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gttretetreretrgrgfv frgegfefefe gerfteew Case No.7/95 THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA R U L I N G On the compliance of the norms of Part 1, Article 10 and Part 1 Article 50 of Company Law of the Republic of Lithuania and the provisions of Part 2, Article 2 and Part 6, Article 14 of the Law of the Republic of Lithuania on Initial Privatization of State Property with the Constitution of the Republic of Lithuania 24 January 1996, Vilnius The Constitutional Court of the Republic of Lithuania, composed of the justices of the Constitutional Court Algirdas Gailiûnas, Kæstutis Lapinskas, Zigmas Levickis, Vladas Pavilonis, Pranas Vytautas Rasimavièius, Stasys Staèiokas, Teodora Staugaitienë, Stasys Ðedbaras and Juozas Þilys, the secretary of the hearing - Daiva Pitrënaitë, the petitioner - Kæstutis Skrebys and Gediminas Vagnorius, the Seimas members, representatives of a group of the Seimas of the Republic of Lithuania members, the party concerned - Alfonsas Vileita, the Seimas representative, the adviser of the Seimas Committee of State and Law, pursuant to Part 1, Article 102 of the Constitution of the Republic of Lithuania and Part 1, Article 1 of the Law on Constitutional Court of the Republic of Lithuania, in its public hearing on 4 January 1996 conducted the investigation of Case No.7/95 subsequent to the petition submitted to the Court by a group of the Seimas of the Republic of Lithuania members, requesting to investigate if the norms of Part 1, Article 10 and Part 1, Article 50 of Company Law of the Republic of Lithuania, as well as the provisions of Part 2, Article 2 and Part 6, Article 14 of the Law of the Republic of Lithuania on Initial Privatisation of State Property are in compliance with the Constitution of the Republic of Lithuania. The Constitutional Court has established: I The Seimas passed Company Law of the Republic of Lithuania on 5 July 1994 (Official Gazette “Valstybës Þinios”, No.55 - 1046, 102 - 2050, 1994; No.41 - 993, 1995), the Supreme Council of the Republic of Lithuania adopted the Law of the Republic of Lithuania on Initial Privatization of State Property on 28 October 1991 (Official Gazette “Valstybës Þinios” No.10 - 261, 1991 together with subsequent amendments). In the laws of 20 July 1994 some articles of the Law on Initial Privatization of State Property, including those disputed by the petitioner, were amended (Official Gazette “Valstybës Þinios” No.58 - 1137, 59 - 1159, 1994). The petitioner requests to investigate if the norm of Part 1, Article 10 of the Company Law “Reorganization is transformation of a Company as a legal person without liquidation procedure”, the norm of Part 1, Article 50 of the said law, which provides that “public and private companies shall have to amend their Articles of Association according to this law and have them registered according to the procedure established by the Law on Register of Enterprises within 9 months as of the date of the enactment of this law” (according to the wording of the Article which is in force at present - within 12 months), as well as the norm of Part 2, Article 2 of the Law on the Initial Privatization of State Property which provides that “companies, which are included either in the list of the objects, which are subject to privatization for hard currency, or in that of special purpose companies” shall not be entitled to increase its share capital and authorised capital from its own funds which are formed out of the results of its annual commercial activities, providing the share capital, including the capital which has been accumulated according to other laws, exceeds 30% of the authorised capital of the company, and also the norm of Part 6, Article 14, which provides that the shares of private joint stock companies which are disposed of by the state power and government institutions shall be sold by announcing the close subscription for shares. II The petitioner grounds his request with following arguments.

1. The disputed norms of Company Law do not insist that companies undergoing reorganization be established legally, i. e. that the company until reorganization be founded pursuant to earlier in force Company Law, or according to the prescriptions of the new Company Law, neither do they insist upon reregistration of state or state stock enterprise into a company after it has been privatized according to the procedure established by the Law on Initial Privatization of State Property, as well as other legal acts, regulating privatization of state property. On the contrary, the provision of Part 1, Article 50 of the said law stipulates making no reservations: “Public and private companies shall have to amend their Articles of Association according to this Law and have them registered according to the procedure established by the Law on the Register of Enterprises within 12 months as of the date of the enactment of this law”, and, as a matter of fact, conditions are created to legalize unlawful rewriting of state and state stock enterprises (without privatization procedure, nor any official bargain and sale or other type of negotiation transactions, thus violating the Law on Initial Privatization of State Property, as well as then in force Law on State Enterprises) into private companies, as such companies are already entitled to reorganization and to ostensibly lawfully register themselves according to the new Company Law.
