1.The authorised capital of the company shall be increased provided that a general meeting by an at least 2/3 vote resolves to issue new shares or to increase the par value of the issued shares and to amend the Articles of Association accordingly. The company may issue new shares or increase their par value only after its authorised capital is fully paid (at the last issue price).
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2.Amendments to the Articles of Association relative to the increase of the authorised capital shall be registered according to the procedure established by the Law on the Register of Enterprises after all the shares have been subscribed for and the first instalments have been collected. If not all shares are subscribed for during the subscription period, the Articles of Association shall be amended and the amount of the authorised capital shall be changed by the resolution of the general meeting. In this case the increase of the authorised capital may not exceed the par value of the subscribed for shares.
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3.The authorised capital shall be considered as increased only upon registration of the amendments of the Articles of Association in the Register of Enterprises of the Republic of Lithuania.
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4.If within 12 months from the day of the general meeting which passed the resolution to increase the authorised capital, amendments to the Articles of Association relative to the increase of the authorised capital are not registered in the Register of Enterprises of the Republic of Lithuania, the increase of authorised capital shall not be recognised. In this case all the contributions must be returned.
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5.The resolution to issue preference shares of a new class may be passed, if it is supported by a 2/3 vote of the attending preference shareholders, including non-voting preference shareholders.
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Article 43Increase of the Authorised Capital by Additional Contributions
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1.The company may increase its authorised capital by additional contributions of its shareholders and other persons only by issuing new shares. When the company is increasing its capital by additional contributions, the state, municipality or state social insurance may acquire its shares at issue price equal to the par value of the share by making a set-off, in the manner prescribed by the Government, against the company’s arrears to the state, municipal and state social insurance fund budgets, provided that the company’s authorised capital does not exceed its equity capital and the company’s balance sheet does not show losses. If the company has received funds from the state or municipal budget for the funding of the company’s investment programmes, the company’s authorised capital must be increased by issuing new shares which are transferred to the state or the municipality.
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2.An insolvent public company shall be prohibited from increasing its authorised capital by additional contributions by means of public offering. The company may offer these shares only to its creditors, shareholders and employees.
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3.If a public company has issued convertible debentures, its authorised capital may be increased by issuing new shares (of the par value specified in the resolution concerning the issue of convertible debentures), for which convertible debenture holders could exchange their debentures. When convertible debentures are being issued, the shareholders must be granted pre-emption rights to acquire these debentures in proportion to the number of shares held by them in the public company, unless its Articles of Association provide otherwise.
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4.If a decision to increase the authorised capital out of additional contributions is taken in a company in which the state or the municipality owns shares carrying 2/3 (3/4) of the votes or over 1/2 or 1/3 (1/4) of the votes and subsequent to the implementation of the decision the share of the state or municipality in the company’s authorised capital could decrease and the shares owned by the state or municipality would accordingly carry less than 2/3 (3/4) of the votes or not in excess of 1/2 or 1/3 (1/4) of the votes, the company’s authorised capital may be increased by additional contributions only according to the procedure established by the Law on the Privatisation of State-owned and Municipal Property, unless other laws provide otherwise.
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Article 44Increase of the Authorized Capital out of the Funds of the Company
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1.The authorised capital of the company may be increased by the resolution of a general meeting out of the retained profit, share premium or reserves by issuing new shares which are transferred to the shareholders without payment, or by increasing the par value of the previously issued shares.
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2.The general meeting shall pass a resolution to increase the authorised capital on the basis of the financial statement drawn up not earlier than 30 days prior the meeting.
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3.It shall be prohibited to increase the authorised capital of the company out of the retained profit, share premium or reserves until the losses shown in the financial statements are covered.
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4.Upon increasing the authorised capital out of the company's funds, the amendments to the Articles of Association shall be registered according to the procedure established in the Law on the Register of Enterprises. Alongside with other documents, the balance sheet of the company shall be filed with the registrar. 5. When the company is increasing its authorised capital out of the retained profit, share premium or reserves, the shareholders shall be entitled to free new shares, the number of which must be proportionate to the total par value of shares owned by them, except for the cases specified in Paragraph 2 of Article 35 of this Law and Paragraph 6 hereof. The shares shall be allotted according to the shareholders’ list as of the day of the meeting and the par value of shares owned on that day.
