DECREE OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA

DECREE OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA official translation GOVERNMENT OF THE REPUBLIC OF LITHUANIA RESOLUTION No. 1265 Regarding a Revised Version of the Resolution of the Government of the Republic of Lithuania of 3 July 1997 No. 713 “On Business Development Measures” 1998 October 21 Vilnius The Government of the Republic of Lithuania has resolved :

1. To amend the Resolution of the Government of the Republic of Lithuania of 3 July 1997 No. 713 “On Business Development Measures”: 1.
2. A revised version of the above Resolution (annexes excluding) shall be set forth to read as follows: Government of the Republic of Lithuania Resolution On Business Development Measures The Government of the Republic of Lithuania has decreed: 1.To set up a Private Insurance Company “Lithuanian Export and Import Insurance” (hereinafter referred to as the Company), which shall operate in compliance with the Law on Insurance, the Company Law, the Law on the National Debt and other legal acts of the Republic of Lithuania, its Articles of Association and this Resolution.
3. To establish that the Company shall provide insurance coverage for: 2.
4. export credit (financial credit), commodity credit and investments abroad of Lithuanian economic entities against the political risks. The above activities of the Company shall be provided funding by the Export Promotion Fund in accordance with the procedure established by the Business Development Council. The object of insurance of investments abroad against political risks shall be the losses from investment activities sustained by the insured due to political reasons, upon the occurrence of the insurance event provided for by paragraph 5 of this Resolution; 2.
5. export credit (financial credit) and commodity credit against commercial risks. When transacting insurance of commodity credit against commercial risks, the Company must assign a certain part of the assumed risks to other insurance or reinsurance companies; 2.
6. long-term credit granted to small and medium business enterprises for the implementation of investment projects against commercial risks.
7. To approve: 3.
8. The Regulations of the Private Insurance Company “Lithuanian Export and Import Insurance” (appended); 3.
9. The Regulations of the Business Development Council (appended).
10. To establish that: 4.
11. The Ministry of Economy shall fulfil the functions of one of the Company’s founders; 4.
12. The State shall own at least 51% of the Company’s shares. The Ministry of Economy shall hold the shares owned by the State; 4.
13. At least 50% of the Company’s net profit shall be allocated for investment in the development of the Company’s primary activity (mandatory reserves, etc.); 4.
14. Upon the shareholders’ decision the Company’s losses shall be first of all covered by using funds from the reserves formed by the Company and the shareholders’ contributions, or the losses shall be carried over to the next tax year (but only for a period not exceeding 3 years). When the sustained losses increase to 25% of the authorised capital, the Business Development Council shall suspend compensation of insurance contributions, the holder of the state-owned shares shall initiate and convene the shareholders’ meeting at which it will vote in favour of the decision to suspend the conclusion of new insurance contracts, to provide information on the matter to the banks, to discuss the causes of the losses and shall within 20 days submit to the Government of the Republic of Lithuania its findings and proposals; 4.
15. By the insurance contract the Company shall guarantee, in accordance with the procedure established by the Business Development Council, the repayment of up to 80% of the outstanding portion of the loan, whereas the risks for the other portion shall be assumed by the loan bank. On the decision of the Business Development Council the Company may guarantee the repayment of 100% of the outstanding loan; 4.
16. The economic entity must conclude an agreement with the Company regarding the assignment of its claim to the accounts receivable which emerge upon the delivery to the buyers of the products manufactured by the economic entity or/and regarding the commitments to assign its ownership rights to the manufactured products or other property (provided the company transacts insurance as provided for by subparagraphs 2.1 and 2.2 of this Resolution); 4.
17. In cases where the amount received by the bank (after the bank has had its claims satisfied from the economic entity and received an insurance indemnity) exceeds the amount of the loan and the accrued interest, the Company shall be refunded the amount in excess of the loan and accrued interest which amount however may not exceed the insurance indemnity; 4.
18. The Company shall keep records of the concluded insurance contracts and shall file, by the 20th day of every month, a report on the concluded contracts with the Business Development Council and the Ministry of Finance as well as informing them of the fulfillment of other commitments of the Company; 4.
19. Every six months (by the 25th day of the first month of the following six-month period) the Chairman of the Business Development Council and the Company’s administrative director shall report on the Company’s activities to the Government of the Republic of Lithuania; 4.
20. The Company’s financial statements must be every month audited by an independent auditor. The Chairman of the Business Development Council must not later than within 3 months after the close of the financial year file with the Government the annual financial statements accompanied by the auditor’s findings; 4.
