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Newsletter 2011 October

  • Lithuania

    28-10-2011

    Administrative Law

    Suggestions to adopt the new Code of Administrative Offences

    Before the restoration of the Independence of the Republic of Lithuania the Code of Breaches of the Administrative law (further on - Law) had been adopted. The Law and its later amendments are valid until 1st January 2012. Having in mind that the validity term of the Law is coming to an end, it is suggested to adopt a new legal act regulating the administrative responsibility – the Code of Administrative Offences (further on – the Code). The draft code was submitted to the Parliament by the Government on 14th September, 2011.

    The following important points of the draft Code may be of interest to the legal entities.

    According to the draft Code, it is suggested to prolong the limitation period to set an administrative offence from current six months until, without any exceptions, two years from the date of the occurrence of the offence, and in case of the pending offence – until two years from the date when it became clear about the administrative offence.

    According to the draft Code, administrative penalties shall be warning, fine (maximum 20 000 Lt) and public works. The latter one, similarly to the Law, is alternative penalty to the fine. Together with those penalties the deprivation of special rights and the confiscation of the property might also be applied.
    According to the draft Code, administrative arrest and removal from the work (position) will not be applied as the administrative responsibility.

    According to the draft Code, it is possible not to penalize at all when the person does the insignificant offence, e.g. fills the document in incorrect way. The penalties will not be set when businessmen use wrong explanations of the controlling authorities.

    Current Law states relatively big penalties, seeking 30 000 Lt, 50 000 Lt, 60 000 Lt and even 100 000 Lt, which exceeds the limits of the penalties, stated in the current Criminal Code.

    In order to maintain the coordination of the sanctions of criminal and administrative responsibility it is suggested to state the maximum sanction of 20 000 LT in the draft Code.

    Company Law

    Amendments to the Law on Stock Companies proposed

    Article 59.6 of the Law on Stock Companies of the Republic of Lithuania (hereinafter the Law on Stock Companies) provides that a company may allocate not more than 1/5 of the net profit of the reporting financial year for the purposes of payment of annual bonuses to members of the Board and the Supervisory Board, payment of incentives to employees and other allocations.

    The existing regulation makes it possible for the majority of shareholders, participating in the activities of the company’s management bodies, to allocate for themselves up to 20 per cent of the company’s profit from the preceding year in the form of annual bonuses and to withhold from paying dividends at all or to allocate a very small part of the company’s profit for the payment of dividends. In addition, since the taxation rules applicable to annual bonuses are more beneficial than dividend taxation rules, the payment of annual bonuses in lieu of dividends or as part of salary in remuneration for work in the company’s management bodies allow tax evasion and tax gain. On 4 August 2011 the President of the Republic of Lithuania submitted the draft law on the amendment of Article 59 of the Law on Stock Companies to the Parliament.

    In addition to the currently valid requirement that a part of the distributable profit for annual bonuses may not exceed 1/5 of the net profit of the fiscal year, the draft law amending the Law on Stock Companies proposes to establish additional restrictions on the part of the company’s distributable profit allocated for annual bonuses of members of the board and supervisory board. The draft law on amendment of the Law on Stock Companies provides that annual bonuses may not exceed 1/3 of the company’s profit allocation for payment of dividends.

    Civil Process

    Confirmed Common Claim Conception

    By the decision No. 885 of 13 July, 2011, the Government of the Republic of Lithuania confirmed the Common Claim Conception and obliged the Ministry of Justice to prepare and submit related legislation projects to the Government till 1 January, 2012. Currently the right to submit the common claim is declared in Section 5 of Clause 49 of the Civil Process Code. However this right is implemented in practice only in exceptional cases. There is no legislation on the rights’ implementation mechanism, no clear definition of the common claim, not clear who has a right to submit the common claim, what are the requirements for the content of such claim, what is the procedure for claiming and investigating such claim, what are the procedural consequences and meaning of such claim, also what is the power of the decision taken. There is a suggestion to change the Civil Process Code in relation to the proposed Common Claim Conception, because of the increased number of cases in Lithuanian courts, when there are number of plaintiffs, who submit claims on the same legal and factual basis – grounding from the same factual circumstances and having the same legal background (e.g. claims of tourists for travel agencies regarding inappropriate implementation of the tourist service agreement, claims of the employees on employers regarding the unpaid salaries). Such proposal of amending the Code is provided in order to save the financial resources of parties involved, diminish the work load of the courts and avoid cases of different decisions in the different courts.