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6.When, implementing the decision of the general meeting or the court to rectify the violations committed in the course of authorised capital formation or increase, the company increases the authorised capital out of the retained profit, share premium (the amount in excess of the par value) or reserves, the shareholders, whose property rights were violated, shall have the pre-emption right to free new shares in proportion to the shares owned by them. The general meeting may adopt a resolution to rectify the violations committed in the course of the authorised capital formation or increase by re-allotting shares if the shareholders who after the committed violations owned more shares or owned shares of higher par value than was due to them, on the day of the general meeting (when the resolution to rectify the violations is passed) own a not smaller amount of shares or own shares of not lower par value than is necessary to rectify the violations and provided that the shareholders give a written consent to such a decision.
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7.Upon the registration of the increased authorised capital, the Board shall, according to the procedure established in the Articles of Association, notify the shareholders of the procedure for the acquisition of the new shares. If the shareholders do not communicate their wish to acquire new shares within 6 months from the receipt of such notice, the company may dispose of them according to the procedure established by the general meeting. If the shares are uncertificated, the new shares shall credited to the securities accounts.
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8.The new shares shall give their holders equal rights with the holders of other shares of the same class to receive dividend for the business year in which the new shares were issued.
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Article 45Reduction of the Authorised Capital
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1.The authorised capital may be reduced by a resolution of the general meeting adopted by a 2/3 vote in favour. When the company has issued shares of different classes, the general meeting may reduce the authorised capital if this resolution is supported by holders of different classes of shares (including voteless shares) by a 2/3 vote of shareholders of that class attending the meeting. If the company is reducing its authorised capital in the case specified in subparagraph 2 of paragraph 2 hereof, a resolution may also be taken at the same general meeting to increase the authorised capital of the company by additional contributions, by issuing new shares to be acquired by the creditors of the company.
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2.The authorised capital may be reduced in order to:
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1)pay available funds of the company to all the shareholders in proportion to the par value of the shares owned by them ;
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2)cover the losses entered in the company’s balance sheet;
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3)implement the court decision to reduce the authorised capital;
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4)transfer the property for arrears in payments into the state, municipal or state social insurance fund budgets (in the amount by which the transferred property has been assessed to be below the book value of the property as shown in the company’s balance sheet); (Article45, Paragraph 2, Subparagraph 4 shall be in effect until 31 December 2000);
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5)rectify, in the manner prescribed by the Government, the errors committed in the course of the authorised capital formation and increase (provided that the shareholders who have the number of their shares reduced give their written consent thereto), also to transfer into state or municipal ownership production and engineering infrastructure facilities, social objects, buildings (their parts) so that the state or municipality could fulfil their functions. In this case the number of shares owned by the state or municipality shall be accordingly reduced, except where state or municipality possessing over 1/2 of the votes after the authorised capital reduction would possess 1/2 or less than 1/2 of the votes. (Article45, Paragraph 2, Subparagraph 5 shall be in effect until 31 December 2000) 3. The authorised capital may be reduced only in the following ways:
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1)by decreasing the par value of shares; or
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2)by cancelling the shares.
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4.When reducing the authorised capital the company must in the first place cancel its shares. The par value of all shares or the number of shares shall be reduced proportionately to all shareholders, except in cases provided for in this Article, Paragraph 2, Subparagraph 3 (unless the court decides otherwise) and in Subparagraph 5.
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5.The resolution to reduce the authorised capital must be announced publicly 3 times at intervals not shorter than 30 days, or by notifying each shareholder and creditor.
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6.While reducing its authorised capital, the company must give additional guarantees for its liabilities to each creditor who requests them.
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7.Amendments to the Articles of Association of the company relative to the reduction of its authorised capital shall be registered according to the procedure established by the Law on the Register of Enterprises: not earlier than 6 months after the first public announcement and 30 days after the third public announcement or not earlier than 3 months after the notification of all shareholders and creditors and after the provision of additional guarantees to those creditors who so requested. The above rules shall not apply if the authorised capital is reduced by cancelling the company's shares acquired by purchasing said shares out of the net profit or the retained profit, or by acquiring them without payment. The authorised capital shall be considered to have been reduced only upon registration of the amendments to the Article of Association in the Register of Enterprises of the Republic of Lithuania. Where the company’s authorised capital is being reduced in order to cover the losses entered in the company’s balance sheet, the amendments to the company’s Articles of Association may be presented to the registrar of the register of enterprises for registration immediately after the adoption of the resolution by the general meeting.
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8.If the shareholders fail to timely deliver their shares to the Board for withdrawal from circulation and cancellation, the company’s Board shall publicly declare said shares invalid.
