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Newsletter 2009 October

  • Lithuania

    22-10-2009

    Corporate Law

    The Law on Companies has been amended and supplemented

    On 17 July 2009 the Law amending and supplementing the Law on Companies has been approved.

    Most of the amendments have been adopted in order to implement the Directive of the European Parliament and of the Council No 2007/36/EB as regards the Usage of Specific Shareholders Rights in the Companies which Shares are Admitted to Trading on a Regulated Market.

    The new wording of the Law determines new non-property rights of shareholders, i.e. to ask questions in regard to the agenda of the general meeting of shareholders. Furthermore, the new provisions establish that a company can provide the shareholders with a possibility to participate and vote in the general meeting of shareholders by means of electronic communication. It should be noted that in this case the requirements and limitations for the usage of electronic communication devices could be applied only when it is necessary for the identification of shareholders and the assurance of the security of transmitted information, and only when they are in proportion to the achievement of the above mentioned goals.

    By the amendments the new provisions concerning the submission of a voting report to the shareholders of listed companies are established. From now on upon request of shareholders, the inspector of the general meeting of shareholders will have to submit to the shareholders an exhaustive voting report, i.e. the information on the amount of the authorised capital which is represented by voting, the total amount of shares by which it has been voted, the total number of shareholders that voted, etc. It should be noted that the shareholders must demand such an exhaustive voting report before the voting has started.

    The amendments establish additional requirements for the disclosure of information to the general meeting of shareholders. From now on the shareholders of listed companies, who have acquired the shares in their own name, but in the interest of other persons, shall have to disclose the final client to the general meeting of shareholders.

    The implementation of the right of shareholders of listed companies to participate in the general meeting of shareholders has also been simplified: it has been established that one can authorise another person by electronic means. There is no requirement for such authorisation being approved by notary public. However, such authorisation shall be concluded in a written form (i.e. concluded not by means of video, audio or other way). A shareholder shall inform the company about the authorisation concluded using electronic means.

    Some of the amendments have been adopted in the regulation of the procedure of making the agenda of the general meeting of shareholders. From now on the agenda may be supplemented by the shareholders holding the shares which grant not less than 1/20 of all votes. Until now the amount of 1/10 of votes has been established. Moreover, a possibility to submit proposals using electronic communication devices is set forth in the amendments.

    By the amendments some of the restrictions effective until now concerning the constitution of the bodies of the company have been repealed. From now on the head or a member of the board of the subsidiary or the parent company shall no longer be forbidden to become a member of the supervisory board. A member of the supervisory board of the subsidiary or the parent company shall no longer be forbidden to be a member of the board.

    Upon amendments coming into force, the new terms of the convocation of the general meeting of shareholders shall apply. Until now it has been established that the general meeting of shareholders shall be held within 40 days after the date of the receipt of the request to convene a meeting. From now on the term of 30 days shall apply. Until now a notice on convocation of the general meeting of shareholders must have been published in the daily indicated in the articles of association or delivered against signature or sent by registered mail to each shareholder not later than 30 days before the general meeting of shareholders. From now on this term is shortened to 21 day. Accordingly, the amendments establish that in such cases when the meeting has not been held, the repeated meeting may be convened not earlier than after 5 days and not later than after 21 day from the day of the general meeting of shareholders which has not been held. Until now the terms of 5 and 30 days have been established.

    The amendments and supplements to the Law have completely come into force as from 1 August 2009.

    Labour Law

    The amendments to the Labour Code have been adopted

    During the period starting on 16 June 2009 and ending on 23 July 2009 Seimas has adopted four laws by which the Labour Code of the Republic of Lithuania has been amended.

    One of the adopted amendments has been approved in order to strengthen the protection of employees coming back to work after the maternity leave. The amendment of the Code, establishes that the employer shall secure employees’ right to come back after the maternity leave to the same or equivalent work place on the conditions not less beneficial than were established before leaving to the maternity leave (including remuneration) and use all of the improved conditions (including remuneration), to which he would have had the right in case of uninterrupted work.

    Also, the protection of employees working under fixed-term employment contracts has been strengthened by the amendments. The Code has been supplemented with the new provision, stating that working conditions, professional training and incentive opportunities shall not be less beneficial for the employees working under fixed-term employment contracts in comparison with the employees working under open-ended employment contracts.

