REPUBLIC OF LITHUANIA REPUBLIC OF LITHUANIA LAW ON CREDIT UNIONS Chapter 1 General Provisions Article 1. Objectives of the Law This Law establishes grounds for the activities of credit unions, terms a

Article 17

of this Law, the Board must notify the supervisory institution thereof no later, than within 10 days.

At the request of a member of the credit union he may be issued a certificate confirming his membership in the credit union and the amount for his share. Article
Rights and Duties of a Credit Union Member
A credit union member shall have the right to: 1) attend meetings of the credit union and to have one vote during voting; 2) elect and be elected to the bodies of management and control of the credit union; 3) obtain information about the activities of the credit union, its financial-economic condition and assets or to request that he be presented for familiarisation or for copying the annual and intermediate accounts, the report of the Board concerning the activities of the credit union, minutes of the meetings, the register of members. Other documents may be presented to the member provided that they contain no secrets the divulging whereof would inflict material damage to the credit union. It shall be prohibited to refuse access to the information for other reasons. The refusal to present the required documents must be executed in writing if requested by the member. Disputes concerning the member's right of access to information shall be settled in court; 4) appeal in court against the resolutions of the general meeting and the Board; 5) withdraw from the credit union; 6) have a share or shares in the credit union of the minimum amount or of the maximum amount established in the bylaws; 7) receive the share of profit distributed among the members -dividend in proportion to the amount of his share; 8) receive a portion of assets of the credit union in liquidation in proportion to the amount of his share; 9) bequeath his share to one or several persons; 10) with the consent of the Board transfer his share to the ownership of other persons in accordance with the procedure set forth in item 10 of Par.

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of this Law; 11) request that the credit union return his share contributions; and 12) make use of services provided by the credit union on easy terms established in the bylaws.