2. In the contested provision of Part 2, Article 2 of the Law on Initial Privatization of State Property certain enterprises are indicated, which are allowed to increase their share capital only up to no more than 30% of its authorised capital share. It means that this provision already does not prohibit all the remaining state enterprises, i. e. those in which more than 50% of the authorised capital (shares) belong to the state (local government) by the property right, and which are not included into the list of objects subject to privatization for hard currency, or into the list of special purpose state enterprises, to increase share capital which exceeds 30 or even 50% of the authorised capital of the enterprise. Thereby the privatization of state or public share enterprise without making bargain and sale or other type of negotiation transactions is legalized. This violates the provision of Part 1, Article 2 of the Law on Initial Privatization of State Property which reads: “enterprises may be subject to further privatization only in the case that they have undergone privatization pursuant to the Law of the Republic of Lithuania on Initial Privatization of State Property”, as well as privatization services are evaded, i. e. the enterprise is privatized neither with any bargain and sale, or voucher, or money payments. Not only does the Law on Initial Privatization of State Property ban to privatize a state enterprise according to the Law on State Enterprises which was in force until 31 December 1994 by evading the former, but the Law on State Enterprises itself prohibited to do so, in Part 4, Article 4 of which it was indicated that “the share capital of the enterprise cannot exceed the state capital”. Articles 30 and 31 of the said law stipulated that a state enterprise was entitled to invest a certain amount of the profit into production by increasing its share capital, but it was banned to increase the private capital share to the extent that the latter exceeded the state capital and thereby the status of the enterprise would be changed from state into that of private. On the other hand, when the assets of enterprises were constantly indexed, it was simply impossible to accumulate such share (private) capital from the undistributed profit, so that this capital could have exceeded the state one. But no state enterprise could be privatized (it could not change its status into that of private enterprise) according to the Law on State Enterprises. Therefore such privatization of enterprises, which changed their status from a state stock enterprise into that of a joint-stock (private) company by evading the Law on Initial Privatization of State Property was, and is, illegal, as the Law on Initial Privatization of State Property, as well as the Law on State Enterprises were violated, because these laws prohibit to privatize state property in such manner. Thus, as if on the grounds of the Law on State Enterprises, but, as a matter of fact contradicting the said law, state enterprise would become private, and only persons of a certain social group could acquire the property of that enterprise, and not every citizen who was entitled to acquire state property according to the laws of the Republic of Lithuania. Therefore the Law on State Enterprises could not be considered equal to the Law of Initial Privatization of State Property, as only on the grounds of the latter law every state enterprise or any other state property may be privatized, and citizens may acquire the property of state enterprise only subsequent to the procedure prescribed by this law.
3. The disputed provision of Part 6, Article 14 of the Law on Initial Privatization of State Property provide certain persons, on the grounds of their work place and social status, with privileges to acquire property - shares of the enterprises where they work - under much more favourable conditions (for much smaller prices) than other persons. Alongside, this provision legalizes the arbitrary privatization of state enterprises by evading the Law on Initial Privatization of State Property and by violating of then in force Law on State Enterprises. As could be seen in document No.1-05-1470 of the Department of State Control, the enterprises, in which there existed state capital, would reregister into joint-stock companies, as well as into private joint-stock companies, although it is indicated in this document, that state enterprises “were entitled to reregister only into joint-stock companies, in which the remaining state possessions are to be privatized only pursuant to the Law on Initial Privatization of State Property, i.e. by means of public subscription for shares, and never into private joint-stock companies. To privatize state property by close manner only pharmacy, medical technical service, veterinary offices and enterprises, as well as information agencies, editorial offices, enterprises of scientific research of the corresponding profile (pharmacy, medical technical service) were permitted as established by Article 20 of the aforesaid law, and also publishing houses of periodicals (newspapers and magazines) after supplementing the list by the 17 February 1994 Resolution of the Seimas of the Republic of Lithuania “On appending item 8 of the Resolution of the Supreme Council of the Republic of Lithuania “On coming into force of the Law of the Republic of Lithuania on Initial Privatization of State Property””. Thus most joint-stock companies and private joint-stock companies, which have some state property share the same origin, but by further privatizing the aforesaid state property - the shares disposed of by state power and governing institutions, - and by violating equal personal rights which are guaranteed by the Constitution, pursuant to the aforementioned law more favourable conditions are created for the employees of some enterprises, for those of private joint-stock companies to make it more precise, than for the employees of other enterprises to acquire state property: it is employees of private joint-stock companies who can purchase shares from the state with no market price, as the initial price by selling shares by close manner is not raised, whereas the employees from other enterprises can purchase the shares only with a market price. III When preparing the case for the public hearing of the Constitutional Court, Pranciðkus Vitkevièus, the Chairman of the Seimas Committee of State and Law, Julius Veselka, a member the Seimas, Alfonsas Vileita, the adviser of the Seimas Committee of State and Law, submitted their considerations as to the arguments set forth in the request. In the opinion of the said persons, the disputed provisions are in compliance with the Constitution. In Part 1, Article 10 of Company Law only the notion of the enterprise reorganization was established, it regulates neither privileges, nor restrictions, nor other matters concerning the management, utilisation, or disposal of state property. Part 1, Article 50 has no such provisions either, in which the stipulation to amend their Articles of Association according with Company Law and that of the specified time during which it has to be done are indicated. The disputed provisions of Articles 2 and 14 of the Law on Initial Privatization of State Property regulate the rights of state as the owner to correspondingly manage, utilise, or dispose of its property, but the aforesaid articles do not establish any privileges or restrictions which might violate Article 29 of the Constitution. And the fact that some matters concerning the management, utilisation, or disposal of state property is just precisely in compliance with the provisions of Article 128 of the Constitution. IV