    By the amendments of the Code, the new provisions regarding employers have been established. The new provisions expand the right of the employer to include softer requirements into the collective agreement regarding the termination of the employment contract with the senior employees. Until now the Code applied certain restrictions to the possibility of terminating the employment contracts with the employees who would be entitled to the full old age pension in not more than 5 years. From now on a possibility of shortening the mentioned 5-year-term up to 3 years, if so agreed in the collective agreement, has been established by the amendments. It should be noted that this provision will be valid until 31 December 2010.

    Furthermore, the employers will be entitled to provide in the collective agreements shorter notice terms. Until now the Code established that the employer is entitled to terminate the employment contract by giving the employee a 2 months written notice against signature whereas not less than 4 months notice given in cases of the termination of the employment contract with employees, who will be entitled to the full old age pension in not more than 5 years, who are under 18 years of age, disabled persons and employees raising children under 14 years old. Moreover, the amendments established the possibility of determining shorter notice periods in the collective agreement – accordingly, the terms of 1 month and 2 months have
    been settled. It should be noted that this provision will also be valid until 31 December 2010.

    The legal status of the employer has been improved by one more new provision. From now on in case the employee has the right to receive the severance pay of five monthly average wages, the employer will be able to pay this severance pay upon his own decision not later than within 3 months from the dismissal day by allocating the payment of severance pay to equal parts and at least once per month. Until now a general rule, establishing that the employer must make a full settlement of accounts with an employee being dismissed from work on the day of his dismissal, unless a different procedure for settling is provided for in the laws or a different agreement between the employer and the employee exists. This amendment shall also be valid until 31 December 2010.

    Legal Status of Aliens

    The amendments to the Law on Legal Status of Aliens have been adopted

    As from 4 August 2009 the amendments to the Law on Legal Status of Aliens have come into force.

    By the amendments the order of issue of visas has been specified. From now on an alien shall submit his documents for the issue of a visa not only directly to the diplomatic mission or the consular post of the Republic of Lithuania, at the border checkpoint, or to other authorised state institutions but also through the travel agencies, accredited according to the requirements of the Common Consular Instructions.

    Furthermore, the order of issue of temporary residence permits has also been amended. Until now a temporary residence permit could be issued to the alien who carries on legitimate activities in Lithuania according to three legal grounds prescribed in the Law, one of which is: an alien registers an entity as an owner or co-owner who owns at least 10% of the authorised capital or voting rights and his presence is necessary for carrying on entity‘s activities. The mentioned ground has been amended by establishing that a temporary residence permit shall be issued when an alien registers an entity as an owner or co-owner, when the par value of the shares of the authorised capital belonging to an alien is not less than LTL 50,000 and his presence is necessary for carrying on entity‘s activities.

    The conditions of the withdrawal of the right to stay in the Republic of Lithuania have also been supplemented. From now on the right of a minor national of the EU member state, if this satisfies his best interests, or the EU member state national, who has been residing in Lithuania without interruption for 10 years, may be withdrawn only in case of a threat to the state security. The common rule, establishing that the right of the EU member state national or his family members to reside in Lithuania may be withdrawn if the stay in Lithuania of this national and/or his family members would constitute a threat to the state security or public policy, remains effective without any change, but from now on it will no longer be applicable to the persons mentioned in the previous sentence.

    Public Procurement

    The amendments to the Law on Public Procurement have been adopted

    On 22 July 2009 the amendments to the Law on Public Procurement (hereinafter – LPP) have been adopted. The major part of the amendments has come into force as from 1 September 2009, and the other respectively – as from 1 January 2010 and 1 January 2011. For the procurement procedures which have been started after the above mentioned dates the requirements of the new wording of LPP shall be applicable, and the procurement procedures started before 1 September 2009 shall be accomplished according to the wording of LPP effective until the specified dates.

