Official translation

Official translation Official translation REPUBLIC OF LITHUANIA LAW ON THE AMENDMENT OF THE LAW ON CO-OPERATIVE SOCIETIES (CO-OPERATIVES) 1 June 1993 No. I-164 Vilnius (as amended by 28 May 2002 No. IX-903) Article 1. Revised Version of the Law of the Republic of Lithuania on Co-operative Societies (Co-operatives) The Law of the Republic of Lithuania on Co-operative Societies (Co-operatives) shall be amended and set forth to read as follows: “REPUBLIC OF LITHUANIA LAW ON CO-OPERATIVE SOCIETIES (CO-OPERATIVES) CHAPTER ONE GENERAL PROVISIONS The State of Lithuania supports the co-operative movement, recognises provision of services to the members of co-operative societies (co-operatives) (hereinafter referred to as “co-operative societies) to be the chief purpose of such societies, promotes co-operative activities, and enshrines the independence of co-operative societies in law. Article 1. Purpose of the Law This Law shall regulate the establishment and activities of co-operative societies and their associations, rights and duties of the members, management and control, formation of capital, distribution of profit, reorganisation, and liquidation of co-operative societies. Article 2. Main Definitions of this Law 1. “Co-operation” means mobilisation of activities and resources laid down in law and aimed at achieving common goals of the members. Co-operative societies may be established for this purpose. 2. “Co-operative society” means an enterprise established by legal and (

1. or)natural persons in accordance with the procedure set by law for the purpose of meeting economic, social and cultural needs of its members. Its members shall contribute funds for capital formation, share the risk and profit according to the turnover of members’ goods and services with this society and take an active part in the governing of the co-operative society. 3. “Document acknowledging the contributed member’s share” means a documents confirming person’s participation in the formation of co-operative society’s capital, as well as obligations of the co-operative society to its member. The Law on Securities Market shall not apply to members’ shares of the co-operative society. 4. “Member’s contribution” means person’s monetary and non-monetary property contribution to the co-operative society. 5. “Turnover of goods and services of a co-operative society member with the co-operative society” (hereinafter referred to as the “turnover”) means the amount of value of economic operations and economic events, expressed in monetary value, performed during a financial year by a co-operative society member with the co-operative society. 6. “Payments proportionate to the turnover” means payments to co-operative society members from the profit, in proportion to the turnover of co-operative society members’ goods and services with the co-operative society. 7. “Dividend” means the portion of profit paid to a co-operative society member which is in proportion to the value of share held by each member. Article 3. Status of a Co-operative Society 1. A co-operative society shall be a legal person of limited civil liability. 2. The assets of a co-operative society shall be separated from the assets of its members. A co-operative society shall be liable for its obligations only to the extent of its assets. A member of a co-operative society shall be liable for the obligations of the co-operative society to the extent of member’s contribution subject to payment for member’s share. 3. A co-operative society shall have at least 5 members. 4. A co-operative society shall have its own name. The name of the co-operative society must contain the words "kooperatinė bendrovė" (co-operative society) or "kooperatyvas" (co-operative) 5. A registered office of a co-operative society shall be situated in the Republic of Lithuania. CHAPTER TWO ESTABLISHMENT OF CO-OPERATIVE SOCIETIES AND THEIR RIGHTS Article 4. Incorporators and Incorporation Agreement 1. Incorporators of a co-operative society must be at least 5 natural and (
2. or)legal persons. 2. Each incorporator of a co-operative society must be its member. 3. Incorporators of a co-operative society shall conclude an incorporation agreement of a co-operative society, draw up a draft of by-laws of the co-operative society, convene a statutory meeting. An incorporation agreement shall be a public document. 4. An incorporation agreement shall include the following: 1) name, surname, personal number and place of residence of incorporators - natural persons; name, code, reigstered office and names and surnames of authorised representatives of incorporators – legal persons; 2) rights and duties of incorporators when establishing a co-operative society, their liability for non-compliance with incorporation obligations; 3) name of a co-operative society which is being established; 4) persons (incorporators as well as other persons) who are authorised to represent a co-operative society which is being established, their rights and duties; 5) rates of membership fees, minimum and maximum amounts of member’s share; 6) each incorporator’s obligation to pay a membership fee prior to a statutory meeting and to pay member’s contribution which is not less than minimum member’ share; 7) procedure, terms and conditions for the payment of a membership fee and member’s share, fines for failure to timely pay a membership fee and member’s share; 8) procedure for convening a statutory meeting and voting at it, as well as participants of such meeting; 9) compensation for expenses related to incorporation and remuneration for incorporation; 10) procedure for refunding paid membership fees and members’ shares, if a co-operative society has not been established; 11) procedure for solving disputes among incorporators; 12) date and place of concluding an agreement. 5. An incorporation agreement of a co-operative society must be signed by all incorporators: natural persons and (
