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Newsletter 2010 October

  • Lithuania

    04-11-2010

    CONSTRUCTION LAW

    The amendments and supplements to the Law on Construction have come into force

    As from 1 October the amendments and supplements to the Law on Construction, which were adopted in July this year, have come into force.

    The amendments and supplements to the Law regulate in more detail the elimination of consequences of unauthorised construction. The Law provides for a possibility to legitimize unauthorised construction by preparing project documentation and by paying the fee indicated by the Law in such cases when in the land plot, in which the unauthorised construction has been found, the construction of a new building of that particular purpose is allowable or when such works of reconstruction or repair of such building are allowable under valid documents of territorial planning and such construction does not contradict to the mandatory requirements of the legal acts of environment protection, heritage protection, protection of protected areas.

    In order to simplify the construction process, the set of design conditions for a building shall no longer be required. The builders will only have to obtain the conditions for connection to engineering networks and traffic routes and special requirements issued by state institutions if it is intended to build in protected areas or the territories of cultural heritage.

    Moreover, the amendments and supplements simplify the procedures of completion of construction works. From now on upon completion of major repair of a building, change of purpose of a building (premises), renewal (modernisation) of a house of one or two units, the construction works will no longer require acceptance. The declaration on completion of construction submitted by the builder shall be sufficient. For completion of construction of a simple building no procedures at all shall be performed. The amendments and supplements also establish the procedure of elimination of consequences insurred by construction works carried under illegally issued document allowing the construction, more precisely define the terms of a building, temporary building, incomplete building, reconstruction of a building and other terms, comprehensively regulate the cases in which the document allowing the construction is required, etc.

    New administrative penalties in the area of Construction

    As from 1 October 2010 the amendments to the Code of Administrative Offences have come into force. The amendments were adopted in order to harmonise the definitions of the Code with the ones of the Law on Construction, clearly differentiate penalties, imposed for unauthorised construction, supplement the Code with the new penalties which have not been established until now for other offences of the laws on construction.

    As from now the Code clearly establishes the fines, imposed for unauthorised construction by differentiating the fines according to the category of a building, type and territory of construction works. For instance, as from now on it is clearly distinguished that a fine of ten thousand to twenty thousand Litas may be imposed for unauthorised construction of a new building of exceptional significance. Meanwhile, unauthorised construction of a new building of non-exceptional significance in the territory of the object of cultural heritage, areas of cultural heritage, areas of conservational protection priority, complex protected areas or seaside protection zones, may incur a fine of five thousand to ten thousand Litas.

    The Code has been supplemented with the new provisions, establishing administrative penalties for unauthorised demolition of construction. For instance, the Code establishes that unauthorised demolition of a building may incur a fine of two thousand to five thousand Litas. Until now, penalties for unauthorised demolition have not been regulated by the legal acts.

    By the amendments the fines for use of a building prior to completion of construction works have been eliminated. Until coming into force of the amendments a fine of five hundred to five thousand Litas might have been imposed for such actions.

    As from now on, fines for offences of the legal acts regulating territorial planning and fines for performance of expert examination of construction works by breaching the legal acts may be imposed on the ground of the Code. Until now, penalties for the above offences have not been established.

    Moreover, the provisions of the Code regarding penalties for unauthorised reconstruction and unauthorised major repair of a building have been amended. Further, the Code has beensupplemented with the new provisions as regards the simple repair ofa building.

    The amendments to the Technical Regulations of Construction have been adopted

    According to the amendments to the Law on Construction, which have recently come into force, in September 2010 several technical regulations of construction have been amended, several technical regulations of construction effective until now have been revoked, and several new technical regulations of construction have been approved.