4. In the process of judicial investigation Gediminas Vagnorius, a representative of the petitioner, explained that, according to the data of the privatization offices, 32.9% of state property which had been planned to privatize in the initial stage of the privatization, was privatized. In other words, the vouchers have been used, it was allowed to purchase with them, or it was purchased in fact, only one third of the possessions previously assigned to back them. The Law of Initial Privatization of State Property provided for the privatization for vouchers of two thirds of the property subject to privatization, and that for money - of one third. According to the Government data, 72% of the property which was foreseen in the programme of initial privatization, have been privatized. But these numbers cannot differ to such a degree. Such conflict of the data indicates what share of state property is transferred without any bargain and sale transactions. The greater part of the property foreseen in the programme of initial privatization has been transferred to other owners, i.e. it has been privatized without any payments, transactions, and without any voucher or money payments. The aim of the petitioner’s request is to achieve that the Constitutional Court suspended the further illegal privatization, as the remaining property is being privatized at present as well, without making any bargain and sale transactions. In the opinion of the petitioner, the collectives of enterprises who took part in the privatization of state property are innocent because laws and government resolutions created diverse circumstances to make use of them, and the institutions of power, as well as the officials who made amendments to the laws and government resolutions are fully responsible. Political decisions are needed which may eliminate the effects of illegal privatization taking into account that it was because of the decisions of the State, the Government and the Seimas that the said effects appeared. With what we can agree is that formally Articles 10 and 50 of Company Law are in conformity with the Constitution and the laws. But the most important problems is, and which made question the aforesaid articles, that the requirements set forth in them are not complete, e.g. as to the reorganization: the aforementioned articles do not contain provisions as to what shares or capital is recognized legally or illegally acquired. If an enterprise belonged to the state, and later on it was reregistered as a company after the laws had been changed, therefore, in the opinion of the petitioner, the said articles had to prescribe as to what basis, to what bargain and sale transaction, to what bylaw of privatization on the grounds of which it was permitted to reorganize the state enterprise into a company. These articles contain no such prescriptions and essentially they are based on the register data control. Certain privileges may be established for some groups of persons, but different privileges may not be established for the same groups of persons. In this case the collectives of enterprises are meant, which may actually have privileges, but the problem is that some collectives have privileges, whereas others have no privileges whatsoever. The collectives and the people who followed the Law on Initial Privatization of State Property and acquired shares when participating in open subscription for shares (through privatization offices), had to pay their own vouchers and money for these shares ten or forty times, and in some cases one hundred times as much as their nominal value. Persons from the enterprises which were not specially included into the privatization programmes had the opportunity to acquire shares the price of which was a great many times less than their real price. Thus there appears inequality which is forbidden by Article 29 of the Constitution which provides that all people shall be equal before the law and there must be no privileges. The arguments of the representative of the party concerned that Article 128 of the Constitution is not violated, as state property is managed, utilised and disposed of legally according to Company Law, as well as the Law on Initial Privatization of State Property, cannot be agreed with. In the opinion of the petitioner, this it not so. The management, utilisation and disposal of state property are regulated not by each and every law. Disposal of state property according to the law, or not according to the law, depends upon the fact, if such disposal of property is based on the law regulating the disposal of state property. If, e.g., privatization is conducted incorrectly on the basis of the Law on State Enterprises, but this law does not regulate the process of privatization. It regulates the management of the enterprise but it does not regulate the transfer of possessions, therefore it is not correct to maintain that, e.g., the state property was utilised legally during the privatization process. In this case everyone had to base himself on the Law on Initial Privatization of State Property, and not other laws. The Law on State Enterprises provided that every enterprise shall be entitled to use some part of its profit for the purposes of its production, therefore it was permitted to assign some part of the profit to increase capital. But the Law on State Enterprises, as well as Government resolutions, in principle prohibited to accumulate such an authorised share capital that it exceeded state capital. After Article 2 of the Law on Initial Privatization of State Property was supplemented with Part 2, which had not been in the said law before, conditions were created for the enterprise to change its owner without any bargain and sale transaction. The petitioner, therefore, proposes that Part 2 of Article 2 of this law be abrogated so that the Government would not, by using this Part as a cover, as well as by treating it freely, be able to apply the laws in various manner.
