REPUBLIC OF LITHUANIA
LAW
ON STATE ENTERPRISES
Chapter 1
GENERAL PROVISIONS
Article 1. Objectives.
1. This Law law shall define the establishment,
reorganisation and liquidation, management, the basis of
financial and other commercial-economic activities of state
enterprise (SE) and state stock enterprise (SSE) set up
(acquired) from the funds provided by the state (local
government). This Law shall not apply to those special state
enterprises which operate exclusively according to their own by-
laws, i.e. the bylaws of the individual state enterprise. The
list of such enterprise, also their model bylaws shall be
approved by the Supreme Council of the Republic of Lithuania on
the recommendation of the Government.
2. When the text of this Law applies both to a state
enterprise and a state stock enterprise, the word "enterprise"
shall be used.
Article 2. State Enterprises (SE) and State Stock
Enterprises (SSE).
1. A state enterprise shall be an enterprise established
from the funds provided by the state (local government) which has
not issued shares (has not received subscriptions) or which has
issued shares (has received subscriptions) with their nominal
value not exceeding 1\5 of the enterprise's authorised capital. A
state enterprise which has issued shares with the nominal value
exceeding 1\5 of the enterprise's authorised capital shall be a
state stock enterprise. The shares of a state stock enterprise
shall be circulated publicly or may have a limited sphere of
circulation. The shares of a state enterprise shall be neither
bought nor sold on the stock exchange; nor shall they be
registered with the appropriate state bodies.
2. The share of a state (local government) enterprise in the
SE or SSE may not be included into the amount of the nominal
stock capital based on which enterprises shall be divided into
SE, SSE and joint stock companies, and shareholders shall be
granted rights to form managing bodies of the enterprises. An
enterprise formed through a merger of the capital of several SEs
or SSEs shall function as a SSE.
3. The bodies of State governance and administration shall
not be allowed to own shares of SSEs or SEs.
Article 3. The Enterprise as a Legal Person.
1. From the day of registration, the enterprise shall have
the rights of a legal person. The basis of economic activities of
an enterprise shall be the capital owned by the state which
through investment into an enterprise the state (local govern
government) entrusts to the enterprise. The rights of the
enterprise to manage, use and handle the assets entrusted to it
by the state (local government) shall be established by this Law
and the bylaws of the enterprise. The share capital and state
(local government) capital shall belong under the joint-partial
ownership plan to the shareholders and the state (local
government).
2. The enterprise shall be of a limited liability. It shall
be liable for its obligations only by way of its property from
which sums shall be claimed and recovered in accordance with laws
of the Republic of Lithuania. Neither the State (local
government), nor the shareholders or the employees of the
enterprise shall be liable by way of their other property for the
obligations of the enterprise. The enterprise shall not be liable
for the obligations of the State (local government), its
shareholders or employees.
3. The enterprise shall have its own name (name of the
firm), which shall include the words "state" or "state stock" or
their abbreviations. The enterprise shall not have a name (name
of the firm) similar to or identical with one of the registered
enterprises which could interfere with normal economic activities
of the enterprises.
4. The enterprise shall have its own seal, which shall carry
its name (name of the firm) and the words "the Republic of
Lithuania".
Article 4. Composition of Assets of the Enterprise.
1. Assets of the enterprise shall consist of:
1. state capital;
2. share capital; and
3. loan capital.
2. The authorised capital of the enterprise shall consist of
the nominal state capital and the nominal share capital. The
amount of the authorised capital shall be established by the
bylaws of the enterprise. The managing bodies of the enterprise
shall guarantee that the owned assets of the enterprise (the
difference in the balance sheet between the net value of total
assets and the loan capital) be not smaller than the amount of
the state capital and the nominal share capital. If the owned
assets of the enterprise become smaller than the amount of the
state capital and nominal stock capital, the payment of bonuses
and dividends from the profit of the enterprise shall be
prohibited.
To restore the balance between the amount of the state
capital and the nominal share capital, and the owned assets, the
state enterprise shall use, accordingly, the state capital and
the share capital, and the state stock enterprise -- the share
capital.
3. The loan capital of the SSE cannot exceed the share
capital 0, excluding the share of other enterprises (SE and SSE).
4. The share capital of the enterprise cannot exceed the
state capital. The enterprise which has accumulated share capital
exceeding the state capital owned by it, shall be reorganised
into a joint stock company or a private joint stock company
within six months in the procedure prescribed by law. If the
amount of the nominal share capital of the SSE becomes less than
1\5 of the enterprise's authorised capital, the minimum amount of
the share capital of the SSE shall have to be restored within six
months or the SSE shall have to be reorganised within the same
period into a SE. A SE which has accumulated the nominal share
capital exceeding 1\5 of the authorised capital of the enterprise
must be reorganised within six months into a SSE.
5. An enterprise shall be prohibited from acquiring shares
of the enterprise, joint stock company or private joint stock
company which is its shareholder and the nominal value of the
shares of which exceeds 1\10 of the authorised capital, if the
nominal value of the shares it is acquiring exceeds 1\10 of the
authorised capital of said enterprise.
6. The state capital accumulated (held) at the enterprise
shall not be divided into shares. It shall be appropriated as the
investment of the state (local government) into the enterprise
and shall be entered in a separate state capital account of the
enterprise.
Article 5. The Rights of the Enterprise.