3. or)persons authorised by legal persons. Authenticity of the signatures of natural persons who signed an incorporation agreement of a co-operative society must be attested by the notary. 6. authenticity ofand participants of a statutory meetinvand who are citizens of the Republic of Lithuania and are 18 years of age and over, or citizens and legal persons registered in Lithuania. Article 5. By-laws 1. Incorporation documents of a co-operative society shall comprise by-laws and an incorporation agreement. 2. By-laws of a co-operative society shall be a document which serves as the basis for co-operative society’s activities. 3. The by-laws of a co-operative society shall state: 1) the name of the co-operative society, the address of its registered office; 2) the purposes of activities of the co-operative society; 3) duration of activities of the co-operative society where the activities are of limited duration; 4) the amount of the membership, minimum and maximum rates of members’ shares, the procedure for payment of membership fees and members’ shares, additional members’ shares, assessment of the non-monetary members’ shares; 5) conditions of membership in the co-operative society, rights and duties of the society members, procedure for disposal of members’ shares; 6) management and supervisory organs of the co-operative society, their competence, the procedure of their election and dismissal, requirements for a Board member, chairman, head of the administration, member of the audit commission (auditor); 7) conditions and procedure for joining a co-operative society, withdrawal or expulsion therefrom, procedure for registration of the co-operative society members in the register of the co-operative society members; 8) procedure for calling meetings of members of the co-operative society and the procedure of voting at the meetings; 9) procedure for registration and performance of operations of the turnover of goods and services of a co-operative society and its members, procedure for drawing up and approval of an annual financial statement of the co-operative society; 10) procedure for distribution and approval of profit (losses); 11) procedure for borrowing of funds from its own members; 12) conditions and procedure for the use of property and services rendered by the co-operative society. 4. The by-laws of a co-operative society may contain other articles, provided that said articles are in conformity with the laws of the Republic of Lithuania. 5. By-laws of a co-operative society must be signed, prior to a statutory meeting, by all incorporators natural persons and (
4. or)persons authorised by legal persons. The notary shall attest the authenticity of the signature of a natural person who has signed the by-laws of a co-operative society. Article 6. Registration 1. A co-operative society shall be registered with the register of legal persons in accordance with the procedure established by law. Upon registration of a co-operative society which is being established, it shall be considered established and acquire the rights of a legal person. 2. A statutory meeting shall be convened and voting shall be conducted at it in accordance with the procedure defined in an incorporation agreement. A statutory meeting may be convened if the incorporators have paid all membership fees specified in the incorporation agreement, and paid all members’ shares. By-laws of a co-operative society must be approved at a statutory meeting. The moment of approval of by-laws of a co-operative society at a statutory meeting shall be considered to be the moment of conclusion of such by-laws. Requests to register a co-operative society may be made only following the statutory meeting in which the by-laws of a co-operative society have been approved and of its management organs have been elected. 3. After registration of a co-operative society, the incorporators as well as other persons who have been authorised to represent a co-operative society which is being established, must within 10 days transfer incorporation documents and the formed management organs must accept such documents, drawing up an acceptance certificate. Article 7. Rights of a Co-operative Society A co-operative society shall have the following right: 1) to engage in activities complying with laws and purposes laid down in the by-laws of a co-operative society; 2) keep accounts with the banks of the Republic of Lithuania and foreign states; 3) manage the property belonging to it by the right of ownership, use it and dispose of it according to the law of the Republic of Lithuania; 4) form unions of co-operative societies, as well as other organisations in accordance with the procedure established by other laws ; 5) enter into contracts and assume property liabilities; 6) fix prices, rates and tariffs for its products, work and services; 7) borrow under agreement from the funds of its members according to the procedure laid down in the by-laws of the co-operative society; 8) determine its organisational structure, set up branches and other structural subdivisions, as well as establish other enterprises and organisations. 2. A co-operative society may also have other rights which do not contradict the laws and other legal acts of the Republic of Lithuania. 3. Disputes between a co-operative society and its members, and third persons shall be considered according to the procedure established by law. CHAPTER THREE MEMBERS OF A CO-OPERATIVESOCIETY Article 8. Members 1. Natural and (
5. or)legal persons may be members of a co-operative society. 2. A person who wishes to become a member of a co-operative society must file an application. An application shall be considered and a person shall become a member of a co-operative society under the conditions and in the manner prescribed by the by-laws of a co-operative society, provided that he has paid a membership fee and the sum of his member’s share is not less the amount of minimum member’s share. If a person is not admitted to a co-operative society, the paid membership fee and member’s share shall be refunded in the manner and within the time limit specified in the by-laws, but not later than within three months from the adoption of a decision. 3. Members of the co-operative society shall be registered in the register of members of the co-operative society in the manner prescribed in the by-laws of this co-operative society. 4. The register of the members of the co-operative society shall contain the following information: 1) name, surname, personal number and place of residence of a natural person, or the name, code and registered office of a legal person; 2) date of joining the co-operative society; 3) amount of the member’s share (description of member’s share and monetary expression of its value), as well as each change in the amount of the member’s share; 4) date of termination of the membership in a co-operative society. 