5. According to the interpretation of Kæstutis Skrebys, a representative of the petitioner, the provision of Part 1, Article 10 of Company Law, stipulating that “Reorganization is transformation of a Company as a legal person without the liquidation procedure”, does not necessitate that enterprises, which are under reorganization, be legally established, i.e. that the enterprise be established according to the requirements of then in force Company Law, or of the newly adopted Company Law. Neither does the aforesaid provision necessitate that state and state stock enterprise be reregistered after it was privatized pursuant to the procedure established by the Law on Initial Privatization of State Property and other legal acts regulating the privatization of state property. The petitioner concedes that thereby conditions are created to legalize the reregistration of state and state stock enterprises into private joint-stock companies without any privatization, nor with any bargain and sale or any other negotiation transactions making official, thus violating the Law on Initial Privatization of State Property, as well as then in force Law on State Enterprises. The Law on State Enterprises provides that the share of private capital shall not exceed 50% of the total capital amount, but this provision was not followed. A state enterprise, after it had increased its authorised capital, would become reregistered into a joint-stock company, or even into a close company, i.e. into a private enterprise, and later based its activities on other laws which regulate private ownership relations, and not on the Law on State Enterprises.
6. In the opinion of Alfonsas Vileita, a representative of the party concerned, Part 1, Article 10 and Part 1, Article 50 of Company Law which are contested by the petitioner have nothing in common with what has been and is going on in the field of privatization. Company Law regulates the activities of every company, no matter how and by what manner they were established. Part 1 of the disputed Article 10 contains the notion of reorganization. Only existing joint-stock companies are subject to reorganization. The need to reorganize them is natural. Sometimes this need arises because of the interests of the companies themselves, viz., commercial, trade, production, etc., as well as market struggle interests. Reorganization may also be obligatory in the case that the Service for Prices and Competition requires to do so. From the economical point of view, it would be far-fetched to prohibit to reorganize companies. This Article, therefore, formally is in compliance with Article 29, as well as Article 128, of the Constitution. Part 1, Article 50 contains the second disputed norm. Not only does this norm is formally in compliance with the Constitution, but it is essentially indispensable. The legislator obligated every existing joint-stock company to reregister itself and to amend its Articles of Association according to the new law. A company, however, may be established illegally, but the corresponding legal norm provides for such a case. It is established in item 3 of Part 1, Article 11 of Company Law that a company may be liquidated by the decision of the court on the grounds of violations of law established by the laws of the Republic of Lithuania. But this is not to be linked with either reregistration or reorganization. The question of the legality of the acquisition of property may be judged only by judicial procedure. The representatives of the petitioner based their arguments on the Law on State Enterprises which was in force until December, 1994, and they quoted that the share capital of the enterprise cannot exceed the state capital. But further on there is another sentence - Article 4 provides that an enterprise may accumulate share capital exceeding the state capital owned by it. It also established that the state capital accumulated (held) at the enterprise shall not be divided into shares. The joint-stock company or the private joint-stock company appears pursuant to this law. In the opinion of the representative of the party concerned, the amendment of Article 2 of the Law on Initial Privatization of State Property, which as if contradicts Articles 29 and 128 of the Constitution, is, in its essence, in compliance with the Constitution. Such norm existed before, formulated a little differently though, and it was not contested. The petitioner argues that enterprises are being acquired without any bargain and sale. If enterprises are being acquired without any bargain and sale, then this is not the object of the investigation of this Court. There exist institutions which have to take measures in all cases when property is taken illegally, so that this property was taken back by legal procedure after bringing an action against such persons. When adopting privatization acts, there existed one goal, viz., to privatize property. The said Law on Privatization also provided for privatization. Thus, in the opinion of the representative of the party concerned, Part 1, Article 10 and Part 1, Article 50 are in compliance with the Constitution. When estimating the amendment of Part 2, Article 2 of the Law on Initial Privatization of State Property, it could be said that there exist some exceptions for certain enterprises which are to be sold for hard currency. The legislator had in mind replenishing the hard currency fund. This norm in its essence is in compliance with Article 29, as well as Article 128, of the Constitution. Article 14 of the Law on Initial Privatization of State Property provides for the manner of initial privatization. It contains an indication that state stock companies and state enterprises which possess share capital shall be privatized after a public subscription for shares is announced, as well as a stipulation that the aforementioned condition shall not be applied to objects which are to be sold for hard currency, as well as to banks and private joint-stock companies, which are privatized by close subscription for shares. The representative of the party concerned asserts that the disputed provision of this Article is in compliance with the Constitution. The Constitutional Court holds that:
7. When reestablishing the independent State of Lithuania, the institute of private ownership was reinstated into the legal system of the country. In Article 44 of the Provisional Basic Law it was indicated that the economical system of Lithuania shall be based upon the ownership of the Republic of Lithuania which is composed of various kinds of ownership. Private ownership of citizens is mentioned first among them. That was the basis to implement economic reform. The priority of private ownership is consolidated in Part 1, Article 46 of the Constitution which reads: “Lithuania’s economy shall be based on the right to private ownership, freedom of individual economic activity, and initiative”. One of the main economical policy trends of the restored Republic of Lithuania has become privatization of property. Already in 1990 laws were passed which provided for the opportunity to establish in diverse manner enterprises which possess private capital (the Law on Enterprises, Company Law, the Law on Partnerships, etc.) or for state enterprises to accumulate private (share) capital (the Law on State Enterprises and the like). In the Law on State Enterprises adopted on 25 September 