bylaws of a cooperative society; 3) elect or remove the Board (manager), chairperson of the Board, audit commission and their members; 4) assess the work of the Board (manager) and the audit commission (auditor), approve annual accounting and the programme of business activities ; 5) approve distribution of profit (losses); 6) establish the procedure for paying wages in a cooperative society; 7) solve issues concerning the joining and withdrawal of a cooperative society from unions (associations), establishment of their structural subdivisions and enterprises, termination of their activities, as well as other organisational issues; 8) adopt decisions to liquidate a cooperative society; 9) solve other issues concerning the activities of a cooperative society. The meeting of members ( authorised representatives) shall be convoked by the Board once a year no later than within 3 months of the end of a business year. Unscheduled meetings shall be convoked by the Board ( the manager) on its own initiative or at the request of the audit commission (auditor) or at the request of no less than 1/4 of the members ( authorised representatives) of a cooperative society. The meeting of members may adopt resolutions if it is attended by at least 1/2 of all members. The meeting of authorised members may adopt resolutions if it is attended by at least 2/3 of the authorised representatives. If the meeting is not attended by the established number of members (authorised representatives) a repeated meeting shall be called. At such meeting resolutions may be adopted if it is attended by at least 1/3 of the members or 1/2 of the authorised representatives. Resolutions at the meetings shall be adopted by simple majority vote with the exception of cases specified in Paragraphs 2 and 8 of Article 16 and in cases of expulsion of the members when resolutions are adopted by at least 2/3 of the votes. At the meeting voting by open ballot shall be used with the exception of cases where secret ballot is provided by this law, the bylaws of a cooperative society or when it is requested by at least 1/10 of the members ( authorised representatives) of a cooperative society. Members of the Board and audit commission shall be elected by secret ballot. Article
  21. Board or Manager of a Cooperative Society The Board is a collective governing body directing the activities of a cooperative society in the period between the meetings of members (authorised representatives). In cooperative societies the membership of which is at least 100, manager may be elected instead of a Board. The Board shall direct business activities of a cooperative society , manage its affairs, represent a cooperative society in court or other institutions. The Board or the manager shall be elected by the meeting of members ( authorised representatives) for a term not exceeding 3 years. Until the Board is elected, the affairs of a cooperative society shall be managed by the founders. The number of the members of the Board and the powers of its members and the chairperson of the Board shall be established in the bylaws of a cooperative society and the resolutions of the meetings of members (authorised representatives). The meeting of members (authorised representatives) shall have the right to remove the chairperson (manager) of the Board prior to the expiration of his/ her term. Upon the expiration of the term, the Board shall exercise its powers until the new board is elected. Members of the Board and the chairperson of the Board (manager) may resign at any time. Procedure for the resignation shall be established in the bylaws of a cooperative society. The Board shall adopt its resolutions at its sittings which shall be valid if at least 2/3 of all the members of the Board participate. Resolutions shall be adopted by simple majority vote. Members of the Board as well as chairperson of the Board ( manager) must reimburse losses sustained by a cooperative society incurred by the resolutions of the Board, which are not in compliance with the bylaws of a cooperative society or the laws of the Republic of Lithuania. The resignation or removal of the members of the Board or the chairperson of the Board (manager) shall not exempt him from the reimbursement of losses incurred through his fault. Article
  22. Control of Activities The activities of a cooperative society shall be controlled by the audit commission ( auditor), which shall be elected at the meeting of members for a term not exceeding 3 years. On the decision of the meeting of members ( authorised representatives), provisional control commissions may be formed. Members of the audit commission (auditors) may only be persons who are not on the Board of a cooperative society or who are next of kin to the members of the Board or related to them by marriage. Audit commission (auditor) shall: 1) inspect annual balance sheet and other accounting and business documents of a cooperative society; 2) report all established violations to the meeting of members (authorised representatives), the Board (manager); 3) at the end of a business year, submit its findings on the accounting and financial condition of a cooperative society to the meeting of members. The meeting of members (authorised representatives), the Board (manager), audit commission (auditor) may invite experts to participate in inspections. CHAPTER
