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Newsletter 2012 June-July

  • Lithuania
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03-08-2012

Company Law

Law on Small Partnerships adopted

In order to accelerate the start of a business and create necessary conditions for private business to enter the market at the lowest cost, on 29 June 2012 the Parliament of the Republic of Lithuania (hereinafter “the Parliament”) adopted the Law of the Republic of Lithuania on Small Partnerships (hereinafter “the LSP”), which establishes a small partnership as a new legal form of a limited liability legal entity.

A small partnership as a legal form of a legal entity is designed for small business. The existence and operations of a small partnership are based on intuitu personae – the principle of cooperation by virtue of personality. For these reasons, only natural persons may incorporate a small partnership and/or join it as members. The number of incorporators of a small partnership may be up to 10, whereas the number of its members is unlimited. New members of a small partnership shall be admitted upon a resolution of the meeting of members of a small partnership in accordance with the procedure established in the regulations of a small partnership.

In order to simplify the procedure for the incorporation of a small partnership, the LSP does not require any minimum authorised capital. As soon as the Government of the Republic of Lithuania or its authorised institution approves model forms of an incorporation agreement, of a deed of incorporation, and of the regulations of a small partnership, it will become possible to incorporate a small partnership electronically, without the certification of incorporation documents by a notary.

Taking into account different needs of a business due to its operations, the nature and volume of a business as well as other factors, the incorporators of a small partnership will be able to choose one of the two possible structures of bodies of a small partnership: either both the meeting of the members of a small partnership and the head of a small partnership as an individual management body of a small partnership, or just the meeting of the members of a small partnership which shall, at the same time, perform the functions of a management body of a small partnership.

It is hoped that the new legal form will fill in the niche between an individual enterprise and a private limited-liability company, will promote entrepreneurship, and will ease the business development.

The LSP will come into effect on 1 September 2012.

Amendments to the Law on Companies adopted

On 19 June 2012, in preparations to pass the LSP, the Parliament adopted amendments to the Law of the Republic of Lithuania on Companies (hereinafter "the LC"). The amendments provide that a company may be reorganised into a small partnership if all the shareholders in the company are natural persons and their number does not exceed ten.

In addition, the Parliament adopted further amendments to the LC which provide that a company may be reorganised into a general partnership or into a limited partnership, where the company has at least two shareholders.

The amendments to the LC will come into effect as of 1 September 2012.

Labour Law

Amendments to the Labour Code adopted

On 26 June 2012, the Parliament adopted amendments to Article 204 and Chapter XIX of the Labour Code of the Republic of Lithuania (hereinafter the Labour Code). Chapter XIX regulates individual labour disputes.

According to currently valid legislative framework, labour disputes commissions are formed in enterprises, institutions, and organisations from an equal number of representatives of the employees and the employer for a period of up to two years. The application of the institute of a labour disputes commission has revealed a number of shortcomings of the regulation. For example, since members of a labour disputes commission work in the same enterprise, institution or organisation where the employee who initiates a labour dispute is employed, and since members of a labour disputes commission are paid their average salaries by the employer, parties to an individual labour dispute depend both financially and materially on the employer and, therefore, cannot make impartial decisions. As, according to currently valid provisions of the Labour Code, the employer is not entitled to appeal against the decision of the labour disputes commission to the court, it also produces an effect of a lack of interest from the employer’s side to resolve individual labour disputes at the labour disputes commission. Employers avoid initiation of formation of labour disputes commissions; in those enterprises, where labour disputes commissions function, members of a labour disputes commission often fail to agree and, therefore, decisions are not made.

In order to ensure higher quality, greater impartiality and effectiveness of resolution of individual labour disputes, the amendments to the Labour Code dropped ineffective labour disputes commissions at enterprises, institutions and organisations and provide that labour disputes commissions shall be established and shall continuously function at the territorial divisions of the State Labour Inspectorate. A labour disputes commission shall consist of three members: the chairman of the labour dispute commission, an employees’ representative and an employers’ representative, appointed, respectively, by managing bodies of trade unions and employers’ organisations which operate within a particular territory of the respective territorial division of the State Labour Inspectorate.

The chairman of the labour disputes commission shall be a civil servant of the State Labour Inspectorate, who is appointed by the Chief State Labour Inspector of the Republic of Lithuania and has a university degree in law. The chairman of the labour disputes commission shall perform solely the duties of the chairman of the labour disputes commission.

It is noteworthy that a written application for examination of an individual labour dispute may be submitted to the labour disputes commission not only by the employee (as is the case at the moment), but also by the employer. The application must be filed with the labour disputes commission at that territorial division of the State Labour Inspectorate in the territory of which the employee’s workplace is located.