1990 two types of enterprises were provided for: that of a state enterprise which has not issued shares (has not received subscriptions) or which has issued shares (has received subscriptions) with their nominal value not exceeding 1/5 of the enterprise’s authorized capital, and that of state stock enterprise which has issued shares with the nominal value exceeding 1/5 of the enterprise’s authorised capital (Article 2). In Article 4 of the said law it was established that a state enterprise which has accumulated the nominal share capital exceeding the state capital must be reorganized within six months into either a joint-stock company or a private joint-stock company. Virtually the same requirements were established for state co-operative enterprises, state stock enterprises, as well as for enterprises that were leased, for the establishment whereof state property was used (rented) (the 16 October 1990 Resolution of the Supreme Council “On the procedure for the entry into force the Law on Partnerships and for reregistration of other types of enterprises”). In the aforesaid legal acts the attempt of the legislator to pursue economical reform by increasing the share and the role of private property in national economy is evident. This may be seen from the 25 September 1990 Resolution of the Supreme Council “On the procedure for the entry into force the Law of the Republic of Lithuania on State Enterprises”. Item 3 of the said Resolution provides that the Government must prepare and submit a draft programme of de-nationalization until 20 October 1990, and to present lists of state enterprises which may function as state joint-stock enterprises or become private enterprises, as well as of enterprises which are to be transferred to the local government. The same Resolution (item 4) prohibited the commence of buying out, selling out or privatize state capital (property) in every other manner until the coming into force the law which regulates de-nationalization. However, already on 4 December 1990 Provisional Law “On Accumulation of Private Capital of Employees in State Enterprises” was passed. It held that “in some state enterprises capital was begun to be collected from the employees before the implementation of the privatization programme”. Therefore it was permitted in Article 1 of this law for state enterprises (state stock enterprises or state co-operative enterprises), with some exceptions, to form share capital from the contributions of employees by privatizing up to 10% of state capital goods (funds) which have been accumulated in the enterprise. Thus, before adoption of the Law on Initial Privatization of State Property, a prerequisite was created in other laws to permit state enterprises to issue shares (to collect contributions) or to privatize a part of state property. It is noteworthy to indicate that in the aforesaid legal acts there were some discrepancies as well: some of them established prohibition to distribute the property of state enterprises, collective farms and state farms by using shares (the 26 July 1990 Resolution of the Supreme Council “On economical reform of Lithuania”, etc.), whereas some others consolidated the opportunity by accumulating private capital to change the type of the enterprise by reorganizing a state enterprise or a state stock enterprise into a private joint-stock company (Articles 4 and 9 of the Law on State Enterprises). The Law on Initial Privatization of State Property was passed on 28 February
8. In its Article 2 it is consolidated that a state enterprise shall be privatized only once, and further privatization is possible only in the case that it has been already privatized according to the Law on Initial Privatization of State Property. The prohibition to privatize state enterprises, offices and other state property otherwise than it was prescribed in the said law was consolidated in the 14 March 1991 Resolution of the Supreme Council “On the entry into force of the Law of the Republic of Lithuania on Initial Privatization of State Property” as well. As it was mentioned, some laws then in force which regulated enterprise activities consolidated prerequisite for state enterprises to issue shares (collect contributions) or privatize a part of the capital goods (up to 10%) of the enterprise. The state capital accumulated (held) at the enterprise was not to be divided into shares (Part 6, Article 4 of the Law on State Enterprises). At the same time there was no prohibition to increase private share capital from its profit (from the reserve funds of the share capital and those of profit - Part 1, Article 31 of the Law on State Enterprises). Thus legal conditions were created to increase share (private) capital without privatizing (purchasing) state capital of the enterprise, and depending on how the ratio between share and state capital changed, pursuant to the procedure established by the Law on State Enterprises to reorganize state enterprises into joint-stock companies or private joint-stock companies, to register of the changed legal status in the Register of Enterprises, and further on to follow Company Law in its activities.
9. Property is the right to possessions. It means that the owner has the right to peacefully make any impact on his property, providing that thereby neither law is violated, nor contract is breached, nor the rights of the third party are restricted, as well as to prohibit other persons to make any such impact. The inviolability of property, its social function and necessity to regulate property relations are all interdependent. All this is significant when establishing the rights and obligations of the owner disposing of the possessions by the right to private property, as well as to public property. The contents of the rights of the owner constitutes the right to manage, utilise, and dispose of his property which belongs to him. General principles of the right to ownership are set forth in the Constitution and detailed in the Civil Code and other laws. Part 3, Article 47 of the Constitution enumerates property which exclusively belongs to the Republic of Lithuania (entrails of the earth, as well as nationally significant internal waters, forests, parks, roads, and historical, archaeological and cultural facilities), and according to Articles 98 and 981 of the Civil Code, other possessions may also belong by the right of property. This property, as a rule, is assigned to implement functions of state power, or those of executive and order, or other which are generally important, or the belongings of such property to the state may be linked with the significance of the objects of the right of property themselves. Part 2, Article 128 of the Constitution stipulates: “procedures concerning the management, utilisation, and disposal of State property shall be established by law”. Consequently, the relations which appear when managing, utilising and disposing of state property are to be regulated only according to the law. Therefore the norms of bylaws may never contradict the law. In the view of questions which are under investigation in this case, the requirement of Part 3, Article 46 of the Constitution whereby the state is to regulate economical activity so that “it serves the general welfare of the people” is also relevant. Thus state property must be managed so that there were no contradictions to this constitutional provision.