5. At a meeting of the members of a co-operative society a member of a co-operative society – legal person shall be represented by the body to whose competence such representation is assigned, or a person authorised by it. Article 9. Termination of Membership Membership in the co-operative society shall be terminated: 1) upon the member's withdrawal; 2) upon the member's expulsion; 3) when he transfers his member’s share to another person; 4) upon the death of the member – natural person; 5) after the winding up of the legal person - member of the co-operative society or upon the reorganisation of its activities; 6) upon the liquidation of the co-operative society. Article 10. Procedure for Termination of Membership and Settlement Following the Termination 1. The procedure for withdrawing from a co-operative society shall be established in the by-laws of the co-operative society. 2. A member may be expelled from the co-operative society in accordance with the procedure established in the by-laws, by decision of the meeting of the members of the co-operative society, if he fails to fulfil the duties of a member, violates the by-laws of the co-operative society, decisions of the meeting of the members, the laws of the Republic of Lithuania related to the activities of co-operative societies, causes damage to the co-operative society. If the expelled member of the co-operative society disagrees with such decision, he shall have the right to appeal to the court within three months of the date when he learnt or should have learnt about the adoption of the said decision. 3. Membership of a person who has transferred his member’s share shall terminate upon adoption of a decision by the meeting of the co-operative society members regarding the membership of the person who has acquired the transferred member’s share. 4. A co-operative society must settle accounts with the person whose membership has been terminated due to his withdrawal, expulsion or transferring of a member’s share to another person, not later than within a year from the day of its members meeting at which a financial statement and profit (losses) of a financial year when membership of such person terminates, are approved. 5. The co-operative society must return to the person whose membership has been terminated due to his withdrawal, expulsion or transferring of member’s share to another person, member’s contribution for the member’s share, provided that such share has not been transferred to another person, refund a portion of the property assigned, by decisions of members’ meetings, to the member before the beginning of a financial year when membership terminates, in cash at market prices, pay the payment and dividend proportionate to the turnover, if a decision on their payment for that year has been adopted by the members’ meeting. Non-monetary member’s contributions, if such person wishes so, shall be returned in kind, except for the cases when this is impossible or would cause disproportionate damage to a co-operative society or the person whose membership in the co-operative society terminates. Membership fee shall not be refunded. 6. The heirs of a deceased natural person - member of a co-operative society, assignees of the rights of a liquidated or reorganised legal person – member of a co-operative society, if they are not the members of the co-operative society and have not become, in the manner prescribed by it by-laws, members of this co-operative society within a year from the acquisition of these rights, shall be refunded the member’s contribution specified in paragraph 5 of this Article, contributed for member’s share, returned a portion of the property assigned to the member, paid the payment and dividend proportionate to the turnover in the manner and under the conditions laid down in this Article. Article 11. Rights and Duties of a Co-operative Society Member A co-operative society member shall have the right to: 1) participate in a meeting of co-operative society members, elect and be elected to the management and supervisory organs; 2) have one vote during the voting regardless of the amount of the member’s share; 3) dispose of a member’s share in accordance with the procedure established by this Law and other laws; 4) receive a payment proportionate to the turnover; 5) receive a dividend; 6) to use the property and services of a co-operative society in the manner and under the conditions laid down in the by-laws; 7) receive a portion of property (its monetary equivalent) of the co-operative society in liquidation in accordance with the procedure established in the by-laws; 8) obtain information on the activities and property of the co-operative society; 9) be a member of several co-operative societies, unless the by-laws of these co-operative society provide otherwise; 10) lend funds to a co-operative society under an agreement according to the procedure established by its by-laws; 11) withdraw from a co-operative society and receive the member’s contribution, specified in paragraph 5 of Article 10 of this Law, contributed for member’s share, payment for the portion of the property assigned to the member, payment and dividend proportionate to the turnover. 2. A member of a co-operative society must adhere to the bylaws, implement decisions of the management and supervisory organs of the co-operative society, carry out turnover with the co-operative society, have care of the property of the co-operative society, and look after the increase thereof. 3. Other rights and duties of a member of a co-operative society shall be laid down in the by-laws of the co-operative society. CHAPTER FOUR CAPITAL OF A CO-OPERATIVE SOCIETY AND DISTRIBUTION OF PROFIT Article 12. Composition of the Capital 1. The capital of a co-operative society shall consist of the own and borrowed funds. Own funds shall be formed from membership fees, members’ shares investments, deductions from the profit of this society, other income not prohibited by law. The capital of a co-operative society, with the exception of members’ contributions made for member’s share, may be indivisible or assigned (the whole or a part of