21. The Republic of Lithuania State Budget allocations for the promotion of export in 1997 shall be used in the following manner: LTL 10 mil. shall be used to pay up for the Company’s shares; LTL 30 mil. shall be used for the payment of insurance contributions in accordance with the decisions of the Business Development Council. Insurance contributions shall be paid to the Company for the provided insurance coverage by concluding insurance contracts. On the decision of the Government of the Republic of Lithuania the above allocations may also be used to increase or restore the company’s capital; 4.
22. Allocations from the State Budget of the Republic of Lithuania for the promotion of export must be used for insurance contributions (if the Company carries out activities provided for by subparagraphs 2.1 and 2.2 of this Resolution) and for the payment of insurance indemnity upon the occurrence of the insurance event due to political reasons, for increasing the Company’s capital or covering the losses, also for partial financing of other trade (export) development measures. Insurance against political risks contributions shall be paid into the Export Promotion Fund following the procedure established by the Business Development Council, insurance indemnity for political risks shall be financed with the Export Promotion Fund resources. In the 1998 Lithuanian State Budget LTL 10 mil. are allocated for buying back from the other shareholders the Company’s shares; 4.
23. The Small and Medium Business Promotion Fund resources shall be used for making insurance contributions and for paying insurance indemnity (if the Company carries out the activities provided for by subparagraph 2.3 of this Resolution). LTL 8 mil. from the total amount of the Privatisation Fund resources for 1998 which have been assigned for the Small and Medium Business Promotion Fund must be allotted for increasing the Company’s capital; 4.
24. Those obligations under the insurance contracts the fulfillment whereof has been guaranteed by the Government of the Republic of Lithuania according to the insurance contracts concluded by the Company, which the Company has failed to fulfill in full or in part shall be fulfilled by the Government of the Republic of Lithuania.
25. To establish that the following isolated events or several successive events shall be considered as the insurance event because of political reasons (its likelihood is referred to as political risks), if they make it impossible for the buyer to fulfil its obligations; 5.
26. In the country of the buyer of the economic entity’s products: 5.1.
27. there has been an outbreak of a war, civil war, revolution, revolt, civil unrest, mass strikes or a change of the government conditioning crucial political changes: 5.1.
28. the government undertakes unforeseen actions, including the official announcement of the refusal to fulfil the obligations of the state, the freezing of deposit accounts, nationalisation, expropriation or other political measures, also the moratorium on (banning of) settlement in foreign currency with foreign buyers; 5.
29. unforeseen events which obstruct the performance of contracts, including embargo and other restrictions on transportation of goods, happen in third countries through which goods are transported or currency is transferred.
30. To extend the state guarantee for the insurance contracts concluded by the Company in 1998 provided that the insured amount does not at any time exceed LTL 50 mil.
31. To charge the Ministry of Economy to set up the Business Development Council headed by the Minister; which would pass decision in accordance with the procedure approved by the Council on the use of budgetary and other state allocations for the promotion of export and small and medium business.
32. To charge the Minister of Economy to sign, in compliance with this Resolution, all documents relating to he setting up of the Company.
33. The Ministry of Foreign Affairs together with the Ministry of Economy and Ministry of Finance must furnish the Company with information necessary in order to assess the countries’ political risks. The holder of the state-owned Company shares must initiate the general meeting of the Company’s shareholders and vote for the approval of the methods of country-risk categorisation and the appropriate lists of countries included in one of the country-risk categories”; 1.
34. The revised version shall be set forth to read as follows: 1.2.
35. the Regulations of the Private Insurance Company “Lithuanian Export and Import Insurance” approved by the above Resolution (appended); 1.2.
36. the Regulations of the Business Development Council approved by the above Resolution (appended).
37. To repeal the Resolution of the Government of the Republic of Lithuania “Regarding Small and Medium Business Credit Insurance” of 31 July 1998 No.
38. Prime Minister Gediminas Vagnorius Minister of Economy Vincas Babilius APPROVED by the Resolution of the Government of the Republic of Lithuania of 3 July 1997 No. 713 (revised version as presented in the Resolution of the Government of the Republic of Lithuania of 21 October 1998 No. 1265) Regulations of the Private Insurance Company “Lithuanian Export and Import Insurance” General Provisions
39. The Private Insurance Company “Lithuanian Export and Import Insurance” (hereinafter referred to as the Company) shall conclude with economic entities in accordance with the procedure prescribed by the Business Development Council export credit (financial credit) and commodity credit insurance contracts as well as contracts of insurance of investments abroad of Lithuanian economic entities against political risks. The Company shall also provide export credit and commodity credit insurance against commercial risks. Export credit (financial credit) insurance contracts shall be concluded only to cover loans extended for the manufacture or export of goods of Lithuanian origin or provision of services (provided that not less than 50% of the product’s value is created in Lithuania). The Company shall also provide insurance of long-term loans extended to small and medium enterprises for the purpose of implementing investment projects.