  23. LIQUIDATION OF A COOPERATIVE SOCIETY Article
  24. Termination of the Activities of a Cooperative Society The activities of a cooperative society shall be terminated: 1) on the resolution of the meeting of members (authorised representatives); 2) upon the expiration of the term provided for in the bylaws; 3) when the remaining number of members is less than the number prescribed by the bylaws; 4) on court's decision recognizing a cooperative society insolvent; 5) when governmental institutions cancel the registration of a cooperative society for the violation of the laws of the Republic of Lithuania. Article
  25. Liquidation Procedure Procedure for the liquidation of a cooperative society shall be established by this and other laws of the Republic of Lithuania, and by the bylaws of a cooperative society. Institution which has adopted the decision to terminate the activities of a cooperative society shall appoint liquidators or obligate the Board (manager) of a cooperative society to do that. Upon appointing the liquidator, a cooperative society shall acquire the status of a cooperative society under liquidation. The Board (manager) of a cooperative society shall loose its powers. Its functions shall be taken over by the liquidators which: 1) shall re-register a cooperative society into a cooperative society under liquidation; 2) shall announce in the press twice, with one months break, about the liquidation of a cooperative society or inform each member and creditor of a cooperative society about it; 3) shall represent the cooperative society in court, in its relations with state and governmental institutions as well as other legal and natural persons; 4) during the liquidation, shall make accounting balances of a cooperative society; 5) complete the fulfillment of obligations pursuant the contracts of a cooperative society and conclude new ones which do not contravene the laws regulating the activities of a cooperative society under liquidation; 6) within 6 months after the announcement of the liquidation, accept and satisfy demands and claims of creditors, recover debts payable; 7) in case of disputable liabilities, an adequate sum shall be appropriated from the funds of a cooperative society and paid into the deposit account of a notary's office; 8) shall satisfy creditor's demands. The surplus property shall be distributed to the members of a cooperative society according to the procedure established in the bylaws and in proportion to their share investments and the amount of property owned by them. When disputes arise between the members of a cooperative society concerning the distribution of the surplus profit, the liquidators shall suspend the distribution of property. Disputes between members and members' disputes with liquidators shall be settled at the meeting of members ( authorised representatives) and if the meeting fails to settle them, they shall be settled in court; 9) During the liquidation, shall submit performance reports to the meeting of members on dates fixed by it. Upon completion of the liquidation, it shall submit its final account. Liquidators shall be jointly liable to a cooperative society and third persons for losses incurred through their fault. If a liquidator acts individually, he shall be liable severally. Documents of a liquidated cooperative society shall be kept according to the procedure established by the Government of the Republic of Lithuania. Former members of a cooperative society and their heirs shall have the right to familiarise with these documents and obtain their copies. CHAPTER
  26. UNIONS (ASSOCIATIONS) OF COOPERATIVE SOCIETIES Article
  27. Establishment and Activities of Unions (Associations) Cooperative societies may join into unions (associations) for the solution of tasks provided for in their bylaws. Members of unions (associations) may be also other legal persons ( companies, societies, associations, etc), if their membership is in conformity with the objectives of the unions (associations) of cooperative societies. The union ( association) of cooperative societies may be formed from two or more legal persons. Unions (associations) of cooperative societies shall be established, registered, managed, shall function and be liquidated according to the same procedure as cooperative societies. Unions (associations) of cooperative societies shall function according to their bylaws which shall be adopted by the congresses, conferences or meetings of their delegates (authorised representatives). A union (association) shall be deemed established when it is registered according to the established procedure. Cooperative societies and their unions (associations) may take part in the activities of international cooperative organisations and develop other international activities. CHAPTER
  28. FINAL PROVISIONS Article
  29. Enforcement of this Law This law shall become effective beginning from 1 July
  30. I promulgate this law adopted by the Seimas of the Republic of Lithuania. Algirdas Brazauskas President Republic of Lithuania

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