6. it)to the members of the society. The borrowed capital shall consist of loans and other borrowed funds. 2. Own funds shall constitute fixed and reserve capital. Fixed capital shall be used for business activities of a society and for the acquisition of assets. On the decision of the meeting of the members (agents), the reserve capital shall be used for extraordinary expenditure and for covering losses, and a part of the reserve capital, exceeding 1/10 of the own capital, may be used for other purposes on the decision of the members’ meeting. 3. Deductions to the reserve capital shall be mandatory for co-operative societies until the reserve capital makes up 1/10 of the own funds value. The amount of mandatory deductions into the reserve fund make up not less than 5 per cent of the net profit. Article 13. Co-operative Society Member’s Share 1. The co-operative society member’s share shall be equal to the value of member’s contributions made by the member. 2. The minimum and maximum amount of the member’s share, the procedure for payment thereof as well as additional member’s contributions, liability for the violation of this procedure as well as the procedure for evaluation of non-monetary (things, results of intellectual activities, as well as other tangibles and intangibles) member’s share shall be established in the by-laws. 3. A member’s share may not include land and property for agricultural purposes the right to disposal of which is restricted for the person who makes a member’s contribution, as well as the property to which a co-operative society may not acquire the right of ownership. 4. Member’s contribution made by a co-operative society member for member’s share shall be registered in accounting documents and he shall, in the manner prescribed by the by-laws, be issued a document acknowledging the contributed member’s share. Such document shall include the following information: 1) name of a co-operative society; 2) name, surname and personal number of a holder of member’s share - natural person, or name and code of legal person; 3) value of member’s contributions. 5. Co-operative society members shall have the right to transfer member’s share to other persons. Co-operative society members shall have preference to acquire under the same conditions the member’s share being transferred. A co-operative society member must, in the manner prescribed by the by-laws, inform in writing other members of the co-operative society the management organ about intention to transfer a member’s share. If none of the co-operative society members who were informed about a member’s share being transferred, has not acquire the said member’s share within a month, a member who transfers the member’s share shall acquire the right to transfer it to the third person. A co-operative society member shall dispose of a member’s share in the manner prescribed by this Law, other laws and the by-laws. Article 14. Distribution of Net Profit 1. The distribution of the net profit earned by a co-operative society during a financial year must be approved not alter than within 4 months of the end of the financial year. 2. Net profit shall be distributed in the following manner : 1) deductions to capital reserve fund shall be made; 2) a part of the profit proportionate to the volume of the turnover; 3) dividends shall be paid. 3. The undistributed profit shall be used according to the procedure established in the by-laws. 4. Up to 10 per cent of the dividends shall be appropriated for the payment of dividends. 5. The maximum amount of dividend shall be established in the by-laws of the co-operative society. CHAPTER FIVE MANAGEMENT AND CONTROL OF A Co-operative society Article 15. Management Organs of a Co-operative Society 1. The management organs of a co-operative society shall be the members' meeting, the board or the head of the administration. 2. In a co-operative society whose membership exceeds 100, the members' meeting may be replaced by the meeting of representatives of the co-operative society members. A meeting of representatives of the co-operative society members shall have the powers of the members’ meeting established by this Law. In the meeting of representatives of the co-operative society each representative shall have one vote. The by-laws of the co-operative society shall establish the procedure and conditions for election and dismissal of representatives of the co-operative society members. Audit shall be mandatory for a co-operative society whose by-laws provide for the substitution of a meeting of representatives of the members for a members’ meeting. 3. The by-laws of a co-operative society whose membership does not exceed 50, may establish that the board is not formed and that its functions shall be carried out by the head of the administration. Article 16. Meeting of Co-operative Society Members 1. The meeting of the co-operative society members shall: 1) make decisions concerning the admittance or expulsion of members of a co-operative society, termination of membership upon transferring a member’s share to another person. A members’ meeting may instruct the board to make these decisions, except those regarding the expulsion of a member; 2) amend and supplement the by-laws of a co-operative society; 3) elect, remove the board members and its chairman or, if the board is not set up, elect, remove the head of the administration; also elect, remove members of the audit commission and its chairman (auditor) or, if the audit commission is not set up, approve a firm of auditors; 4) evaluate the work of the board, and in the case when the board is not set up, the work of the head of the administration and the audit commission (auditor), as well as findings of the audit commission (auditor) or a firm of auditors with regard to a financial statement of a co-operative society; 5) approve annual financial statements, make decisions on the distribution of the profit and refunding of losses; 6) approve a programme of co-operative society’s activities; 7) decide the issues relating to the joining of unions by a co-operative society, withdrawal from them, establishment of their structural subdivisions and representative offices, other enterprises and organisations, termination of their activities, as well as other organisational issues; 8) approve rules of procedure of the board, the head of the administration and the audit commission (auditor); 9) approve the procedure of remuneration for the board members and its chairman, and in the case when the board is not set up – the head of the administration, as well as the audit commission (auditor); 10) make decisions on the acquisition, transferring, lease or mortgage of the fixed assets, making and granting long-term loans, guarantee and surety for the obligations of other economic entities, provided that the amount of these transactions exceed 1/10 of the value of co-operative society’s own funds; 11) adopt a decision to reorganise, restructure or liquidate a co-operative society. 2. The meeting of co-operative society members may have other rights and powers provided for in the by-laws of a co-operative society. 3. The meeting of co-operative society members shall be convened by the board of the co-operative society, and if the board is not set up or it does not convene a meeting in the set cases and within the fixed time limits – by the head of the administration or not less than ¼ of co-operative society members. 