10. Article 29 consolidates the principle of equality of all people before the law, the court, and other State institutions and officers. This principle must be observed when passing and applying laws, as well as administering justice. This principle obligates to apply uniform legal assessment to homogeneous facts and prohibits to arbitrarily assess essentially homogeneous facts. In Part 2, Article 29 of the Constitution it is established that a person may not have his rights restricted in any way, or be granted any privileges, on the basis of his or her sex, race, nationality, language, origin, social status, religion, convictions, or options. However, persons themselves may be different, and in some cases, when passing laws, this is to be taken into consideration. For example, if a law, directed for the good of the society or for aspiration of humanism, takes into consideration the differences of social status of persons, it does not mean, of its own accord, that the principle of the equality of persons is violated. Besides, quite frequently laws are inflicted only on certain categories of persons, or they are valid only in specific situations, under which persons of one or the other category fall. The variety of social life determines the manner and contents of legal regulation. But diverse interpretation of inborn personal rights and their diverse application to individual categories of persons is not to be permitted. The arguments raised by the petitioner will be assessed while considering these motives.
11. On the compliance of the norms of Part 1, Article 10 and Part 1, Article 50 of Company Law with the Constitution. The petitioner argues that the norm of Part 1, Article 10 of the Company Law “Reorganization is transformation of a Company as a legal person without liquidation procedure”, and the norm of Part 1, Article 50 of the said law, which provides that “public and private companies shall have to amend their Articles of Association according to this law and have them registered according to the procedure established by the Law on Register of Enterprises within 12 months as of the date of the enactment of this law” contradict Articles 29 and 128 of the Constitution. Article 29 of the Constitution which consolidates the principle of equality of persons is placed in Chapter 2 of the Constitution entitled “The Individual and the State”. This Chapter establishes universally recognized human rights and main freedoms, as well as the principles of their implementation and protection. The norms of this Chapter are the guaranty of inborn and other constituted rights and freedoms. This is especially evident in the sphere of property protection. Part 2 of Article 23 which consolidates the inviolability of property, of the Constitution, reads: “The rights of ownership shall be protected by law”. Thus the regulation of property relations are to be specified in laws. In Part 2, Article 128, the one upon which the petitioner grounds his request, it is stated that procedures concerning the management, utilisation, and disposal of State property shall be established by law. It means, therefore, that the legislator is commissioned to regulate questions concerning privatization of state property, activity of state enterprises, control of state shares possessed in joint-stock companies, as well as other matters connected with the management, utilisation, and disposal of State property. He may choose legal manner for this regulation so far that it does not contradict the Constitution. In the opinion of the petitioner, the disputed norms of Articles 10 and 50 of Company Law contradict the Constitution because they do not contain provision that enterprises which undergo reorganization must be established legally, otherwise conditions are created to legalize illegal rewriting of state enterprises, as well as state stock enterprises into private companies. The disputed norm of Part 1, Article 10 of Company Law defines the transformation of an enterprise as a subject of economy without its liquidation. Besides, in this Article the manner of transformation is established and its procedure is regulated. The manner of reorganization and its procedure are obligatory for every subject the activity whereof is regulated with this law, i.e. for every joint-stock company and private joint-stock company (Article 1 of this law). Another type of law, the one regulating the activity of state and municipal enterprises, contains an analogous norm (Article 19 of the 21 December 1994 State and Municipal Enterprise Law of the Republic of Lithuania). Article 37 of the Civil Code indicates that reorganization is one of the fundamentals of coming to an end of the existence of legal person. Meanwhile Company Law defines reorganization as transformation of a company without the liquidation procedure, i.e. the main attention is paid to the specific character of companies (as well as other enterprises) functioning as the subjects of commercial economic activity: to the continuity of the activity, to the succession of the rights and liabilities of the companies reorganized. The disputed norm does not establish any restrictions or privileges concerning the procedure of reorganization, on the grounds of which the principle of the equality of persons may be violated. At the same time attention is to be paid to the fact that according to the disputed norm of Article 10 of Company Law the company is entitled to undergo reorganization providing it was established pursuant to earlier in force Company Law, or it was reorganized into a joint-stock company or a private joint-stock company pursuant to other legal acts regulating the activity of enterprises and was reregistered in the Register of Enterprises. A legal person, as well as a joint-stock or private joint-stock enterprise, may commence its activity only after it has registered its articles (rules) of association (Article 25 of the Civil Code). The company shall follow its articles of association in their activity and their provisions may not contradict existing valid laws. Neither does the disputed norm of Part 1, Article 50 of Company Law in which the requirement is set forth that public and private companies shall have to amend their articles of association according to this newly adopted law and have them registered according to the procedure established by the law foresee any privileges or discrimination with respect to individual persons or any provisions concerning managing, utilising or disposing of state property. The contested norms regulate neither company establishment, nor privatization of state property. These questions fall under respective regulation of other norms of this law and under other laws. The decision of legality of company establishment and privatization of state property is the matter of investigation of a particular civil or any other legal case. Taking into consideration the motives advanced, a conclusion is to be made that the norm of Part 1, Article 10 of the Company Law “Reorganization is transformation of a Company as a legal person without liquidation procedure”, as well as the norm of Part 1, Article 50 of the said law, which provides that “public and private companies shall have to amend their Articles of Association according to this law and have them registered according to the procedure established by the Law on Register of Enterprises within 12 months as of the date of the enactment of this law” are in compliance with the Constitution.