The credit union's bylaws may also provide for other rights of members which are in compliance with the laws of the Republic of Lithuania.
A member of the credit union shall have no right to vote when the issue of his membership in the credit union is being decided at the general meeting and in other cases provided for in the bylaws when he has a direct interest.
A member of the credit union must: 1) make timely notification, should the grounds for his membership in the credit union cease to exist; 2) pay the entrance fee, share contributions and other purpose-oriented contributions within the time limits set out in the bylaws; 3) act in compliance with the bylaws, fulfil the obligations of the credit union and implement the resolutions of the management and control bodies, participate in the activities of the credit union; and 4) duly and timely carry out loan agreements, agreements concerning the keeping of deposits with the credit union and other agreements concluded with him.
A member of the credit union may not at the same time be a member of another credit union, if this is prohibited in the bylaws.
Upon withdrawal or expulsion from the credit union, a member of the management of control body of the credit union may not continue to perform his functions in the above bodies. The withdrawing members who are employed in the credit union under the employment contract may refrain from terminating the employment contract, unless the bylaws provide otherwise. Article
Rescission of Membership and Termination of Membership
Membership of the credit union shall be rescinded in the following cases: 1) if the Board grants the member's request to withdraw from the credit union; 2) upon the demise of the member; 3) upon recognising the member legally incapable in accordance with the procedure established by the laws of the Republic of Lithuania; 4) upon the member's expulsion; and 5) when he becomes a member of another credit union, if the bylaws of the credit union prohibit membership of more than one credit union.
Membership of the credit union shall terminate upon the liquidation thereof in the cases provided for in Par. 1 of Article 50 of this Law. Article
Withdrawal from the Credit Union
Every member of the credit union shall have the right to withdraw from the credit union at their own will upon notifying the Board thereof in writing no later than 3 months in advance. Resolution concerning the withdrawal and settlement of accounts with the withdrawing member shall be adopted by the Board.
A member may withdraw only at the end of the business year. The Board may permit a member to withdraw before the end of business year, provided that accounts may be settled with the withdrawing member without causing damage to the interests of the credit union.
If the bylaws prescribe the residence of the members in one locality - a township or a village - as a condition of membership of the credit union, a member who is moving from the locality must notify the Board of his withdrawal in writing. Article
Expulsion from the Credit Union
If a member of the credit union fails to fulfil his obligations, violates this Law and the bylaws, he may be expelled from the credit union only on the decision of the general meeting. The Board may suspend the member's rights until the general meeting at which the issue of his expulsion from the credit union is to be considered.
A member may be expelled provided that he has been given an opportunity to be heard at the general meeting and if 2/3 of the credit union members participating in the meeting vote in favour of his expulsion.
If the expelled member disagrees with the decision of the general meeting concerning his expulsion, he shall have the right to appeal to court for the revocation of such decision within 3 months of the day of passing of the decision. Article
Settlements with the Former Members of the Credit Union
The time period within which settlements must be made with the member who has withdrawn from the credit union or has been expelled from it shall be determined assessing the financial position and the state of assets (liquidity) of the credit union and upon deducting sums belonging to the credit union. Settlements must be made no later than within 12 months from the day of actual withdrawal or expulsion of the member of the credit union.
A person who has been expelled or has withdrawn from the credit union shall lose the right to make use on easy terms of the services provided by the credit union from the moment of his expulsion or withdrawal from the credit union.
The Board of the credit union, protecting the interests of the credit union and its members, must within 10 days from the day of the member's withdrawal or expulsion, review all contracts for the provision of services by the credit union which have been concluded with him and, as necessary, rescind said contracts or, if the other party does not object, change the terms and conditions of the contracts.
Disputes concerning settlements between members shall be resolved in court.
Amounts due to a deceased member shall be paid out to his heirs in the same manner as in the cases of his withdrawal or expulsion, if the heirs are not members of the credit union and are not admitted as members thereof in accordance with the procedure established by this Law and the bylaws.
Amounts due to a person who has been recognised legally incapable shall be paid out to his lawful representative after the latter presents the required documents. Article
Proxies A member shall have the right to authorise another person to vote for him at the meeting of members or perform other actions. At the meeting of members of the credit union the proxy may represent only one member of the credit union. The member's proxy must be certified by a notary. A member of management or control bodies of the credit union may not be a proxy of the credit union member. Article
Liability of a Member of the Credit Union for the Damage Inflicted on the Credit Union
A member of the credit union shall be liable for the damage inflicted on the credit union in accordance with the procedure established by the Civil Code of the Republic of Lithuania. Rescission of membership of the credit union shall not exempt from liability for the damage inflicted on the credit union.
A member of the credit union shall be liable to the extent of his share contribution (his share of assets). The bylaws of the credit union may establish the member's liability which would be as much as the fivefold amount of his share contribution (his share of assets). Chapter 5 Management of the Credit Union and Control of its Activities Article
Management Bodies
Bodies of management of the credit union shall be the general meeting, the Supervisory Board, the Board and the Loans Committee. Only those members of the credit union who are of age may be members of the bodies of management.
The credit union may not form the Supervisory Board, if it has less than 100 members. In such an instance, the bylaws of the credit union must specify that the functions of the Supervisory Board shall be performed by the Board.
The Loans Committee is a mandatory managing body of a credit union, which must be formed irrespective of the number of members of the credit union.
Upon the decision of the general meeting of the credit union, the administration of the credit union may be formed in the credit union of hired personnel. In the event that the administration is not formed the functions thereof shall be fulfilled by the Board of the credit union. Article
General Meeting
General meeting shall be the supreme managing body of the credit union.
It shall be within the exclusive competence of the general meeting to: 1) approve, mend and supplement the bylaws of the credit union; 2) approve the statutory report of the credit union; 3) elect or remove from office members of Supervisory Board, the Board, and the Loans Committee as well as the auditor, and from among them accordingly, chairpersons of the Supervisory Board, the Board and the Loans Committee; 4) adopt a decision to expel a member from the credit union; 5) consider complaints and proposals of the credit union members concerning the work of the supervisory Board and the Board; 6) establish the minimum and maximum amount of share contribution to be paid by a member and the procedure of payment of share contributions; approve and change the amount of the entrance fee; 7) establish the special purpose of loans made to the members; 8) fix the auditor's salary and annual payments (honorariums) from profit to the members of the managing bodies; 9) establish the limit of funds that may be allotted as remuneration for the work of an accounts expert or independent auditor; 10) fix the amount and procedure of payment of wages for the personnel employed in the credit union on a contractual basis; 11) approve the annual accounts, adopt a resolution concerning the procedure of the distribution of profit and compensation for losses; 12) determine the amount of the share capital, reserve capital, deposit insurance capital and other required capital, decide to compensate with funds from the reserve capital for the losses which are not related to the fixed assets of the credit union; 13) provide for the insurance of deposits received in the credit union, decide to compensate for the losses incurred by the depositors with the deposit insurance capital funds or other capital funds; 14) adopt a resolution to reorganise or liquidate the credit union; 15) resolve the issue concerning adhesion of the credit union to the association of the credit union and withdrawal from it; 16) evaluate the reports of the bodies of management and control of the credit union; 17) during the meeting, if requested by the Supervisory Board, resolve issues within the competence of the Supervisory Board; and 18) resolve other issues reserved for the competence of the general meeting by the bylaws. Article
Grounds for Calling the General Meeting
General meetings shall be called by the Board of the credit union.
The right of initiative to call a special general meeting shall belong to the Supervisory Board, the Board, the Loans Committee and a group of no less than 1/4 of the members of the credit union. A special general meeting must be called if : 1) it is planned to reorganise or liquidate the credit union; 2) the credit union is not in the position to satisfy its financial liabilities or is declared insolvent; 3) it is requested by the members of the credit union who have the right of initiative, or the Supervisory Board, or the Board, or the Loans Committee; 4) on the occurrence of the event provided for in Par.