4. Scheduled meetings of co-operative society members shall be convened by the board (and if the board is not set up – by the head of the administration) annually, but not later than within 4 months after the end of a financial year. 5. Unscheduled meetings of the members shall be convened by the board (and if the board is not set up – by the head of the administration) on its (his) own initiative or on the initiative of not less than 1/4 of the members of a co-operative society. 6. The by-laws shall define the procedure for drawing up an agenda of a members’ meeting and informing the members about a meeting. 7. The meeting of the co-operative society members may adopt decisions if it is attended by at least 1/2 of all members. If the meeting is not attended by the specified number of the members, a repeat meeting pertaining to the same issues on the agenda shall be called. Decisions may be adopted at such a meeting if it is attended by at least 1/3 of the co-operative society members. If such meeting is not attended by the specified number of the co-operative society members, one more meeting shall be convened. It shall adopt decisions regardless of the number of the co-operative society members attending. 8. Decisions at the meetings of the co-operative society members shall be adopted by a simple majority vote of the co-operative society members who have registered in the list of the participants of the meeting, except in the cases specified in subparagraphs 2 and 11 of paragraph 1 of this Article and in the cases of expulsion of the members. In theses cases decisions shall be adopted by a majority vote of at least 2/3 of the co-operative society members who have registered in the list of the participants of the meeting. 9. Voting at the meeting of the co-operative society members shall be by open ballot, except in the cases where voting by secret ballot is prescribed by this Law, the by-laws of the co-operative society or when this is requested by at least 1/10 of the co-operative society members attending the meeting. Members of the board and its chairman, and in the case when the board is not set up – the head of the administration, as well as the audit commission members and its chairman (auditor) shall be elected by secret ballot. 10. Decisions concerning the acquisition, transferring or lease of a portion of the fixed assets, which exceeds 1/10 of the value of the co-operative society own funds, shall require a decision of the members’ meeting adopted by a majority vote, and decisions concerning guarantee or surety of the obligations of other economic entities, or mortgage of the property, or getting and granting of long-term loans when the amount of such transaction exceeds 1/10 of the co-operative society’s own funds, shall require a decision of the members’ meeting, adopted by not less than 2/3 majority vote. The total value of such transactions made without a decision of the members’ meeting, during a financial year may not exceed 1/10 of the value of the co-operative society’s own funds. 11. Minutes of the meeting of the co-operative society members shall, not later than within 5 working days, be signed by the secretary, chairman of the meeting and a co-operative society member authorised by the meeting. 12. A list of the co-operative society members who arrived and registered before the beginning of the meeting, shall be attached to the minutes of the members’ meeting. Article 17. Board or Head of the Administration of a Co-operative Society 1. The board shall be a collegial management organ of the co-operative society. Its activities shall be directed by the chairman of the board. The number of the board members shall be fixed in the by-laws, but it may not be less than 3. 2. Board members and its chairman shall be elected by the meeting of the co-operative society members for a term of office not exceeding 4 years. A board member, chairman or the entire board may be recalled or may resign prior to the expiry of their term of office in the manner prescribed by the by-laws. 3. Working procedure of the board, duties and powers of the board members and its chairman shall be set by the rules of procedure of the board (the head of the administration) approved by the meeting of the co-operative society members. 4. The board shall adopt its resolutions at the sitting which shall be valid if attended by at least 2/3 of all the members of the board. The working procedure and the procedure for convening sittings shall be established in the rules of procedure of the board. The board shall invite to its sittings the head of the administration if he is not the member of the board. 5. Irrespective of the fact whether the board is set up or not, a co-operative society must have the head of the administration. 6. The head of the administration shall be elected and dismissed by the board, and if the board is not set up – by the meeting of the members of a co-operative society. An employment contract with the head of the administration shall be signed by the board chairman, and if the board is not set up – a person authorised by the meeting of the members of a co-operative society. 7. A board member, its chairman, co-operative society member, as well as another legally competent natural person may be head of the administration. Requirements for the head of the administration shall be set in the by-laws. A member of the audit commission, its chairman (auditor) may not be head of the administration. 8. The head of the administration shall be a single-member management organ who directs the administration. The head of the administration shall organise and carry out business-financial activities of a co-operative society, represent the co-operative society in the relations with the third persons, the court, arbitration, conclude transactions, hire and dismiss employees, conclude employment contracts with them, submit to the board material pertaining to his own work, drafts of programmes of activities of a co-operative society, cost-benefit calculations, financial statements and distribution of profit (losses), carry out other activities assigned to him in the co-operative society by-laws. Working procedure of the administration shall be established in the rules of procedure of the administration. 9. The head of the administration shall participate in sittings of the board in a deliberative capacity, if he is not a member of the board. 