    Case Law

    Lithuanian case law

    Regarding the procedural and process aspects of obligatory selling of shares
    On 21 July 2011 the Civil Cases Board of The Supreme Court of the Republic of Lithuania adopted the decision with respect to the civil case No. 3K-3-332/2011. There was a dispute on suspension of the case on transfer of property of shares. The plaintiff bought 95 % of shares of the company and according to the procedures, stated in the Law on Securities, requested the shareholders of minority to transfer their shares to the sole owner. 3 shareholders of the minority refused to transfer the mentioned shares for the price proposed and coordinated with the Securities Commission of the Republic of Lithuania. Following the procedure of a particular ruling the plaintiff started court procedures on the establishment of property rights on the transfer of shares, however, 3 shareholders of the minority initiated court procedures on the establishment of the correct price of the obligatory purchased shares. The Court applied temporary security measures in the second case and the first case was suspended. The Supreme Court decided that the civil case regarding the transfer of property of shares can not be suspended only due to the claim on the establishment of the correct price. If required, the transfer of property right and the payment might be implemented separately, because (if otherwise it is not stated in the law) price is not a necessary condition for the transfer of property neither in civil contracts, nor in buying-selling contracts. Although the Law states that mutual obligations should be implemented simultaneously, the exceptions are also possible. The payment may not necessarily be settled at the exact timing of the transfer of shares. In addition, the Supreme Court clarified that the court involved in the case on the property transfer into shares, may suspend the case, but is not obliged to apply any temporary security measures, because it is not within the competence of this court. The court deciding on the correct price of the shares has also the right to suspend the procedure of share purchase.

    Regarding the procedural aspects of the submission of bill of exchange for paying
    On 15 July 2011 the extended Civil Cases Board of The Supreme Court of the Republic of Lithuania adopted the decision No. 3K-3-332/2011. In this case the dispute arose as the defendant was not in compliance with the formal requirements, stated in Law on Endorsing and Ordinary bill of exchange (further on - Law) regarding the submitting of bill of exchange to the plaintiff and submitting the notice on the non payment of the bill of exchange. The plaintiff asked the court to annul the right of the plaintiff to claim in accordance to the ordinary bill of exchange, because the signed bill of exchange was not submitted for the payment in the foreseen terms, and, secondly, the notice regarding the non-payment of the bill of exchange was not sent in the foreseen terms. The defendant stated in his claim that he informed the plaintiff regarding the non-payment by the unilateral act and that such action should be considered as the proper informing according to the Law. The Supreme court decided that referred clauses of the Law (Clause 40 and Clause 47) state two different, independent and subsequent legal situations. The submission of the bill of the exchange and information regarding the non-payment are different by the nature acts, therefore might not be concluded by the unilateral act of the defendant. Firstly, according to the Clause 40, defendant shall submit the bill of exchange for payment and only after, if the bill of exchange was not paid, shall in accordance to Clause 47 inform the plaintiff regarding the non-payment. In addition, the court decided, that submitting the bill of exchange for payment is considered to be proper as submitting the bill of exchange for payment for the plaintiff, not by informing by the unilateral notice of the defendant. This way it enables person, who paid for the bill of exchange, to get it back.

    Other News

    Eversheds Saladžius continues on cooperating with INVEST LITHUANIA

    Eversheds Saladžius continues on cooperating with the governmental agency INVEST LITHUANIA. INVEST LITHUANIA in partnership with the Lithuanian embassy in London, hosted a series of 3 seminars in 3 cities in the United Kingdom for the promotion of Lithuania as an inward investment location relating to R&D, Shared Services and BPO, as well as Manufacturing. Eversheds Saladžius Partner Rimtis Puišys participated at all of the seminars delivering the presentation on legal environment in Lithuania.

    The seminars took place in Birmingham, Coventry and Cambridge on September 27, 28 and 29 respectively.

    Eversheds Saladžius sponsored the annual business leaders conference in Lithuania

    The major annual business leaders conference in Lithuania Lužio taškas Took place on 22-23 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 300 participants from the leading companies in Lithuania.

    This year Eversheds Saladžius sponsored David Magliano‘s arrival and presentation. David talked about sports and business.

    David Magliano is 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 held 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.

    Daily business newsletter Verslo žinios published Eversheds Saladžius article on trademarks

    Daily business newsletter Verslo žinios as of 14 September published Associate's Simona Vitukynaite article on trademarks.

    Eversheds Saladžius selected as a winner of the Lawyer Monthly Awards

    Eversheds Saladžius has been selected as an outright winner of the Lawyer Monthly Legal Awards 2011 in association with Noble Legal in the category of Corporate Governance Law Firm of the Year - Lithuania.

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