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of this Law; and 5) a decision of the court to call a meeting of the members comes into effect. 3. The general meeting of the credit union members may be called on the decision of the court if: 1) a regular general meeting has not been called within 3 months of the end of the business year and a member (members) of the credit union appealed to court for this reason; 2) the initiators of a special general meeting appeal to court upon the failure of the Board to call such a meeting within the time period set out in Par. 1 of Article 30 of this Law; and 3) creditors appeal to court if a special meeting is not called in the cases provided for in item

Par. 2 hereof. Article

Quorum of the General Meeting and Adoption of Resolutions
The general meeting may adopt resolutions if it is attended by more than 1/

all the members of the credit union. If the meeting does not have a quorum, a repeat meeting must be called, which shall have the right to adopt resolutions on all the issues on the agenda even without the quorum , but if it is attended by at least 1/3 of all the members of the credit union. If the repeat meeting is attended by less than 1/3 of all the members of the credit union, the meeting must be called for the third time and the resolutions in it shall may be adopted according to the agenda and even without a quorum.

The members of the credit union (or their proxies) attending the general meeting shall be registered by signing in the register list which shall be signed by the presiding officer and the secretary of the meeting. Head of the administration who is not a member of the credit union may attend the meeting without the right to vote. A member of the credit union who is not attending the general meeting but who has familiarised himself with the agenda and the draft resolution may inform the general meeting in writing whether he is "for" or "against" it. Such communications shall be included in the quorum of the meeting and added to the voting results , but only of that issue on which the member voted in writing.
Voting at the general meeting shall be open. Secret voting shall be held provided 1/4 of the members of the credit union attending the meeting so request.
Resolutions of the general meeting of the credit unions shall be adopted by a simple majority vote. In the event of a tie vote , the presiding officer shall have a casting vote. In cases specified in items 1, 4, 6, 7, 14 and 15 of Par.

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of this Law , the adoption of resolutions shall require 2/3 of votes of those attending the meeting.