    Following the amendments to the Law on Construction, in pursuance of harmonising legal regulation in the area of construction, inter alia, the following technical regulations of construction have been amended:

    1. STR 1.02.06:2007: “The Description of Order of Acquisition of a
    Right to Run an Office of a Manager of the Main Spheres of Technical Activities of Construction Works and of Assessment Order of Specialists of Territorial Planning”;
    2. STR 1.01.08:2002: “Types of Construction Works“;
    3. STR 1.06.03:2002: “Expert Examination of Construction Works and of Design Documentation of Construction Works“;
    4. STR 1.05.06:2005 “Design of Construction Works“;
    5. STR 1.11.01:2010 “Completion of Construction“;
    6. STR 1.09.06:2010 “Suspension of Construction. Elimination of Consequences of Unauthorised Construction. Elimination of Consequences of Construction Works carried under Illegally issued Document allowing the Construction”.

    Taking into account the fact, that, according to the Law on Construction, as from now on the set of design conditions for a building shall no longer be required from the builders, the respective technical regulation of construction “The Set of Design Conditions for a Building” has been revoked.

    Upon approval of the new technical regulation of construction “Documents allowing the Construction”, the previously effective regulation STR 1.07.01:2002 “Construction Permit“ has been revoked. Accordingly, upon approval of the technical regulation of construction STR 1.12.08:2010 “Description of Order of Supervision of Use of Construction Works“, the previously effective regulation STR 1.11.01:2002 “Order of Acceptance of Construction Works as Fit for Use“ has been revoked.

    Moreover, several brand new technical regulations of construction have been approved, including, STR 1.01.06:2010 “Construction Works of Exceptional Significance“, STR 1.01.07:2010 “Simple Construction Works“.

    It shall be noted that the above mentioned regulations and their amendments have been adopted in order to harmonize the definitions used in the regulations with the definitions of the Law on Construction, harmonize the existing legal regulation, eliminate the contradictions, occurred due to amendments of the provisions of the Law.

    FINANCE LAW

    The Rules on Submission, Registration and Implementation of Public Offer have been amended

    As from 4 August 2010 the amendments to the Rules on Submission, Registration and Implementation of a Public Offer, approved by the Resolution of the Securities Commission of the Republic of Lithuania have come into force.

    As from now on, a person, intending to acquire, in the manner of public offer, a part or all securities granting the voting rights of a company, regarding securities of which the public offer has been submitted, will have to submit to the Securities Commission, inter alia, the following documents: evidence of prices of all transactions concluded within 12 months to the day of excess of the established margin of 1/3 votes (copies of securities sale-purchase agreements, summary of the transactions, executed in the regulated market or multilateral trading system, etc.) and calculation of the weighted average market price in the regulated market and multilateral trading system within 6 months to the day of excess of the established margin of 1/3 votes. In the previous wording of the Rules valid of the enforcement of the amendments, the submission of such documents has not been established. Also, the formula of calculation of such weighted average market price has been determined.

    In order to secure the prevention of possible conflicts of interests, in respect to the public offer to acquire securities, the new provision has been established providing that if the presenter of the public offer is at the same time a member of the managing body of a company issuing the public offer or is a person closely related to a member of a managing body, as defined by the Rules on Notification of Transactions Concluded by the Managers of the Issuers in their Own Name in Securities of Said Issuers, in such a case the existing or possible conflict of interest must be clearly disclosed in the opinion on public offer, announced by the managing bodies of the company.

    The amendments to the Rules for Drawing up and Submission of the Periodic and the Additional Information have been adopted

    As from 4 August 2010 the amendments to the Rules for Drawing up and Submission of the Periodic and the Additional Information have come into force.

    As from now on in the annual report or consolidated annual report (in case the issuer has an obligation to draw up the consolidated financial statements), inter alia, the following information shall have to be indicated: description of main investments made during the reporting period, including their amounts, information about committees’ members of the company (names, surnames, data on participation in the authorised capital of the issuer, beginning and end of the period of office of each person, working places, authorisations granted, general functions). However, upon coming into force of the amendments, the following information will no longer have to be submitted in the annual or consolidated annual report by the issuers, whose issued securities are included into trade in the regulated market in the Republic of Lithuania: information of how the Corporate Governance Code is complied with, as it has been established in the wording of the Rules effective until now.