10. The board members and the board chairman, the head of the administration must refund to the co-operative society the damages caused by reason of the decisions of the board or the administration made in violation of the co-operative society by-laws or the laws related to activities of co-operative societies. Resignation or removal of a board member and the board chairman or the head of the administration shall not release them from refunding the damages caused through their fault. 11. Members of the co-operative society board shall jointly and severally compensate for the damage. Individual board members who voted against when making unlawful decisions harmful for a co-operative society (this must be recorded in the minutes), shall be released from refunding the damage. Article 18. Control of Activities 1. Business-financial activities of a co-operative society shall be controlled by the audit commission (auditor). Members of the audit commission and its chairman (auditor) shall be elected at the co-operative society members' meeting for a term not exceeding 4 years. The co-operative society by-laws may provide that its business-financial activities shall be controlled by a firm of auditors approved by the co-operative society members’ meeting. 2. Co-operative society board members, its chairman, the head of the administration, as well as a person related to the member of the above mentioned management organs by blood, marriage or partnership may not be members of the audit commission or its chairman (auditor). 3. The audit commission (auditor) or a firm of auditors shall: 1) audit business-financial activities of the co-operative society; 2) report all violations established in the activities of the co-operative society to the meeting of the co-operative society members, the board and the head of the administration; 3) at the end of the financial year, present to the meeting of the members its/his opinion on the annual financial statements of the co-operative society. 4. The meeting of the co-operative society members, the board (if it is snot set up – the head of the administration), the audit commission (auditor) may invite experts to take part in the auditing. 5. Working procedure of the audit commission (auditor) shall be established in its rules of procedure. 6. State institutions shall have the right to inspect the activities of the co-operative society in the manner prescribed by law. CHAPTER SIX WINDING UP AND REORGANISATION OF A CO-OPERATIVE SOCIETY Article 19. Reorganisation of a Co-operative Society 1. Reorganisation means winding up of a co-operative society as a legal person without going into liquidation. 2. Co-operative societies may be reorganised in the following ways: 1) by merger; 2) by division. 3. Reorganisation of co-operative societies by merger shall be carried out by: 1) joining one or several co-operative societies to the co-operative society to which all rights and duties of the co-operative society under reorganisation are passed; 2) combining two or more co-operative societies to form a newly created co-operative society to which all rights and duties of the reorganised co-operative societies are passed. Reorganisation of co-operative societies by way of division shall be carried out by: 1) parcelling out the rights and duties of a reorganised co-operative society to other co-operative societies which continue their business; 2) unbundling – founding of two or more co-operative societies on the basis of one co-operative society under reorganisation, to which the rights and duties of the co-operative society under reorganisation are passed in certain portions. 5. The bodies of the co-operative societies which are being reorganised must draft reorganisation conditions. The said conditions shall state: 1) the name, registered office, code of every co-operative society under reorganisation, the code of the value-added tax payer, the register in which the data on this co-operative society are collected and stored; 2) type of reorganisation, co-operative societies which terminate their activities and co-operative societies which continue activities after reorganisation; 3) procedure, conditions and time limits of becoming of a member of a co-operative society under organisation a member of a co-operative society which continues activities after the reorganisation, as well as payments to the co-operative society members; 4) the moment from which the rights and duties of the co-operative society which terminates its activities are passed to a co-operative society which continues activities after the reorganisation; 5) additional rights granted to the management and supervisory organs of the co-operative societies under reorganisation as well as to experts during the period of reorganisation; 6) conditions upon meeting of which the reorganisation may be finished. 6. By-laws of each co-operative society that will be operating after the reorganisation shall be drafted together with the reorganisation conditions. 7. The management organ of each co-operative society that takes part in the reorganisation must prepare written reports. Such reports must indicate the purposes of reorganisation, explain the conditions of reorganisation, continuity of the activities of the co-operative society, as well as specify time limits and economic grounds of reorganisation, if this is requested by the members of the co-operative society which takes part in the reorganisation, having not less than 1/20 votes. 8. Conditions pertaining to the reorganisation of a co-operative society must be evaluated by the experts of proper qualification. Each co-operative society taking part in the reorganisation shall assign an expert. 9. Creation of the conditions of reorganisation must be publicly announced thrice, with at least 30-day intervals between such announcements, or it must be publicly announced one time and all the creditors of the co-operative society must be informed about that in writing. The following must be specified in the announcement: the name, the registered office, the code of each co-operative society under reorganisation, the code of the value-added tax payer, the register in which the data on this co-operative society are collected and stored, type of reorganisation, the moment of a co-operative society which terminates its activities and a co-operative society which continues the activities after the reorganisation, from which the rights and duties of the co-operative society which terminates the activities are passed to the co-operative society which continues the activities after the reorganisation, where and from when it is possible to familiarise oneself with the reorganisation conditions, incorporation documents of the co-operative societies which continue activities after the reorganisation and (