The minutes of the general meeting shall be signed by the presiding officer, the secretary and at least one member of the credit union authorised by the general meeting. The list of members attending the meeting must be attached to the minutes and if the voting was in writing, the ballot papers must be attached as well, and kept till the end of the next general meeting. Article
Procedure for Convening of General Meetings
A regular general meeting shall be convened by the Board of the credit union every year, but no later than within 3 months after the close of a business year. The Board must notify about the general meeting according to the procedure established by the bylaws of the credit union and at least, 20 days in advance of the date on which the meeting is to be held.
The persons who request that a special meeting be called, shall submit an application to the Board, indicating the reasons and objectives for calling such a meeting and a draft agenda thereof . Upon receipt of an application, the Board must, within 10 days from the submission of the application, notify the members of the credit union about the calling of a special general meeting and no later than within 20 days of the announcement thereof, convene said meeting.
A repeat general meeting of the members of the credit union must be called within 10 days of the day of the meeting which failed to be convened and the members of the credit union must be notified thereof at least 5 days in advance of the repeat meeting.
A general meeting may be called without observing the above requirements, provided that all the members of the credit union give their consent thereto.
The notice about the general meeting must specify : 1) the name and address of the credit union; 2) the place, date and time of the meeting; and 3) the agenda of the meeting and draft resolutions.
The members of the credit union must be given the opportunity to familiarise themselves with the documents concerning the agenda of the meeting at least 5 days prior to the meeting.
The chairperson of the general meeting shall be elected each time, from the members of the credit union, and until his election, the meeting shall be presided over by the chairperson of the Supervisory Board unless the bylaws of the credit union provide otherwise.
The general meeting shall have no right to pass resolutions on issues which are not on the agenda, if the meeting is not attended by all the members of the credit union. Only the agenda of a meeting which failed to take place shall be valid at the repeat meeting. Article
Invalidness of Resolutions of General Meeting Members
Per declaration of credit union members or head of management, the resolutions of the general meeting may, according to the procedure prescribed by court, be declared invalid, should they contradict this Law, the credit union statutes and other Republic of Lithuania laws.
A resolution of the general meeting may be submitted as a complaint before the court, no later than 30 days within the date of the adoption of the resolution, or from the day, when the person learned or was to learn of the adoption of the resolution. Article
The Supervisory Board
The Supervisory Board is the body supervising the legality and expediency of the activities of the credit union.
The number of the members of the Supervisory Board, which may not be less than 3 and no more than 9, shall be prescribed by the bylaws of the credit union. The Supervisory Board and its Chairperson shall be elected by the general meeting for a term not to exceed 3 years.
A member of the Board of the credit union, a member of the Loans Committee or an auditor may not be members of the Supervisory Board. A member of the Supervisory Board may not assign or delegate his functions to other persons.
Members of the Supervisory Board may be paid honorariums for their work. Article
The Powers of the Supervisory Board
The Supervisory Board shall: 1) monitor how the Board and/or the Administration implement the resolutions of the general meeting; 2) analyse the activities of the credit union and its Board, the accumulation and utilisation of financial resources, remuneration for work, and financial condition; 3) present to the general meeting the report containing its findings and proposals; 4) warn the Board of the credit union, Loans Committee, or members of the credit union, that they should immediately eliminate violations of activities in the credit union, or notify the general meeting thereof; 5) present to the general meeting their findings and proposals concerning the draft annual accounting balance sheet, the draft distribution of profit and compensation for losses; 6) represent the credit union in court proceedings when disputes between the credit union and its Board, members of the credit union and its Board are settled; 7) submit proposals to the Board to revoke unlawful resolutions adopted by it or request that the general meeting should revoke unlawful resolutions adopted by the Board; 8) may refer issues that are within their competence to the general meeting for resolution; and 9) resolve other issues provided for in the bylaws.
The Supervisory Board shall have the right to invite an expert or an independent auditor to inspect and assess the accounting balance sheet of the credit union and other accounts.
On the request of the Supervisory Board, the Board of the credit union and /or the Administration must present documents concerning the activities of the credit union.
The meeting of the Supervisory Board shall be lawful, if it is attended by more than half of its members. The resolutions shall be adopted by a simple majority vote of those present. The members of the Supervisory Board shall have equal rights. During voting, each member shall have one vote. In the event of a tie vote, the chairperson shall have the casting vote.
The Supervisory Board shall work according to the procedure established by its work regulations. Article
The Board of the Credit Union
The Board is a collegiate executive-managing body of the credit union the activities of which are directed by its chairperson. The number of the Board members, which must be odd and at least 3, shall be established by the bylaws of the credit union. The members of the credit union and its chairperson shall be elected by the general meeting of the credit union for the term not exceeding 3 years. Members of the Supervisory Board of the credit union, members of the Loans Committee or the auditor may not be a member of the Board or its chairperson.