    Moreover, by the amendments the new provisions have been established, providing that in the cases when the issuer must drawup, accordingly, the consolidated annual financial statements, or interim financial statements or interim consolidated financial statements, he may submit the joint confirmation of the responsible persons that, to their knowledge, accordingly, such annual financial statements or annual consolidated financial statements, or interim financial statements, or interim consolidated financial statements of the issuer drawn up in accordance with accounting standards, are true and fairly reflect the property, obligations, financial status, profit or loss and cash flow of the issuer or group of companies; that, to their knowledge, true review of the business development and activities has been indicated in the respective report of the issuer.

    LABOUR LAW

    The Description of Order of the State Social Insurance of Persons, Employed under Employment Contracts for the First Time has been approved

    As from 9 September 2010 the Description of Order of the State Social Insurance of Persons, Employed under Employment Contracts for the First Time has come into force.

    The Description establishes the conditions of state social insurance of persons, employed under employment contracts for the first time during the period starting 1 August 2010 and ending 31 July 2012 and submission of data to the territorial departments of State Social Insurance Fund Board. It shall be noted that the Description shall be applied in the cases, when the salary of a person, employed under employment contract for the first time does not exceed the amount of 3 minimal monthly salaries for no longer than 1 year of his employment during the period starting 1 August 2010 and ending 31 July 2012.

    According to the Description, the state social insurance contributions shall only be calculated for the following types of state social insurance as provided in the Description, calculating from the salary of the new participant of labour market for the period, when one is insured with several but not all types of social insurance: sickness and maternity social insurance, unemployment social insurance, labour accidents and occupational diseases social insurance and health insurance. If the salary calculated for the new participant of the labour market exceeds the amount of 3 minimal monthly salaries, the social insurance contributions for all types of state social insurance shall be calculated.

    The Description also regulates the order of submission of data to the territorial departments of the State Social Insurance Fund Board, other rules of execution of the insurance.

    CORPORATE LAW

    The Law on Agricultural Companies has been amended

    On 21 August 2010 the Law amending Article 3 of the Law on Agricultural Companies has been adopted.

    Upon coming into force of the amendments, when incorporating the agricultural company in Lithuania, the registered office of the company may be not only within the Republic of Lithuania, as it has been established until now, but also in other member states of the European Union or European Economic Area.

    The sample forms of incorporation documents of a private stock company have been amended

    As from 1 October 2010 the amended sample forms of incorporation act and of articles of association of a private stock company approved by the Minister of Economy have come into force.

    The sample form of articles of association has been amended in accordance with the amended Law on Companies by indicating in the form that the announcements of the company may be announced, when required, not only in a Lithuanian daily, but also in the electronic publication, published by the state enterprise Centre of Registers “Public Announcements of Legal Entities”.

    Moreover, some editorial amendments have been adopted in order to clearly state the provisions of the sample forms of incorporation documents of a private stock company.

    ENERGY

    The resolution of the Constitutional Court has been adopted regarding the Compliance of the Law on Electric Energy to the Constitution of the Republic of Lithuania

    As from 2 October 2010 the Resolution of the Constitutional Court of the Republic of Lithuania has come into force regarding the compliance of the Law on Electric Energy to the Constitution of the Republic of Lithuania.

    The Constitutional Court has stated that Article 42 (3) of the Law of Electric Energy contradicts to the Constitution to the extent that it does not establish the criteria of calculating the price of connection of consumers’ equipment to the system, which should be followed by the National Control Commission for Prices and Energy when approving the prices of connection of consumers’ equipment to the system. Moreover, it has been stated that Article 42 (4) of the same Law also contradicts to the Constitution to the extent that it does not provide for the criteria to be followed when calculating the amount of essential expenditure of distribution system operators, rendering the services of connection of consumers’ equipment to the system.