Out of the multitude of novelties concerning the regulation of the labour disputes commission, it is also noteworthy that parties shall be allowed, on the grounds and as prescribed in the Code of the Civil Procedure of the Republic of Lithuania, to petition removals of members of the labour disputes commission, parties to a labour dispute shall be able to conclude a written peaceful settlement agreement, the plaintiff shall be able to waive all or part of claims made, the parties shall be entitled to make additional claims and give additional evidence.

The decisions of the labour disputes commission shall be passed by a majority of votes. In case a member (members) of the labour disputes commission fails to report to the meeting and if the chairman decides to consider the case on its merits, the decision is made by the attending members of the labour dispute commission. Where the case is heard by two members and their opinions differ, or where the case is heard solely by the chairman of the labour disputes commission, the decision shall be made at the discretion of the chairman of the labour disputes commission.

In contrast to currently valid provisions, not only the employee, but also the employer shall be able to appeal to the court against the decision of the labour disputes commission. It is significant that, upon coming into force of the decision of the labour disputes commission, the decision must be executed, except for the cases where the entire decision or part of it must be executed immediately. The decision of the labour disputes commission becomes effective upon expiry of the term to appeal to court if neither of the parties has lodged a complaint in court. The time limit for appeal against the decision of the labour disputes commission is one month from the adoption of the decision by the labour disputes commission.

The adopted amendments to Chapter XIX of the Labour Code provide for novelties in relation to resolution of labour disputes not only in the labour disputes commission, but also in court.
 
Taking into account that it is not always fair and reasonable to apply the principle of full indemnity for the employee’s lost income in compensation for preventing his work in a specific job, and also taking into account that lengthy court trials currently pose a higher economic risk to the employer, the Labour Code was amended to provide that, where the employee gets employed at another workplace after he was dismissed without a valid reason or in violation of the procedure established by law, the court shall award him not the entire average work pay for the entire period of involuntary idle time from the day of dismissal from work until the day of execution of the court decision, but the difference in pay for such a period.
 
The amendments to Article 204 and Chapter XIX of the Labour Code will come into force on 1 January 2013.
 
On 28 June 2012, the Parliament adopted an amendment to Part 1 of Article of the Labour Code. The amendment supplements the procedure for establishing the minimum hourly pay rate and the minimum monthly wage. The amendment provides that if, upon the recommendation of the Tripartite Council, the Government fails to decide on the minimum hourly pay and the minimum monthly wage until 1 June of the running year, or if there is no recommendation from the Tripartite Council concerning the minimum hourly pay and the minimum monthly wage, then the minimum hourly pay and the minimum monthly wage for the next fiscal year shall be determined and approved by the Parliament until the end of the Parliament’s spring session, taking into account the average annual inflation of the last year (calculating the national consumer price index) and the influence of other factors that affect the average salary in the public and private sectors.
 
On 30 June 2012, the Parliament adopted amendments to Articles 98 and 99 of the Labour Code, and supplemented the Labour Code with new Article 981. The amendments, inter alia, provide that an employee must commence work not earlier than on the day after an employment contract was concluded and that the employer must notify the person’s commencement of work to the State Social Insurance Fund’s administration institution at least one working day prior to the planned start of work. If the employer has failed to notify the person’s commencement of work to the State Social Insurance Fund’s administration institution at least one working day prior to the employee’s planned start of work, this shall be considered as an indication of illegal work.
 
The amendments to Articles 98, 99, and 187 of the Labour Code, as well as new Article 981 came into force on 1 August 2012.
 
On 30 June 2012, the Parliament adopted a legislative amendment which extends the maximum period, for which a fixed-term employment contract can be concluded, where an employee is employed in a newly established position, from 31 July 2012 until 31 July 2015. This amendment came into force on 13 July 2012.
 
Increase in the minimum pay for work
 
On 20 June 2012, the Government of the Republic of Lithuania adopted resolution No. 718 to increase, effective 1 August 2012, the minimum monthly salary to 850 LTL (gross) and the minimum hourly pay to 5.15 LTL (gross).

 

Bankruptcy Law

 

Amendments to the Law on Enterprise Bankruptcy adopted
 
On 21 June 2012, the Parliament adopted amendments to the Law of the Republic of Lithuania on Enterprise Bankruptcy (hereinafter the LEB) to supplement the LEB with the provisions on hearing claims to recognise transactions null and void, as well as on other claims of the administrator against the debtors of an enterprise in bankruptcy/bankrupt enterprise, not only at court according to the place of registered office of an enterprise in bankruptcy, but also at an arbitration tribunal. If, before the initiation of bankruptcy proceedings, the parties agreed to refer such legal actions or claims to arbitration, they shall be heard at court or at an arbitration tribunal in accordance with the provisions of the Law of the Republic of Lithuania on Commercial Arbitration.