In addition to the main members of the Board, no more than 3 candidates may be elected for the same term, which upon the decrease of the number of the Board members, shall replace the Board members who may not serve in the office. These candidates shall have the right to attend the Board meetings without the right to vote.
If the number of the members of the Board becomes less than the minimum number of members established by the bylaws and there is no possibility to replace the lacking members of the Board with the elected candidates, the remaining members of the Board must convene a special meeting.
Members of the Board may be paid honorariums for their work on the Board. Article
Powers of the Board
The powers of the Board and its members shall be established by the bylaws of the credit union, and the procedure of its work by the work regulations adopted by it.
The Board shall : 1) admit new members into the credit union, suspend their membership in the credit union in cases specified in Par.1 of Article 22 hereof; 2) represent the credit union in court, arbitration bodies and other institutions; 3) organise and convene general meetings; 4) set interest rate on deposits and on loans; 5) enter into employment contracts with hired employees in the name of the credit union; 6) enter into civil transactions with the members of the credit union and third parties in the name of the credit union; 7) maintain the register of members of the credit union; 8) consider the material submitted by the auditor, the activities of the administration ( if there is such) and present its findings to the Supervisory Board or the general meeting ; 9) prepare drafts of accounting balance sheet, distribution of profit, procedure for the compensation for losses and other drafts of accounts; 10) consider the applications of the members of the credit union, concerning the transfer of their shares and shall notify said member about the consent or prohibition to transfer his share to another person no later than within 1 month from the receipt of the application; 11) invest the funds of the credit union, which are not immediately required, into the securities issued by the government, if it is permitted under the bylaws; 12) lend the funds of the credit union , which are not immediately required, to other credit unions or Associations of Credit Unions as well as borrow money from them, if it is permitted under the bylaws; 13) settle accounts with the former members of the credit union on terms and conditions specified in Article 23 of this Law; 14) inform, in due time, the supervision institution about the reduction of the minimum number of the members or the share capital and submit other data required by this institution according to the rules of the supervision of the activities of credit unions, approved by the Bank of Lithuania; and 15) consider other issues concerning the activities and management of the credit union that are not within the exclusive competence of the general meeting, the Supervisory Board or Loan Committee.
The Board shall adopt resolutions on issues assigned to its competence by this Law or bylaws. Members of the Board must keep the secrets of the credit union confidential. Members of the Board shall have equal voting rights. In the event of a tie vote, the chairperson of the Board shall have a casting vote. Article
Loans Committee
Loans Committee shall be elected by the general meeting from at least three members of the credit union for the term of three years. A member of the Supervisory Board of the credit union , the Board or the auditor may not be a member of the Loans Committee.
Loans Committee shall consider the applications of the members of the credit union, concerning members loans. It shall decide whether the loan requested by the member is in compliance with the purposes set out in the bylaws, shall provide for the terms and conditions of its disbursement and repayment and shall submit proposals concerning these issues to the Board of the credit union. The Board may not conclude members loan contract with a member of the credit union, if it was not approved by the Loans Committee.
For its activities the Loans Committee shall account to the general meeting in the manner prescribed by the bylaws, but at least once a year.
Members of Loans Committee may be paid honorariums. Article
Liability of the Members of the Supervisory Board, the Board and the Loans Committee
For the damage caused to the members of the credit union, the members of the Supervisory Board, the Board and the Loans Committee shall be liable under the Civil Code of the Republic of Lithuania.
Only those members of the Supervisory Board, the Board and Loans Committee shall be released from the obligation to compensate for the losses, who voted against the resolutions that are not in compliance with this Law, the bylaws of the credit union or other laws of the Republic of Lithuania, or did not attend the meeting at which such resolutions were passed. In this event, they must present a written protest to the presiding officer within 7 days after they learnt or ought to have learnt about such resolutions. Article
Auditor of the Credit Union
The credit union must have at least one auditor who shall be elected by the general meeting for a term set out in the bylaws of the credit union but not exceeding three years. The auditor's office may be held by a member of the credit union possessing a diploma certifying his proper qualifications. A member of the Supervisory Board, the Board and Loans Committee or a chief financier (accountant) employed in the credit union may not be the auditor.
If it is not possible to elect the auditor from the members of the credit union, the general meeting shall approve the independent auditor, which the Supervisory Board recommends to hire under contract.
The auditor (independent auditor) shall control the financial- business activities of the credit union, and the implementation of the resolutions passed by the general meeting . For the performance of his duties, the auditor shall have the right to demand to present to him all necessary books and accounts.