    It has been noted in the Resolution that, following the imperatives established by the Constitution that the State shall regulate economic activity so that it serves the general welfare of the nation, that the State shall defend the interests of the consumers, the obligation of the legislator arises to define not only the criteria of establishing limits of the prices of electric energy, but also the criteria of calculating of the prices of services (including connection of electric equipment to the distribution systems), so that the mentioned prices could be differentiated in accordance with the consumers which are objectively in different situations, also with the services required by consumers, essential expenditure of connection of consumers’ equipment to the system and also if the proprietary contribution of these consumers has been made when connecting consumers‘ equipment to the system. Such criteria must be accurate, reasonable so there would be no preconditions for abuse when establishing the prices of such services thus breaching the rights and interests ofconsumers of electric energy.

    Under imperatives of protection of consumers’ rights established in the Constitution, the obligation of the legislator arises to establish such legal regulation that would ensure effective protection of the rights of consumers of electric energy. The resolution notes that if the criteria of calculating the prices of connection of consumers’ equipment to the system in Article 42 Part 3 of the Law on Electric Energy, which shall be followed by the National Control Commission for Prices and Energy when approving the prices of connection of consumers’ equipment to the system are not set, the imperatives arising from the Constitution are being deviated from. According to the above mentioned arguments the Constitutional Court has made a conclusion that Article 42 Part 3 of the Law to the extent that it does not establish the criteria of calculating the price of connection of consumers’ equipment to the system contradicts to Article 46 Part 3 of the Constitution (the State shall regulate economic activity so that it serves the general welfare of the nation) and Article 46 Part 5 (the State shall defend the interests of the consumer) and the constitutional principle of state under the rule of law.

    It has been established in the Resolution that the imperatives arising from the Constitution shall be deviated from by establishing in Article 42 Part 4 of the Law that all consumers shall have to pay 20 per cent of the essential expenditure related to connection of consumers’ equipment, suffered by distribution system operators, rendering the services of connection of consumers’ equipment to the system, without establishing the criteria according to which the amount of essential expenditure of distribution system operators, rendering the services of connection of consumers’ equipment to the system would be calculated, also without establishing the mentioned criteria so that such an amount could be differentiated according to the consumers who are objectively in different situations, also in accordance to the services required by the consumers, also if the proprietary contribution of these consumers has been made when connecting consumers‘ equipment to the system. The Constitutional Court has ruled that Article 42 Part 4 of the Law on Electric Energy to the extent that it does not establish the mentioned criteria according to which the amount of essential expenditure of distribution system operators, rendering the services of connection of consumers equipment to the system would be calculated, contradicts to Article 46 Parts 3 and 5 of the Constitution and the constitutional principle of state under the rule of law.

    Other News

    Jonas Saladžius, Managing Partner of Eversheds Saladžius, participated at the IBA (International Bar Association) annual meeting in Vancouver, Canada. Jonas is a member of the IBA, member of the Committees on Banking Law, Corporate and M&A Law, Arbitration and Litigation of the Section on Legal Practice. He is also a member of European Forum of IBA, member of Capital Markets Forum of IBA and of Law Firm Management Committee of the PPID of IBA.

    Gerda Diniute, Asscociate at Eversheds Saladžius, delivered presentation Mergers & Acquisitions: How to Shop Properly inLithuania and Abroad at the business breakfast of the French Chamber of Commerce in Lithuania on 29 September 2010. With the global recovery of economy and business the speaker invited the audience to overlook the peculiarities of mergers & acquisitions in Lithuania, discuss the regulatory differences for mergers & acquisitions in US, EU and East Asia markets. The presentation also listed the differences between mergers & acquisitions and takeovers and elaborated on how to select a right M & A partner in Lithuania and abroad.

    Eversheds Saladžius sponsored the annual business leaders conference in Lithuania "Lūžio taškas". The major annual business conference in Lithuania Lūžio taškas was held on 23-24 September this year. The conference, participated by the top business leaders in Lithuania happens to be one of the major business events in the country and summoned approximately 200-300 participants from the leading companies in Lithuania.

    For a third year already Eversheds Saladžius became a sponsor of the conference. This year Eversheds Saladžius sponsored kitchen virtuoso chef de cuisine Danny Boom‘s arrival and presentation. We are also proud to inform that one of Eversheds International Limited partners Andrew Symms was participating at the conference with his presentation.

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