12. On the compliance of the provision of Part 2, Article 2 of the Law on Initial Privatization of State Property with the Constitution. Part 2, Article 2 of the Law on the Initial Privatization of State Property contains the provision that companies, which are included either in the list of the objects, which are subject to privatization for hard currency, or in that of special purpose companies, shall not be entitled to increase its share capital and authorised capital from its own funds which are formed out of the results of its annual commercial activities, providing the share capital, including the capital which has been accumulated according to other laws, exceeds 30% of the authorised capital of the company. In the opinion of the Petitioner, all the remaining state enterprises, i. e. those in which more than 50% of the authorised capital (shares) belong to the state (local government) by the property right, and which are not included into the list of objects subject to privatization for hard currency, or into the list of special purpose state companies, are permitted to increase their share capital which exceeds 30 or even 50% of the authorised capital of the enterprise. Thereby, i.e. by evading the Law on Initial Privatization of State Property, the privatization of state or state stock enterprise without making any bargain and sale or other type of negotiation transactions is legalized. The petitioner asserts that the disputed norm whereby certain restrictions in the process of privatization are established only for the enterprises subject to privatization for hard currency or special purpose state companies contradict Articles 29 and 128 of the Constitution. The notion of the special purpose company is indicated in Article 2 of the Law on Initial Privatization of State Property. This notion is further specified in Article 5 of Company Law entitled “Special Purpose Companies”. It provides that the status of special purpose companies may be assigned to companies which fulfil functions that are of vital significance for the state or companies whose activities require a special regime. The sphere of activity in which such companies may operate shall be approved by the Seimas on the recommendation of the Government, and the shares held by an institution of state power or government must account to at least 70% of votes. According to Part 2, Article 7 of the Law on Initial Privatization of State Property, the list of objects subject to privatization solely for hard currency shall be approved by the Central Commission for Privatization (according to the 4 July 1995 Law on Privatization of State and Municipal Property - the Commission for Privatization). As a rule, these are the enterprises which may attract foreign investments by the character of their activity or other specific features. The activity of these and the other objects alike usually has the significance of greater importance in functioning of the national economy, in fulfilling universally important functions (postal and telegraph service, energy supply, etc.), therefore the conditions established by the law are completely understandable and are in accordance with the norm of Article 128 of the Constitution in which it is established that procedures concerning the management, utilisation, and disposal of state property shall be established by law. Conditions of privatization of certain objects as established in Part 2, Article 2 of the Law on Initial Privatization of State Property are equally applied to all persons who take part in the process of privatization. This Article does not provide any advantages or privileges for anyone what may be considered to be the contradiction to Article 29 of the Constitution. The question that the disputed provision does not foresee the same or similar conditions of privatization in respect to some other enterprises subject to privatization may not be considered to be the contradiction to the Constitution. Establishing how to regulate the management, utilisation, and disposal of state property is the right of the legislator consolidated in the Constitution, and it is the Constitution which circumscribes the limits of this right. The question raised by the petitioner that state enterprises were privatized by evading the Law on Initial Privatization of State Property, as well as the earlier in force Law on State Enterprises, is also the one of the application of the aforesaid legal norms which are not subject to investigation in the Constitutional Court, and not that of the compliance of a legal norm with the Constitution. Were it established that state property was privatized by evading law, there would arise a question of responsibility of particular persons. It should be noted that the Civil Code provides the right of the owner, therefore that of the state as well, to demand and obtain his property from illegal management by somebody else (Article 142). Besides, attention is to be paid to the fact that after State and Municipal Enterprise Law had been passed on 21 December 1994, the Law on State Enterprises whereby state capital was not to be divided into shares and to be increased from the profit of the enterprise by issuing new shares became null and void. Therefore at present the provision of Company Law is applied to state capital which is held in joint-stock and private joint-stock companies that all capital of the company shall be divided into shares. Thus the manager (incorporator or authorised person) of state shares enjoys equal rights along with remaining shareholders, the owners of private capital. If the aforesaid state property is being managed by violating the interests of the owner, there arises the question of responsibility of the manager (incorporator or authorised person) of this property. It should be noted that the management of the shares which belong to the state in various types of enterprises, other questions concerning management, utilisation, and disposal of such state property should be regulated more specifically in laws by particularizing the powers of the authorised person, as well as his responsibility in case the property authorised to him should be lost. Taking all this into account a conclusion is to be drawn that the norm of Part 2, Article 2 of the Law on the Initial Privatization of State Property which provides that “companies, which are included either in the list of the objects, which are subject to privatization for hard currency, or in that of special purpose companies” shall not be entitled to increase its share capital and authorised capital from its own funds which are formed out of the results of its annual commercial activities, providing the share capital, including the capital which has been accumulated according to other laws, exceeds 30% of the authorised capital of the company is in compliance with the Constitution.