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9.Upon the reduction of its authorised capital, the company may return to the shareholders their contributions fully or in part, or relieve the shareholders from paying the unpaid contributions (a portion of the unpaid contributions) for the subscribed shares (increase the value of their paid-in contributions). Upon the reduction of the authorised capital, the shareholders may be paid only in cash, unless the Articles of Association of the company or the subscription agreement provide otherwise, except in cases where the resolutions are passed in accordance with item 4 of paragraph 2 hereof.
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Article 46The Right of the Company to Buy up its own Shares
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1.A public company shall be prohibited from buying up its own shares except when:
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1)it seeks to avoid excessive losses due to the fall of the price (rate) of shares;
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2)the company's authorised capital has been reduced in accordance with the procedure established by this Law; and
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3)in the case established in Paragraph 4 of Article 36 of this Law.
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2.The company shall buy up its own shares by the resolution of the general meeting. The par value of the shares of a public company purchased for the purpose specified in subparagraph 1 of Paragraph 1 hereof, and the par value of its other shares held by the company may not exceed 1/10 of the authorised capital.
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3.The company may acquire its own shares out of the authorised capital only in the event of the reduction of its authorised capital.
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4.If the shares of a public company have been acquired in violation of the provisions of this Article, they shall be cancelled and the authorised capital shall be reduced by the resolution of the government institution which registers the shares.
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5.A public company which has bought up its own shares shall not be entitled to the non-property rights carried by these shares.
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6.A private company shall be prohibited from buying up its own shares.
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CHAPTER SIX FINANCES AND DISTRIBUTION OF PROFIT
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Article 47Financial Resources of the Company
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1.The financial resources of the company shall be formed from the internal and external sources. Internal sources may include depreciation charges and profit, external sources may include contributions for shares, proceeds from debentures, grants and subsidies, borrowed funds and other comparable funds.
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2.The company's Board shall determine the method for calculating the depreciation charges and their rates for the recovery of depreciation of its fixed assets as well as for covering maintenance expenses. These rates shall be established taking into account the changes in the efficiency of the company's assets and may not exceed maximum economic rates established by the Government of the Republic of Lithuania. The part of the fixed assets which has been written off prematurely (before it has been fully depreciated) shall be attributable to the losses of the company.
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3.The public company shall have no right to use its profit for other purposes until it pays all the taxes prescribed by laws.
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Article 48Distribution of Profit
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1.The profit of the company received upon deducting all taxes must be distributed not later than within 4 months after the close of the business year when the annual financial statement is being approved at the general meeting. The resolution concerning the distribution of net profit must state:
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1)retained profit (loss) at the beginning of the business year;
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2)net profit or loss of the business year;
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3)distributable profit or loss;
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4)transfers from the reserves;
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5)shareholders’ contributions in respect of losses (if the shareholders decide to cover all or part of the distributable losses);
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6)appropriation of profit to the mandatory reserve;
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7)appropriation of profit to undistributable reserve, distributable reserve, or other reserves provided for by laws;;
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8)appropriation of profit for the payment of dividends;
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9)other cases of profit appropriation: annual payments to the Board and Supervisory Board members (bonuses), use of profit to pay bonuses to the employees and for other purposes; and
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10)retained profit to be carried forward.
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2.When distributing distributable profit (loss), the general meeting shall have the right to include therein retained profit (loss) at the beginning of the business year, net profit or loss of the business year, transfers from reserves, taking into account provisions of other Articles of this Law, shareholders’ contributions in respect of losses.
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3.The sum allocated for the payment of annual share of profit (bonuses) to the members of the Board and the Supervisory Board, bonuses to employees and for other purposes (Subparagraph 9 of Paragraph 1 hereof) may not exceed 1/5 of the net profit and the share of profit set aside for the above purposes may not exceed the share set aside for the payment of dividends.
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4.Bonuses to employees paid from the profit may be paid in advance every quarter, if the current economic performances allow to anticipate sufficient profit. Advance payment of bonuses to the Supervisory Board and members of the Board shall be prohibited. 5. If the aggregate sum of the mandatory reserve and share premium is less than 1/10 of the authorised capital, deductions to the compulsory reserve shall be mandatory and may not be less than 1/20 of the distributable profit.
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6.It shall be prohibited to pay dividends, annual share of profit (bonuses) to members of the Board and Supervisory Board, bonuses to the employees or to otherwise distribute the profit, if the agricultural producers are not paid for the produce sold within the set time period.