    The major part of the amendments has been adopted with a view to create an actually operating electronic public procurement system in Lithuania as well as to encourage the suppliers and contracting authorities to make active use of it. Accordingly, new obligations for a contracting authority have been established in LPP that are related to the use of the Central Portal on Public Procurement (CPPP), which is a public and free of charge web-based system, and which has been created for the following purposes:

    • the obligation to register with the CPPP and to submit the data as provided for by the laws; in order to secure the relevance of the data, upon any changes a contracting authority shall also be under the obligation to renew such data not later than within 5 working days from the relevant change;
    • in order to increase the transparency of the procurement procedures, a contracting authority shall have to draft and approve the plans of the prospective procurement procedures for the current financial year and to publish these plans at the CPPP and at its website (if there is one);
    • the obligation to secure that the procedures for the award of public works, public service and public supply contacts, performed by the means of the CPPP (i.e. a contract notice of a particular procurement procedure (in case of a negotiated procedure without publication of a contract notice – invitation to tender), other documents are submitted and the tenders of the suppliers are accepted by electronic means) shall constitute no less than 50 per cent of the total value of the procurement procedures performed by the particular contracting authority during a calendar year;
    • the obligation to publish contract documents at the CPPP, if possible;
    • as regards the obligation to announce all the information related to the procurement procedures by electronic means, the right of a contracting authority to charge for the contract documents and their translation to foreign languages has also been repealed;
    • the annual reports on small-value tenders must be submitted by both the contracting authorities of “classical sector” and of the “municipal sector”.

    By the present amendments to the LPP the order of procurement procedures performed by contracting authorities belonging to the “municipal sector” has also been tightened:

    • from now on for the said contracting authorities the restrictions for the value of small-value tenders shall apply: to public supply contracts and to public service contracts – LTL 100,000, for public work contracts – LTL 500,000 (VAT exclusive);
    • the provisions enabling to purchase directly from the subsidiaries or other associated legal entities under the exceptions provided for in the LPP (under the provisions of the Civil Code of the Republic of Lithuania) have been repealed (this method has been practically applied to procurement procedures performed by and between the state enterprises);
    • the provisions, stating that contracting authorities belonging to the “municipal sector” in case of a simplified procurement procedure have the right to enter into a verbal agreement irrespective of its value, has been repealed; from now on in such a case, the limit of LTL 10,000 shall be applicable to these contracts;
    • furthermore, the said contracting authorities shall also be under the obligation to submit reports after a simplified procurement procedure is accomplished and about the executed and terminated public contracts;
    • from now on the rules on simplified procurement procedures approved by the said contracting authorities will have to meet the requirements which until the new wording of the LPP were applied only to contracting authorities of “classical sector” (subject to contract notice requirements indicated in Article 92 of the LPP).


    Some other substantial amendments are as follows:

    • in order to repeal the double contract notice mechanism, as from 1 January 2011 certain information, related to the public procurement that is prescribed by the laws of international procurement, on a prior contract notice, etc., shall not be published in the annex of State Gazette “Informaciniai Pranešimai“; there shall only be enough to publish such information in the CPPP and in the Official Journal of the European Union or in other official publications that could be set forth in the laws;
    • the list of persons, whom as a result of their conviction for criminal offences it is forbidden to participate in the procurement procedures, has been expressly specified and supplemented;
    • evaluation of breaches provided for in the Law on Competition shall be subject to higher standards - it shall be forbidden for persons, who committed such a breach of competition rules, to participate in procurement procedures for the period of 3 years;
    • moreover, the former requirement to obtain a permit from the Public Procurement Office in case a contracting authority intends to reject all tenders, submitted for an international tender, is repealed;
    • the Government of the Republic of Lithuania or its authorised institution shall be entitled to determine, what shall be considered an unusually small value in the tender for the award of the public service, public supply and public works contracts.

    Land Reform

    The Law on Land Reform has been amended

    As from 9 July 2009 the Law amending Article 19 of the Law on Land Reform has come into force.

    In the previous wording of the Law it has been set that the Land Management Department and the Law Department under the Ministry of Agriculture are liable for the approval of the methodology for drafting and approving of land reform and land-use projects. According to the new wording of the Law this obligation has been delegated to the Minister of Agriculture.

    According to the previous wording, the projects in relation to the land reform should be drafted using state funds. From now on the state funds can be allocated to the drafting of the land projects which are designed in order to restore land ownership rights and involve personally owned land lots. In other cases, projects shall be drafted and implemented at personal natural or legal entities‘ expenses. The Government is responsible for setting the payment order.

    According to the previous regulation, the Ministry of Agriculture and the Ministry of Environment were responsible for identifying the cases, order and content of the state expertise of land reform projects performed by the Land Management Department. By the amended provisions of the Law, this obligation has been delegated to the Ministry of Agriculture.