 

The amendments came into force on 30 June 2012.

 

Dispute Resolution

Amendments to the Law on Commercial Arbitration adopted

On 21 June 2012, the Parliament adopted amendments to the Law of the Republic of Lithuania on Commercial Arbitration (hereinafter the LCA) to regulate the general provisions of commercial arbitration, by creating possibilities for the parties to refer to arbitration not only the matters of law, but also matters of fact. The LCA defines a commercial dispute as any disagreement between the parties over the matters of fact and/or law, arising out of contractual or non-contractual legal relationships, including, without limitation, the supply of goods, distribution, commercial agency, factoring, lease, outsourcing, consultancy, investment, financing, banking activities, insurance, concession, establishment and implementation of a joint venture, any other industrial or business cooperation, indemnification for damages due to competition law violations, public procurement-based contracts, transport of passengers and cargo by air, sea and land. The LCA no longer makes a distinction between international commercial arbitration and national commercial arbitration. The written form of an arbitration agreement has been extended to include an arbitration clause concluded via electronic communication means. The LCA abridged a list of disputes that may not be referred to arbitration. The amendments provide that an arbitration tribunal may not decide disputes which are to be heard in the administrative proceedings and hear cases which are within the competence of the Constitutional Court. Also, arbitration may not be referred disputes, arising out of family legal relationships, disputes concerning patents, trademarks and design registration, disputes arising out of employment contracts and contracts with consumers, except for cases, where an arbitration agreement was concluded after a dispute had arisen. In addition, arbitration cannot hear disputes where one of the parties is a state enterprise or a municipal enterprise, a state/municipal institution/organization, except for the Bank of Lithuania, unless a prior consent of the founder of such enterprise/institution/organization is obtained concerning the arbitration agreement. The LCA also establishes the procedure for composing the arbitration tribunal. It is noteworthy that the amendments to the LCA provide for wider possibilities in composing the arbitration tribunal. Taking into account relevant amendments to the 1985 UNCITRAL Model Law on International Commercial Arbitration (as amended and revised) in the field of the regulation of interim measures, the LCA regulates, in a separate chapter, the application of interim measures and expands the list of interim measures which an arbitration tribunal shall be entitled to grant. Also, the LCA regulates in great detail the competence of an arbitration tribunal, the conduct of arbitral proceedings, the decision-making and the procedure for the termination of the arbitral proceedings without the final award, the procedure for setting aside an arbitral award, and the recognition and enforcement of the awards by foreign arbitration tribunals.

The amendments to the LCA came into force on 30 June 2012.

Other News

Eversheds Saladžius sponsored the celebration of the 236th Anniversary of the Independence of the United States of America

Eversheds Saladžius sponsored the celebration of the 236th Anniversary of the Independence of the United States of America on July 4 at the Verkiu castle park in Vllnius. This event, organised by the American Chamber of Commerce in Lithuania, is one of the most popular annual events and every year attracts more and more participants who want to feel the real spirit of American Celebration.

Eversheds Saladžius is an active member of the American Chamber of Commerce. Managing Partner Jonas Saladžius is the Board Member of the Chamber.

Eversheds Saladžius has been invited to participate at The International Forum Sustainable Business - Sustainable World

Eversheds Saladžius has been invited to participate at The International Forum Sustainable Business - Sustainable World, organised by Siauliai city Municipality. Associate Gerda Dini?t? delivered presentation on Lithuanian Legal Business Environment.

Eversheds Saladžius to host and sponsor a conference for business leaders in Lithuania for a fifth year already

The major annual business conference in Lithuania L?žio taškas will be held in September this year again. The conference, participated by the top business leaders in Lithuania happens to be one of the major business events in the country and summons approximately 200-300 top management participants from the leading companies in Lithuania.

Last year we sponsored David Magliano's arrival and presentation. David was the architect of the idea of London 2012 Olympic games. A team comprised of David Magliano, Her Magisty Queen Elizabeth II, Tony Blair and other famous politicians of the UK has won the right to hold the 2012 Olympic Games in London. This was the fiercest battle of cities throughout the history of Olympic Games. David's presentation influenced the choice of the city. After this winning, London became the only city of the World to host the Olympic Games for the third time.

This year we have invited a world famous grass hockey coach Mark Lammers who will speak about innovations and courageous risks in sports.

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