40. The Company’s Board shall approve the lists of documents required for conclusion of insurance contracts. Terms and Conditions of Concluding Export Credit (Financial Credit) Insurance Contracts
41. Having concluded an export credit (financial credit) insurance contract, the economic entity may use the loan for manufacturing, exporting goods of Lithuanian origin and financing services provided by Lithuanian economic entities. The received loan may not be used for financing labour costs and for payment of taxes prescribed by law. Payment for the purchased goods and supplied services shall be made by the bank according to the documents presented by the economic entity. Without the Company’s authorisation goods acquired with the loan money may not be transferred to other persons or used for purposes other than those provided for by the documents filed in application for the loan. The above condition may be included in the loan agreement. Upon concluding with the Company a commodity credit insurance contract, the economic entity who exports goods and/or services of Lithuanian origin shall acquire insurance coverage against the buyers insolvency. By the commodity credit insurance contract the Company shall provide cover for not more than 80% of the amount shown in the invoices. Taxes, default interest, penalties shall not be insurable. Draft contracts of purchase/sale of goods on credit or supply of services on credit as well as specimens of invoices with which the economic entity purchases or sells goods or supplies services must be agreed with the Company. When calculating the solvency reserve according to the methods approved by the State Insurance Supervision Authority at the Ministry of Finance, the Company shall assign part (at least 50%) of the assumed commodity credit commercial risks to other insurance or reinsurance companies, recognised as financially reliable by the State Insurance Supervision Authority at the Ministry of Finance. Prior to the automatic signing of the reinsurance treaty (when the risks assumed by the Company automatically become also the risks of the reinsurance company) the assumed risks shall be reinsured in accordance with the principles of facultative insurance (when each specific risk assumed by the Company is individually negotiated).
42. The economic entity shall mortgage to the bank in accordance with the procedure established by law the mortgageable movable and immovable property. Where the Company’s insurance contract guarantees the repayment of 100% of the outstanding loan, the economic entity shall mortgage to the bank in accordance with the procedure established by law the mortgageable movable and immovable property the value whereof amounts to not less than 50% of the amount of the loan.
43. The economic entity must conclude an agreement with the Company concerning the assignment of the right of claim to accounts receivable upon the delivery to the buyers of products manufactured or sold by the economic entity and/or concerning commitments to transfer the title to the manufactured products or products offered for sale or any other property.
44. The economic entity shall also file with the Company documents guaranteeing (or verifying) payment for the products intended for sale. The company shall decide on the adequacy of the filed documents.
45. The duration of export credit (financial credit) insurance and commodity credit insurance contracts shall not exceed 12 months.
46. The economic entity must invest at least 15 % of its own funds in the business project for the implementation whereof the loan is taken.
47. In order to conclude an insurance contract the economic entity must be registered in accordance with the established procedure, be fully prepared to fulfil production obligations related to the specified project and have a fully formed authorised capital.
48. The amount of insurance against political risks contribution shall be fixed by the Business Development Council, and in case of insurance against commercial risks - by the Company board. The Company shall be prohibited from concluding insurance contracts with insolvent enterprises.
49. The loan agreement between the economic entity and the bank must contain a provision whereby the bank obligates itself to directly pay the economic entities’ accounts to the suppliers, carriers and other contracting parties in accordance with the approved business plan.
50. The economic entity must have a current account and open a loan account with the bank which grants the loan.
51. The Regulations present minimum terms and conditions for the conclusion of insurance contracts and an insurance contract may only be concluded provided that the above terms and conditions are fully complied with.
52. 50% of the insurance contributions shall be financed from the Export Promotion Fund. On the decision of the Business Development Council, in view of the planned increase in the enterprise of the volume of production for export as against the average monthly volume during the preceding 12 months, the above share of insurance contribution financed form the Export Promotion Fund may be increased up to 90% (the share of the contribution financed from the Fund shall be increased by 5% for each 2% of increase in the planned export production which exceed 10%). Terms and Conditions of Concluding Contracts Providing Insurance Coverage of Long-term Loans Granted to Small and Medium Enterprises
53. The Company shall conclude insurance contracts only with the economic entities registered in the Republic of Lithuania, with the share of private capital exceeding 50%, the number of employees not in excess of 50 and the annual turnover amounting up to LTL 5 mil. In cases where the insurance contracts are concluded with companies, at least 75% of the capital must be owned by the economic entities which meet the requirements specified herein. The insurance contract guarantees the repayment of only those investment loans in which the working capital share for the implementation of investment project constitutes less than half of the total amount of the loan.