    New Administrative Penalties

    The Code on Administrative Offences has been amended and supplemented

    On 15 July 2009 Seimas has adopted the amendments and supplements to the Code on Administrative Offences.

    The amendments and supplements adopted include such areas as work safety and hygiene, transportation of passengers, regulation of financial markets, spread of public information having negative influence, showing of video movies, protection of authors’ rights, transplantation of human tissues and organs, etc.

    The new provisions in relation to responsibility for the breach of rules of work safety and work hygiene while performing dangerous work have been approved. Moreover, the new provisions have established the fines imposed to the employee who is not sober or is intoxicated by drugs or other toxic materials at his work place or in other premises belonging to the employer during or after working hours. Accordingly, the employer will be fined – from LTL 500 to LTL 1,000 and in the case when the employee performs dangerous work – from LTL 2,000 to 5,000 - for non-suspension of such an employee according to the newly adopted amendments.

    The fines for the breach of legal acts regulating the area of markets in financial instruments have also been tightened. Upon coming into effect of the amendments of the Code, the fines for the market abuse, i.e. manipulation of market and use of inside information while trading in financial instruments have been increased from LTL 1,000-2,000 up to LTL 5,000-30,000. For a repeated breach within the period of one year the fine may reach LTL 30-60 thousand. Also, fines for other breaches of legal acts regulating the markets in financial instruments have been increased, e.g. a fine imposed for not notifying of transactions concluded by the manager of
    the issuer in his own name in relation to the financial instruments of the managed issuer. From now on the maximum fine for such a breach shall be not LTL 2,000, as it has been established prior to the amendments, but LTL 10,000. For a repeated breach within the period of one year the fines may vary from LTL 5 to 15 thousand (until now a fine of LTL 2,000 to 4,000 has been established). Considering that fines have been increased, the examination of the breaches mentioned above has been delegated to the competence of district courts. Until now the cases have been examined and the fines have been imposed by the Securities Commission.

    Some of the amendments to the Code have been adopted in pursuance of implementation of the Directive 2004/23/EC of the European Parliament and of the Council on Setting Standards of Quality and Safety for the Donation, Procurement, Testing, Processing, Preservation, Storage and Distribution of Human Tissues and Cells. By the amendments, the liability for the breach of legal acts regulating the above-mentioned areas related to the donation of organs has been established.

    The above-mentioned amendments have come into force as from 28 July 2009.

    Other amendments to the Code have been adopted in order to tighten administrative penalties in the areas such as spread of public information of negative effect, showing of video movies, protection of authors’ rights, etc., as well as to adjust the competence of state institutions, according to the newly adopted legal provisions and increased fines. All of the amendments of the Code shall completely come into force as from 1 March 2010.

    Other News

    Eversheds Saladžius took great pleasure to sponsor the annual business leaders’ conference in Lithuania Lužio taškas held in Palanga on 24-25 September. This year Eversheds Saladžius sponsored Mark Gallagher‘s, Formula 1 consultant of pilots and sponsors, former Head of Marketing for Jordan Grand Prix and Head of Business Development for F1 Red Bull Racing, arrival and presentation. We are also proud to inform you that Tom Ferguson, energy law expert from Eversheds International Limited, participated at the conference with his presentation on world energy matters.

    This August Dr Lina Aleknaite-Van der Molen joined the team of the Law Firm Eversheds Saladžius. Lina is a Doctor of Legal Sciences (S.J.D.) (Central European University, Budapest, Hungary). Her dissertation The Prospects of Asset Securitization in Lithuania in the Light of Experiences from the United States of America and Europe was evaluated summa cum laude. Lina has experience of the visiting researcher at Max Planck Institute for Comparative and International Private Law, Benjamin N. Cardozo School of Law, New York, the USA and T.M.C. Asser Instituut, the Hague, the Netherlands. The new recruit of Eversheds Saladžius also holds LL.M degree in International Business Law from Central European University, Budapest, Hungary. We are proud to inform that Lina has covered traineeships at international law firm McKenna Long & Aldridge LLP and at the Legal Service of the European Commission, Brussels, Belgium.

    New article on financing by Dr Lina Aleknaite - Van der Molen appeared in the daily Verslo žinios on 14 October.

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