The auditor of the credit union (independent auditor) shall present to the general meeting annual report on the audit of financial-business activities. He must immediately report to the Board and the Supervisory Board the violations determined in the financial- business activities of the credit union, and keep the secrets of the credit union confidential.
The elected auditor may be paid remuneration.
The auditor of the credit union (independent auditor) shall be liable under and in accordance with the laws of the Republic of Lithuania for the unsatisfactory control of the credit union and the concealment of deficiencies in its activities. Article
The Administration If the general meeting of the credit union decides to form the Administration of the credit union, the relationship between the employees of the credit union and the Administration shall be regulated by the Law on Employment Contract of the Republic of Lithuania and the Labour Code. Chapter 6 CAPITAL OF THE CREDIT UNION, MEMBER'S SHARE, INCOME AND EXPENDITURE, FINANCIAL ACCOUNTING AND CONTROL Article
Capital Structure of the Credit Union
The credit union's ownership capital shall consist of the share capital, reserves, insurance of deposits and additional types of capital.
The procedure for the formation and application of deposit insurance capital and additional capital shall be established by the bylaws of the credit union. Article
Share Capital of the Credit Union
The credit union's minimum share capital may not be less than Lt
If the share capital is less , the credit union supervision institution may cancel the licence issued to the credit union.
The share capital of the credit union shall be formed out of the cash contributions of the founders and members of the credit union, paid for their shares.
Share capital shall be formed taking into account the required funds, which the credit union decides to invest into the credit union's assets - premises, equipment and stock necessary for the commencement and development of the credit union's activities.
It shall be prohibited to form the share capital of the credit union from the funds borrowed by the credit union or the property mortgaged to it. Article
Reserves of the Credit Union
The credit union shall form reserves which shall be used for covering the losses of the credit union.
The reserves shall be formed out of the profit of the credit union, which remains after the payment of taxes, having deducted from this profit at least 20 per cent annually, until the reserves shall account for 10 per cent of the amount of long- term investments and extended loans, determined on the basis of the annual accounting balance-sheet .
When a part of the reserves has been used for covering losses of the credit union, it shall be again deducted from the profit so that the reserves would be in the established amount.
Only losses which are attributed to losses incurred by reason of such non-liquid assets as loans and long-term investments, may be covered out of the reserves. Reserves may be applied for covering other losses only by the resolution of the general meeting. Article
The Share (Shares) of a Member of the Credit Union
A share (shares) of the credit union may only be the cash contribution.
The amount of the share, its payment and liability for the non-payment shall be set out in the bylaws of the credit union.
The initial contribution for shares must be at least Lt
Members of the credit union shall dispose of shares and their share in the profit in accordance with this and other laws of the Republic of Lithuania.
It shall be prohibited to take recourse upon the member's contributions, with the exception of cases where the debtor ceases to be a member of the credit union. Article
Distribution of Profit
The profit of the credit union shall consist of the funds which remain after deduction of credit union's expenses and losses of the year from the annual income of the credit union of the same year.
The profit must be distributed no later than within 3 months after the close of the financial year and after the approval of the annual balance sheet in accordance with this and other laws of the Republic of Lithuania.
The resolution on the distribution of profit must state: 1) the amount of profit; 2) taxes; 3) allocations to the reserves; 4) allocations to other types of capital of the credit union; 5) the share of profit allocated to the members (shareholding members) in the form of dividend or any other form prescribed by the bylaws of the credit union; 6) honorariums to the members of the managing bodies and managers; and 7) retained profit.
Dividends to the members of the credit union shall be paid from the profit which remains after the payment of taxes and after the deduction of funds to the reserves and other types of capital provided for in the bylaws.
The profit which remains after the allocations to the types of capital of the credit union may not be paid out in the form of dividends and honorariums or transferred to the members of the credit union, founders or members of the managing bodies in any other manner, if the share capital of the credit union becomes less than the fixed minimum capital prescribed by this Law. Article
Accounting, Reporting and Control of the Credit Union
The financial year of the credit union shall coincide with the calendar year. If the credit union has been registered after the commencement of the business year, then the last day of the calendar year shall be considered as the end of the first business year. If the credit union has been removed from the register before the close of the business year, then the last business year shall end on the day the credit union was removed from the register.
Accounting, reporting and financial control shall be carried out in accordance with the laws of the Republic of Lithuania and legal acts approved by the resolutions of the Bank of Lithuania.
Within three months after the close of the financial year, the credit union shall prepare annual financial statement of the credit union and submit it to the Bank of Lithuania. Article
Standards Restricting the Risk of Credit Union's Activities The Bank of Lithuania may establish the following standards for credit unions: 1) liquidity ratios; 2) maximum open position in foreign exchange; and 3) capital adequacy ratio. Chapter 7 SUPERVISION OF THE ACTIVITIES OF CREDIT UNIONS Article