54. The economic entity must invest not less than 20% of its funds in the business project for the implementation whereof the loan is taken out.
55. The Company shall guarantee by the insurance contract the repayment of the outstanding loan and unpaid interest: 80% of the amount if the fixed assets acquired with the loan funds are mortgaged with the loan bank; 100% of the amount if the fixed assets acquired with the loan funds are mortgaged with the Company.
56. The Company is not in the position to ban investment loans which according to classifier of the types of economic activities are used for the development of the said types of activities (provided that income generated thereby accounts for 1/3 or a larger share of the economic entity’s annual turnover): 511 - 5190 -wholesale trade; 651 - 6599 - financial intermediary services; 671 - 6720 - ancillary financial intermediary services; 70x - 7020x - rent of immovable property and commercial activities; 660 - 6603 - accumulation of insurance and pension funds; 9249x - organising games of chance and betting; 7411 - activities in the legal profession; 1551x - 1552x - manufacture of alcoholic beverages, beer excluding; 011 - 0150 - crop growing, animal husbandry, hunting; 1600 - manufacture of tobacco products.
57. Duration of a loan guaranteed by the insurance contract: not longer than 4 years; for investment in construction projects - not in excess of 6 years.
58. The maximum insured amount of a single insurance contract may not exceed LTL 8000 thou.
59. On the decision of the Business Development Council the insurance contribution may be in part financed from the Small and Medium Business Promotion Fund: 70% of the insurance contribution shall be covered if an investment project is implemented in the district with the unemployment rate exceeding that of the country’s average unemployment rate, 50% if the unemployment rate in the district is not higher than the country’s average unemployment rate. The share of the financed insurance contribution may be increased based on the number of jobs to be created by the investment project - for every 3 jobs additional 5% od the insurance contribution shall be paid. Distribution of Risks and Losses between the Loan Bank and the Company
60. The Company shall guarantee by the insurance contract in accordance with the procedure prescribed by the Business Development Council the repayment of up to 80% of the outstanding loan, whereas the remaining risk shall be assumed by the loan bank. On the decision of the Business Development Council the Company may guarantee the repayment of 100% of the outstanding loan.
61. The bank shall file with the Company’s administration in the manner prescribed by the Company an application for money transfer, substantiated by appropriate documents. Satisfied that the insurance event has occurred for political reasons, the Company shall present to the Business Development Council findings regarding the payment of insurance indemnity. Having received the Company’s findings, the Business Development Council shall within 30 days adopt a decision on the recognition of the insurance event and, upon its recognition, on the payment of insurance indemnity. Conclusion of the Insurance Contract
62. The economic entity which meets the terms and conditions of insurance contract conclusion as specified in these Regulations shall file the established document with the Company.
63. Application to conclude an insurance contract must be considered within a month after the filing of the specified documents with the Company. Having filed the application the economic entity shall be notified of the decision in writing.
64. If the Company makes a conclusion in favour of the economic entity, the latter shall pay the insurance contribution in the established amount or apply to the Business Development Council requesting payment of a certain part of the insurance contribution. The Company shall present to the Business Development Council its findings as to what share of the insurance contribution may be paid for the economic entity. If the Company’s Board sets the insurance contribution of less than 1% and more than 10% of the insured amount, the economic entity shall lose the right to apply to the Business Development Council for the payment for it of a part of the insurance contribution. If the Company’s Board sets the insurance contribution in the amount of more than 1% of the insured sum, the economic entity must itself pay the insurance contribution equal to 1% of the insured sum and may apply to the Business Development Council for the payment of the balance.
65. The insurance contract shall become effective only upon the payment of the insurance contribution. Control over the Use of Insured Loans
66. The Company shall keep a file on the economic entity which has concluded an insurance contract, where all submitted documents and decisions regarding the conclusion of the insurance contract and insurance contributions shall be recorded. The file shall be kept until the bank is repaid the loan or paid insurance indemnity and the Company implements the right specified in subparagraph 5 of these Regulations, and shall be stored for 5 years.
67. The Company shall store information (data) relating to: 29.
68. the sum and number of all the insurance contracts it has concluded in respect of the loans granted to the economic entity; 29.