13. On the compliance of the provision of Part 6, Article 14 of the Law on Initial privatization of State Property with the Constitution. Part 6, Article 14 of the Law on Initial Privatization of State Property regulates the procedure of the selling of shares disposed of by state power and government institutions. This Part provides that such shares which belong to private companies shall be sold by announcing the close subscription for shares. In the opinion of the petitioner, this provision contradicts Articles 29 and 128 of the Constitution, as the enterprises, in which there existed state capital, reregistered themselves illegally into private joint-stock companies (except for the privatization objects of the corresponding profile, as indicated in the Law on Initial Privatization of State Property). By further privatizing state property which is held in the aforesaid enterprises, the employees of private joint-stock companies are placed at advantageous conditions to acquire state property, and thereby the principle of the equality of persons is violated which is consolidated in the Constitution. As it has been mentioned, in the laws regulating enterprise activity and passed as far back as 1990 legal prerequisites were consolidated to reregistrate state enterprises which had increased share (private) capital into stock or private joint-stock companies. In the former, as well as in the now in force Company Law criteria are established (the amount of the authorised capital, the number of shareholders), upon which the type of the company depends (that of a stock or a private joint-stock company). If, when reregistering a state enterprise into a private joint-stock company pursuant to the Law on State Enterprises, the aforementioned criteria as established by the law were violated then it is the question of the application of legal norms which the Constitutional Court shall not judge, and not that of the compliance of a legal norm with the Constitution. An enterprise which has become reorganized into a private joint-stock company according to the Law on State Enterprises may be privatized by buying out state capital which is held in it. The types of privatization are foreseen in Part 1, Article 14 of the Law on Initial Privatization of State Property. The opportunity to set up close auctions and announce a close subscription for shares is also provided in the aforesaid Part (sub-item “a”, item 4). By the way, the aforementioned norm is not being contested in this case. The itself manner of establishing a private joint-stock company and a limited sphere of its activity indicates that shares of such enterprise are issued and offered for sale in a limited manner. The former, as well as now in force Company Law banned when establishing a private company and issuing additional shares to publicly offer them for sale. Therefore the privatization of state capital which is held in private joint-stock companies by announcing a close subscription for shares corresponds to the specific manner of the activity of the aforesaid companies, and the principle of the equality of persons as consolidated in Article 29 of the Constitution is not violated. Taking into account these and the above presented motives, a conclusion is to be drawn that the norm of Part 6, Article 14 of the Law on Initial Privatization of State Property, which stipulates: “the shares of private companies which are disposed of by the state power and government institutions shall be sold by announcing the close subscription for shares” is in compliance with the Constitution. Conforming to Article 102 of the Constitution of the Republic of Lithuania, as well as Articles 53, 54, 55 and 56 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania has passed the following ruling:
14. To recognize that the norm of Part 1, Article 10 of Company Law “Reorganization is transformation of a Company as a legal person without liquidation procedure”, and the norm of Part 1, Article 50 of the said law, which provides that “public and private companies shall have to amend their Articles of Association according to this law and have them registered according to the procedure established by the Law on Register of Enterprises within 12 months as of the date of the enactment of this Law” are in compliance with the Constitution of the Republic of Lithuania.
15. To recognize that the provision of Part 2, Article 2 of the Law on the Initial Privatization of State Property which stipulates: “companies, which are included either in the list of the objects, which are subject to privatization for hard currency, or in that of special purpose companies”, shall not be entitled to increase its joint-stock capital and authorised capital from its own funds which are formed out of the results of its annual commercial activities, providing the share capital, including the capital which has been accumulated according to other laws, exceeds 30% of the authorised capital of the company is in compliance with the Constitution of the Republic of Lithuania.
16. To recognize that the norm of Part 6, Article 14 of the Law on Initial Privatization of State Property which provides that the shares of companies which are disposed of by the state power and government institutions shall be sold by announcing the close subscription for shares” is in compliance with the Constitution of the Republic of Lithuania. This Constitutional Court ruling is final and not subject to appeal. The ruling is promulgated on behalf of the Republic of Lithuania. Justices of the Constitutional Court: Algirdas Gailiûnas Kæstutis Lapinskas Zigmas Levickis Vladas Pavilonis Pranas Vytautas Rasimavièius Stasys Staèiokas Teodora Staugaitienë Stasys Ðedbaras Juozas Þilys