Sanctions Applied by the Supervision Institution
Supervision institution of the activities of credit unions shall have the right to apply the following sanctions against the credit union and its managers for the violation of this and other laws and legal acts, regulating the activities of credit unions: 1) to warn the credit union for the shortcomings and violations and to set the term for their elimination; 2) to impose administrative penalties on the managers of the credit union for the violation of this Law in the manner prescribed by law; 3) to suspend or revoke the licence to perform one or several operations; and 4) to suspend or revoke the licence issued to the credit union to engage in the activities specified in Article 7 of this Law.
The type of sanction and the terms shall be determined by the supervision institution, taking into consideration the nature of the violation.
The resolution of the supervision institution concerning the application of a sanction against the credit union or its managers may be appealed against in a court of law within one month from the date of the adoption of said resolution in accordance with the procedure established by the laws of the Republic of Lithuania. Chapter 8 REORGANISATION AND LIQUIDATION OF THE CREDIT UNION Article
Reorganisation of the Credit Union
Reorganisation means the restructuring of the credit union as a legal entity, without liquidation procedures. The credit union (or unions), newly established in the process of reorganisation and continuing their activities after the reorganisation, shall be the successors to all the rights and obligations of the reorganised credit union.
Credit unions may be reorganised in the following ways: 1) by merger or consolidation of credit unions; 2) by division of credit unions. 3.The reorganisation of the credit unions by merger or consolidation shall be carried out by : 1) joining to the credit union, which continues its activities, of other credit unions which terminate their activities as legal entities; 2) merging several credit unions which terminate their activities as legal entities to form a newly created credit union.
The credit unions shall merge in the manner prescribed by the Law on Competition of the Republic of Lithuania. 5.The reorganisation of credit unions by way of division shall be carried out by: 1) conveying the rights and obligations of the credit union which terminates its activities, to the credit unions which continue their activities; 2) by establishing new credit unions from the credit unions which terminate their activities; 3) by separating a part from the credit union which continues its activities and merging this part with the other credit union, or from which a new credit union is being established.
The credit unions that are being reorganised must prepare reorganisation plans which must state: 1) name and address of each credit union which is being reorganised; 2) the number of its members; 3) its share capital; 4) valuation of its deposits, extended loans and assets; 5) terms and conditions of the assumption of liabilities; 6) the criteria and rules for the management of shares of members in the credit unions which will operate after the reorganisation; 7) criteria according to which the deposits of members and loans extended to members before and after the reorganisation shall be managed; 8) other property and non-property rights and obligations of the members after the reorganisation of the credit union, the terms for the acquisition of these rights and obligations; and 9) the rights accorded to the managing bodies and auditors (experts) of the credit unions during the period of their reorganisation.
The bylaws of each credit union that will be operating after the reorganisation must be also prepared alongside with the reorganisation plan.
The Board of each credit union which is being reorganised shall prepare reorganisation plan for the evaluation of which an independent auditor (expert) may be invited. He must present in writing , the valuation and his conclusions to the general meeting.
Each credit union must make a public announcement of the planned reorganisation no later than 20 days before the date on which the general meeting is to be held, at which the reorganisation shall be considered. During this period, each member of the credit union shall be entitled to familiarise himself with the reorganisation plan and the evaluation thereof.
The resolution to reorganise the credit union may be passed and concurrently the reorganisation plan and the bylaws may be approved by at least 2/3 of all the votes of the members of the credit union which is being reorganised. The resolution of the general meeting concerning the refusal to reorganise the credit union may be appealed against in court by no less than 1/5 of its members.
The reorganisation of the credit union in the event of bankruptcy thereof means the restructuring of the credit union, in which case the appointed administrator splits up the credit union, or sells a part of the assets thereof to other credit unions, in order to ensure the solvency of the credit union and its ability to satisfy the creditor's claims. In the event of bankruptcy, the credit union must be reorganised in the manner prescribed by the Law on Enterprise Bankruptcy of the Republic of Lithuania and other laws and legal acts regulating bank bankruptcy procedure. 12.Each member of the credit union and its creditor must be given a written notice about the reorganisation of the credit union.
The bylaws of the credit union that will operate after the reorganisation shall be registered after the first general meeting. Credit unions which are planned to be reorganised shall be registered in the manner prescribed by Articles 14,15, and 16 of this Law.
Upon the reorganisation of the credit union, its assets shall be conveyed to: 1) in the event of merger or division - newly formed credit union; 2) in the event of joining one credit union to the other - to the latter.
The conveyance of assets shall become effective as of the date of signing the conveyance instruments, unless reorganisation documents provide otherwise. Article
Liquidation of the Credit Union The credit union may be liquidated on the following grounds: 1) the time of the credit union duration has expired; 2) the minimum number of its members, specified in Par.