69. the outstanding amounts of the loans granted to the economic entity who has concluded insurance contracts and the number of such loans; 29.
70. the sales of the property mortgaged by the economic entity which has concluded an insurance contract.
71. During the period of validity of the insurance contract the economic entity shall furnish the Company with information provided for in appropriate insurance regulations.
72. On the shareholders’ decision the Company’s losses shall be in the first place covered from the created reserves and the shareholders’ contributions or the amount of the losses shall be carried forward to the next tax year (but only for a period not exceeding 3 years). When the losses reach the amount of 25% of the authorised capital value, the Business Development Council shall suspend the compensation of insurance contributions, whereas the holder of the state-owned shares shall initiate the general meeting of shareholders where it shall vote in favour of suspension of new insurance contracts, provision of information thereon the banks, discussion of reasons which have caused losses and shall within 20 days submit findings and proposals to the Government of the Republic of Lithuania.
73. The Chairman of the Business Development Council and the Company’s administrative director shall every six months report to the Government of the Republic of Lithuania on the activities of the Company. APPROVED by the Resolution of the Government of the Republic of Lithuania of 3 July 1997 No. 713 (revised version as presented in the Resolution of the Government of the Republic of Lithuania of 21 October 1998 No. 1265) REGULATIONS OF THE BUSINESS DEVELOPMENT COUNCIL Status and Composition of the Council
74. The Business Development Council (hereinafter referred to as the Council) shall be a collegiate body, authorised to adopt decisions on the use of the Export Promotion Fund and Small and Medium Business Fund resources, to determine the share of the contributions of insurance against political risks which may be assigned for the Company’s administrative (organisational) expenses, also to resolve other issues related to business development which have been assigned to its competence by the Government of the Republic of Lithuania.
75. The members of the Council shall be the Minister of Economy (Chairman of the Council) and representatives of the Ministry of Finance, Ministry of Economy, Ministry of Foreign Affairs, Ministry of Agriculture, Ministry of Administrative Reforms and Municipalities’ Affairs, Lithuanian Economic Development Agency, Lithuania’s Exhibition Centre LITEXPO, Lithuanian Confederacy of Industrialists, the Chamber of Trade, Industry and Crafts, Lithuanian Banks Association, National Confederacy of Businessmen, Lithuanian Confederacy of Businessmen Employers.
76. The Minister of Economy shall approve the members of the Council according to the written nominations made by heads of the institutions specified in paragraph 2 of these Regulations.
77. Members of the Council may be removed from their respective posts by the head of the appointing institution. The Council members shall lose their powers after the termination of the employment contract with the institution which appointed them.
78. The functions of the Council Secretary shall be performed by a representative of the Ministry of Economy. Functions of the Council
79. The functions of the Council shall be as follows: 6.1.to approve the procedure of use of the Export Promotion Fund resources and adopt decisions on: 6.1.
80. the payment of the full amount or part of the amount of the insurance contribution; 6.1.
81. the payment of insurance indemnity (compensation); 6.1.
82. partial financing of other trade (export) measures; 6.1.
83. the amount of insurance against political risks contribution; 6.
84. to submit reports to the Government of the Republic of Lithuania on Company’s authorised capital formation and use; 6.
85. to establish the procedure of the use of the Small and Medium Business Fund resources and adopt relevant decisions thereon, making arrangements for partial financing of the measures provided for by the Small and Medium Business Development Programme; 6.
86. to fulfil other functions assigned to the Council by the Government of the Republic of Lithuania. Organisation of the Council’s Work and Adoption of Decisions
87. The Council’s meeting shall be considered valid if attended by at least 8 Council members. Decisions shall be adopted by majority vote of the participating members, in the event of a tie the Chairman shall have the casting. vote. If for some reasons less than 4 members of state institutions remain on the Council, the powers of the Council shall be suspended.
88. The Council shall carry out its activities in compliance with the rules approved by the Chairman of the Council. Meetings of the Council shall be held at least once every three months.
89. The members of the Council use confidential information and must ensure secrecy of the information.
90. A member of the Council who announces having interests or relations connected with the economic entity or the loan bank, shall be excluded from voting. The opinion of the Council member shall be recorded in the minutes of the appropriate Council meeting. Should it transpire, that during the adoption of the decision there has been some dissent on the issue in relation to the above interests and the above member of the Council has taken part in the voting, relevant information shall be presented to the head of the institution which appointed the member, accompanied by a request to remove the member from his post on the Council within 3 days after the establishment of the fact at the Council meeting; the powers of the member shall be suspended.