7. or)co-operative societies which are established anew, or drafts thereof, and reports prepared by the management organs of all the co-operative societies taking part in the reorganisation, evaluations of the experts and financial statements for the last three financial years. 10. The decision on the reorganisation of a co-operative society must be adopted by at least 2/3 of votes of the co-operative society members who have registered in the list of members of the meeting. The decision on the reorganisation of a co-operative society may be adopted only after 30 days from the public announcement of the reorganisation conditions. Reorganisation conditions must be approved and by-laws shall be amended or new ones shall be adopted by the decision on the reorganisation of a co-operative society. 11. Document confirming the adoption of a decision on the reorganisation of a co-operative society must be submitted to the register of legal persons not later than on the first day of official proclamation. The administrator of the register of legal persons must proclaim a decision to reorganise a co-operative society in according to the procedure established by law. 12. Reorganisation shall be recognised as finished when by-laws of a new co-operative society established after the reorganisation or amended by-laws of co-operative societies continuing activities after the reorganisation are recorded in the register of legal persons. 13. The first meeting of the members of a co-operative society established through reorganisation must elect supervisory and management organs. 14. A co-operative society under liquidation may not be reorganised. Article 20. Restructuring of a Co-operative society 1. A co-operative society shall be restructured in accordance with the procedure established in the Civil Code and this Law. All rights and duties of a co-operative society which is being restructured shall be passed to a legal person who will function after the restructuring. 2. A decision to restructure a co-operative society as well as incorporation documents of a legal person who will function after the restructuring shall be adopted by the members’ meeting if not less than 2/3 of the co-operative society members who registered in the list of participants of the meeting, vote for it. 3. Restructuring of a co-operative society must be announced thrice in according to the procedure established in the by-laws with at least 30-day intervals in between, or it must be publicly announced one time, not later than 30 days prior to the adoption of a decision on restructuring, and all the creditors of the co-operative society are informed about this in writing. The announcement must contain the following: 1) name of a co-operative society; 2) registered office of a co-operative society; 3) code of a co-operative society; 4) register in which data on a co-operative society under restructuring are gathered and stored; 5) legal form of a legal person into which a co-operative society is being restructured; 6) procedure, conditions and time limits of a restructured co-operative society member’s becoming a participant of the legal person continuing activities after the restructuring; 7) moment from which the rights and duties of a co-operative society under restructuring are passed to a legal person who continues activities after the restructuring; 8) where and from when it is possible to familiarise oneself with conditions of restructuring, if they are created, incorporation documents of a legal person who will function after the restructuring, and annual financial statements of a co-operative society under restructuring for the last three financial years. 4. Document confirming the adoption a decision on the restructuring of a co-operative society must be submitted to the register of legal persons not later than on the first day of public announcement. The administrator of the register of legal persons must proclaim a decision to restructure a co-operative society in the manner prescribed by legal acts. 5. Restructuring shall be recognised as finished from the moment of recording incorporation of a legal person who will function after the restructuring in the register of legal persons. 6. Incorporation documents shall become invalid if they have not been submitted to the register of legal persons within 6 months of the adoption of a decision to restructure a co-operative society. Article 21. Liquidation of Co-operative Society 1. A co-operative society shall be liquidated: 1) by the decision of the meeting of members; 2) upon the expiry of the time period set for the activities in the by-laws; 3) when the remaining number of co-operative society members is less than the minimum number permitted by this Law, if the co-operative society members do not agree to reorganise or restructure the co-operative society within 6 months after such reduction; 4) by the decision of the court or creditors’ meeting to liquidate a bankrupt co-operative society; 5) by the court decision when the establishment of a co-operative society is declared invalid as provided for in the Civil Code; 6) by the court decision on the initiative of the administrator of the register of legal persons as provided for in the Civil Code; 7) by the court decision when activities of a co-operative society is recognised as not conforming to the requirements of the Civil Code, and a measure of liquidation is applied. 2. The procedure of liquidation of a co-operative society shall be laid down by the Civil Code and this Law. 3. A person which adopts a decision on the liquidation of a co-operative society shall appoint the liquidator. He must have adequate qualifications. Several liquidators may be appointed. If several liquidators are appointed, a liquidation commission shall be set up and one of the liquidators shall be appointed chairman of the liquidation commission. 4. After the appointment of the liquidator (liquidation commission), the organs of a co-operative society, except the members’ meeting, shall lose their powers, the competence of the meeting of the co-operative society members regarding conclusion of transactions, as well as the rights and duties of the management and supervisory organs shall be passed to the liquidators (liquidation commission). 