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7.If, within the period set in Paragraph 1 hereof, the general meeting refuses to distribute the profit or fails to pass a resolution in respect of the profit distribution, the company’s Board (if its is not present - the head of the Administration) must within 30 days after the meeting distribute the profit according to the following rules:
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1)the share of profit used to acquire long-term tangible assets and financial property in the business year for which the profit is distributed shall be attributed to the mandatory reserve, distributable or undiostributable reserves;
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2)the balance of the distributable profit shall be divided into two equal parts: one for the dividends, the other - for the new business year. ’
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Article 49Dividends
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1.The dividend is the share of the profit paid to the shareholder, which is proportionate to the par value of the shares held by him. If a share is not fully paid, the shareholder's dividend shall be reduced in proportion to the unpaid amount of the share price. The Articles of Association may establish that the dividend on fully paid share must be reduced if the last instalment of their price was paid in the business year for which the dividend is paid.
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2.Dividends declared by the general meeting shall be the company's liability to its shareholders. The shareholder shall have the right to claim payment of the dividend as the company’s creditor. The company shall have the right to recover the dividend paid out to the shareholder if the shareholder knew or is supposed to have known that the declared dividend was unlawful.
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3.The general meeting shall be prohibited from declaring and paying dividends if the company is insolvent or if it would become insolvent after the payment of dividends. If the company’s balance sheet shows losses, the general meeting shall have no right to declare and pay dividends until the losses are covered or until the authorised capital is reduced for the above reason. The decisions concerning the covering of losses or reduction of the authorised capital by the amount of the losses and declaration and payment of the dividends may be taken at one and the same meeting. The dividends may be paid out to the shareholders only after the covering of losses or reduction of the authorised capital by the amount of the losses.
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4.The company must pay dividends not later than within 3 months from the day of taking the decision in respect of the profit distribution except for the case provided for in Paragraph 3 hereof. Advance payment of dividends shall be prohibited.
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5.The company shall pay dividends in cash. If the shareholder does not object, dividends may be paid put to him in the company's shares or other securities.
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6.Persons, who were members of the company on the day the general meeting declared the dividends, shall be entitled to the dividend.
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CHAPTER SEVEN FINAL PROVISIONS
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Article 50
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1.Public and private companies must 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 of the date of the enactment of this Law. In the companies in which judicial or exrajudicial bankruptcy procedure is applied the time period specified above shall be calculated from the day of termination of the bankruptcy proceedings or the completion of the extrajudicial bankruptcy procedure.
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2.Public and private companies, including companies reorganised from other types of enterprises in the manner prescribed by Paragraph 3 hereof, whose authorised capital is less than the minimum amount established by this Law, must increase their authorised capital accordingly within 2 years after the promulgation of this Law. Companies which fail to meet this requirement must be reorganised or liquidated according to the procedure established by the laws of the Republic of Lithuania.
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3.State-owned and state stock enterprises, with the exception of those state-owned enterprises which the Government of the Republic of Lithuania does not intend to either corporatise or privatise prior to 2000, as well as individual (personal) enterprises with the rights of legal person must be reorganised into companies according to the procedure established by the Government of the Republic of Lithuania and registered in the Register of Enterprises of the Republic of Lithuania within 12 months from the enactment of this Law. For enterprises which are subject to privatisation under the Law on the Initial Privatisation of State Property, the above-specified time period shall be counted from the day of completion of their privatisation, whereas for enterprises to which judicial or extrajudicial bankruptcy procedure is applied - from the termination of bankruptcy proceedings or completion of the extrajudicial bankruptcy procedure. The Government of the Republic of Lithuania must prepare and submit by 1 November 1994 the list of such enterprises (indicating their authorised capital) to the Seimas for approval, as well as prepare a draft law on state-owned and municipal enterprises.
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4.The total value of shares of a commercial (joint stock) bank, registered in the Republic of Lithuania, in other companies, with the exception of commercial (joint stock) banks and companies directly servicing banks, may not exceed 10% of the bank's fixed capital registered with the Bank of Lithuania.
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5.The Law on Stock Corporations (No. I-425, 30 July 1990) shall be declared invalid.
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6.The Government of the Republic of Lithuania must prepare and submit to the Seimas by 1 June 1995 drafts of laws which would provide for the liability for the violation of the time limits set in Paragraphs 1 and 3 hereof for the registration of the amendments of the enterprises' Articles of Associations and for the reorganisation of enterprises.
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I promulgate this Law passed by the Seimas of the Republic of Lithuania PRESIDENT OF THE REPUBLIC ALGIRDAS BRAZAUSKAS