Article 17

of this Law, has decreased to the extent that the supervision institution prohibits it to continue operation with such membership; 3) the share capital has decreased below the minimum level set out in Par.1 of Article 41 of this Law and it has not been re-established by the time limit fixed by the supervision institution; 4) the Registrar of the Register of Enterprises has adopted the decision to cancel the registration of the credit union. 5) the court's decision to liquidate the bankrupt credit union has come into effect; 6) the court has passed the decision to liquidate the credit union for violation of the laws of the Republic of Lithuania; and 7) the general meeting has passed the resolution to liquidate the credit union, provided no bankruptcy proceedings have been instituted against the credit union.

Having decided to liquidate the credit union, the liquidator shall be appointed on the recommendation of the supervision institution. The managing bodies of the credit union shall loose their powers as of the date of the appointment of a liquidator, who shall discharge their functions.
The liquidator shall notify the institution which has registered the credit union and shall notify the Registrar of the Register of Enterprises about the change in the status of the credit union and about the liquidator. After the credit union acquires the status of a credit union in liquidation, the words "in liquidation" shall precede its name.
The credit union in liquidation may enter only into such contracts that are associated with its liquidation, as well as contracts which are provided for in the liquidation resolution.
The liquidation of the credit union shall be announced publicly, at least 3 times at no shorter than 2-month intervals, or each member and creditor shall be personally notified thereof.
The liquidation procedure of the credit union shall be carried out in accordance with the laws of the Republic of Lithuania and other legal acts, regulating bank liquidation. Article
Bankruptcy Procedure of the Credit Union Institution of bankruptcy proceedings, its investigation in court and liquidation by reason of bankruptcy shall be carried out in accordance with the procedure established by the Law on Commercial Banks of the Republic of Lithuania. Chapter 9 ASSOCIATIONS OF CREDIT UNIONS Article
Establishment and Activities of the Associations of Credit Unions
The Associations of Credit Unions is a voluntary union of credit unions that co-ordinates and fulfils the tasks assigned by the members of the association of credit unions and represents their interests through its activities. The Associations of Credit Unions may be formed according to the territorial and other criteria provided for in Par.4 of Article 17 of this Law.
Credit unions may join into Associations of Credit Unions in accordance with the laws of the Republic of Lithuania and other legal acts.
The Associations of Credit Unions shall become legal entities as of the date of its registration. The property of the association shall consist of the material and financial contributions made by the members of the Association of the Credit Union, proceeds from the services rendered by the Association, charity and other voluntary donations.
The Association of Credit Unions shall be registered in accordance with the procedure established by the Law on the Register of Enterprises and shall operate under their bylaws approved by the assembly of its delegates (proxies), conference or meetings. 5.The bylaws of the Association of Credit Unions must state: 1) the name and address; 2) objectives of its activities; 3) rights, duties, and liabilities of its members; 4) managing bodies and their powers; 5) auditing commission; 6) assets and funds; 7) accounting and reporting; and 8) procedure for the termination of the activities and liquidation. The bylaws may contain other provisions if they are in compliance with the laws of the Republic of Lithuania.
The Association of the Credit Union may apply its income only for the purposes of the implementation of the goals set forth in the bylaws. This income is not distributed among association members as profit.
The Association of Credit Unions shall gather information about credit unions, analyse and assess information provided by its members, analyse and co-ordinate their activities, see to their financial stability and perspectives for the application of the funds which are not immediately required, study the influence of the market on the activities of the credit unions, represent the interests of their members in state power and government institutions; provide assistance on the methods of management, audit, taxes, etc., take part in the activities of international credit unions and cooperate with similar credit unions in other countries, and represent the interests of the credit unions on an international level.
The Association of Credit Unions shall not be liable for the obligations of their members and their members shall not be liable for the obligations of the Association of the Credit Union. Chapter 10 FINAL PROVISIONS Article
Tax Allowances and the Supervision of the Activities of Credit Unions
Till 31 December 1997, credit unions shall be exempt from the Profit Tax of Legal Persons during the first two years of their operation, calculating from the moment of their registration according to the procedure established by this Law. Since 1 January 1998 or if by that time two years will have elapsed from the date of the registration of the credit union, profit of the credit union shall be subject to the profit tax of legal persons , the rate of which shall be reduced by 70 percent.
Other tax allowances shall apply to the credit unions in accordance with the laws of the Republic of Lithuania and other legal acts regulating taxation.
The activities of all credit unions and their associations, registered in the Republic of Lithuania, shall be supervised by the Bank of Lithuania until a separate supervision institution is created. I promulgate this Law passed by the Seimas of the Republic of Lithuania Algirdas Brazauskas President of the Republic Vilnius 21 February 1995 No. I-796

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