5. The liquidator (liquidation commission) shall: 1) submit to the register of legal persons the documents necessary to record the altered data of the register; 2) announce the liquidation in the manner prescribed in paragraph 7 of this Article; 3) represent the co-operative society in liquidation in the court, in the relations with the state institutions, agencies, other legal and natural persons; 4) during the liquidation period draw up the balance sheets of the co-operative society; 5) under the contracts of a co-operative society, complete the discharge of obligations, including payment of debts to the state social insurance fund budget and amounts due as well as penalties and default interest, as calculated by the tax administrator's officers and other state institutions, not later than within six months from the day of announcement of the liquidation, and enter into new contracts which do not conflict with the laws regulating the activities of the co-operative society in liquidation, report back to the meeting of the co-operative society members within the time limits set by it; 6) within six months from the announcement of the liquidation accept and award creditors' claims, collect debts; 7) in case of disputed obligations, allot an appropriate amount from the assets of the co-operative society for the discharge thereof and pay it to the deposit account of the notary's office; 8) after the lapse of six months from the announcement of the liquidation, distribute the remaining property among the co-operative society members in the manner prescribed by the by-laws, having regard to the amount of the member’s share. In the event of disputes between the members of the co-operative society about the distribution of the remaining property, the liquidator (liquidation commission) shall suspend the distribution. Disputes between the members and the members' disputes with the liquidator shall be settled in the court; 9) submit to the register of legal persons the documents which are necessary for striking the liquidated co-operative society off the register of legal persons. 6. The liquidator (liquidation commission) who fails to perform his duties or performs them inadequately, must compensate to the co-operative society for the losses inflicted through the liquidator's (liquidation commission’
8. s)fault, unless otherwise provided for in the by-laws of the co-operative society. The liquidation commission shall be jointly and severally responsible to the co-operative society and the third persons for the losses which the latter incurred through the liquidation commission’s fault. 7. Liquidation of a co-operative society shall be publicly announced two times, with a 30-day interval in between; it shall also be announced to each member and creditor of the co-operative society against his signature or by a registered letter. It shall be announced about the liquidation of a co-operative society to the register of legal persons not later than on the first day of the first day of public announcement. 8. A co-operative society in liquidation may enter into only those transactions which are related to the termination of the activities of the co-operative society, or which are provided for in the decision to liquidate the co-operative society. 9. Documents of the liquidated co-operative society shall be kept in the manner specified by laws and other legal acts. CHAPTER SEVEN ASSOCIATIONS OF CO-OPERATIVE SOCIETIES Article 22. Establishment and Activities of Associations of Co-operative Societies 1. Co-operative societies may form associations for the fulfilment of the objectives provided for in their by-laws. Other legal persons (companies, societies, associations, etc) may also be members of the associations, if their membership is in conformity with the objectives of the associations of co-operative societies. An association of co-operative societies may be composed of two or more co-operative societies. 2. Associations of co-operative societies shall be established, managed, reorganised, liquidated, and function in the same manner as co-operative societies. 3. Unions of co-operative societies shall function in accordance with their by-laws. By-laws shall be adopted by the congresses, conferences or meetings of their delegates. An association shall be deemed established when it is registered according to the procedure established in this Law. 4. Co-operative societies and their associations may take part in the activities of international co-operative organisations and engage in other international activities.” Article 2. Entry into Force of the Law 1. The Law shall become effective as of 1 January 2003. 2. From the entry into force of this Law, the Law of the Republic of Lithuania on Co-operative societies (Co-operatives) shall apply only to: 1) procedures related to the establishment of co-operative societies in respect of which incorporation agreements have been concluded prior to the entry into force of this Law; 2) procedures related to the reorganisation or liquidation of co-operative societies in respect of which decisions on their reorganisation or liquidation have been adopted prior to the entry into force of this Law. Article 3. Implementation of the Law 1. Co-operative societies must co-ordinate their by-laws in accordance with this Law within one year from the entry into force of this Law. 2. Co-operative societies which were established prior to the entry into force of the Law of the Republic of Lithuania on Co-operative societies (Co-operatives) and continue their activities, and in which owned undivided capital exceeds the sum of members’ contributions of the co-operative society members at least one time, may not be restructured into a legal person of another legal form. 3. When liquidating co-operative societies indicated in paragraph 2 of this Article, subparagraph 8 of paragraph 5 of Article 21 of this Law shall not apply. The rest of the co-operative society property, except the owned undivided property, shall, taking into account the amount of the member’s share, be divided among the co-operative society members in the manner prescribed by the by-laws. Such property shall be transferred to the members of the association whose member the liquidated co-operative society was prior to the entry into force of this Law, in the manner prescribed by the by-laws of this association. Article 4. Proposal to the Government To propose to the Government to prepare prior to 1 January 2004 the legal acts regulating activities of agricultural co-operative societies. I promulgate this Law passed by the Seimas of the Republic of Lithuania. PRESIDENT OF THE REPUBLIC VALDAS ADAMKUS