1. The enterprise, in conformity with the laws of the
Republic of Lithuania, and in pursuance of the objectives
specified in its bylaws, may:
1) have its own accounts with the banking institutions
registered in the Republic of Lithuania or in foreign countries s
and use funds deposited therein;
2) define the directions and ways of using all the state and
share capital it owns;
3) make contracts on giving or obtaining loans and fix their
interest rates;
4) issue securities ( with the exception of bonds);
5) buy out (return) part or whole of the state capital
granted to the enterprise, using for this purpose the net assets
of its employees, shareholders and its net assets received from
commercial-economic activities (after discharging its
liabilities);
6) purchase or acquire in any other way, own as its
property, sell or exchange its securities or dispose of them in
any other way;
7) pay out dividends on the shares or give premium shares;
8) define classes and kinds of shares, including those
belonging to the employees, and the procedure for their selling
and distribution;
9) establish economic and trade relations with domestic and
foreign partners, promote commercial activities;
10) make payments for the delivered goods, performed work
and services in any agreed form;
11) establish the organisational and production structure in
the enterprise, set up subsidiaries, define the legal status of
its departments;
12) set up a SSE, be a shareholder of such an enterprise,
establish associations with enterprises of another type, under
the agreements with other SE and SSE establish non-manufacturing
companies (associations), also leave them;
13) improve the conditions of work, life and leisure of the
employees of the enterprise, offer aid to their families,
participate in charities, allocate funds for health care,
culture, education, science, also physical education and sports
of the citizens of the Republic of Lithuania;
14) conclude production, sales, scientific research, design,
experimental and other commercial contracts; and
15) fix the prices, costs and tariffs for its products,
services and other resources, its wages systems, with the
exception of those cases when prices and other norms are
regulated by the State (local government) in accordance with the
laws of the Republic of Lithuania.
The enterprise may also have other civil rights and
obligations which are not specified by this Law, provided they do
not contradict the laws of the Republic of Lithuania and the
bylaws of the enterprise.
2. The State shall regulate commercial-economic activities
of the enterprise only through economic means: subsidies, rates
of interest for the use of the state capital by the enterprise,
orders (contracts) financed by the State and other economic
measures. The founder of the SE in transport and communications,
energy resources, and public utilities, shall have the right to
define obligatory kinds of work, also standards for their
quality. The same shall apply to the SSE if a contract with it
has been concluded and if it has been issued an appropriate
licence for its economic activities.
3. The enterprise shall have the right to receive from the
state centrally allocated (sold) supplies of financial, material
and other assets at a fixed state price or a contractual price
and for the corresponding contractual obligations to the state
(local government) assumed by the enterprise.
4. The enterprise shall have the right through civil
proceedings to demand compensation for the damage caused to it by
unlawful actions of state bodies and organisations, also by
administrative actions of officials in the performance of their
duties.
Chapter 2
FOUNDING, REORGANISATION AND LIQUIDATION
OF THE ENTERPRISE
Article 6. The Founding of the Enterprise.
1. The legal basis for the founding of an enterprise shall
be the foundation act which may be adopted by the Government of
the Republic of Lithuania (local council) or, on the instruction
of the Government, by the authorised Ministry. The body which
adopts the decision on the founding of an enterprise shall be its
founder.
2. The founding of enterprises shall be regulated by the Law
on Enterprises of the Republic of Lithuania, this Law and other
legislative acts.
Article 7. The Bylaws of the Enterprise.
1. The bylaws shall be a legal document by which the
enterprise is guided in its activities.
2. The bylaws of a newly founded SE shall be drafted by the
provisional administration of the enterprise formed by the
founder. If a functioning enterprise is being reorganised, the
bylaws of the SE shall be drafted by its administration. When
founding (reorganising) the SSE, its bylaws shall be drafted by
the shareholders-founders.
3. The bylaws shall be signed by the members of the board of
directors (in the event of the absence of the board - by the head
of the enterprise's administration) or the shareholders-founders.
If there is a council of observers at the enterprise, the bylaws
shall also be signed by its chairman. The bylaws shall be sealed
with the seal of the enterprise; if the enterprise has no seal
with the founder's seal.
4. The bylaws of the enterprise shall establish:
1) the name of the enterprise (name of the firm) and
requisites of the seal;
2) the address of the enterprise;
3) the nature of its commercial-economic activities;
4) the duration of its operational activities if the
enterprise is established for a specified term or a definite
activity;
5) the amount of the authorised capital and its composition;
6) the composition of the nominal share capital according to
the classes of the shares;
7) the nominal value of the shares and the rights conferred
by them;
8) the administrative organs, their powers, composition and
formation;
9) the procedure for convening meetings of the employees and
shareholders;
10) the forms of notifying the employees and shareholders;
11) the procedure for buying out the state capital and share
capital, payments for the shares and terms of payment; and
12) restrictions on the amount of the enterprise's capital
and the volume of its production as established by the local
government.
5. The bylaws of the enterprise can also prescribe other
rules which do not contradict the laws of the Republic of
Lithuania and international agreements.
6. The bylaws of the enterprise shall be revised and amended
by the council of observers. The meeting of shareholders may
adopt a decision that the bylaws of the SSE shall be revised and
amended only by the meeting of its shareholders. If the council
of observers has not been formed, the bylaws of the SE shall be
revised and amended by its board, and the bylaws of the SSE -- by
the meeting of its shareholders. Additions and amendments to the
bylaws shall enter into force upon their registration.
Article 8. Registration of the Enterprise.
1. The procedure of registration of the enterprise and its
terms shall be established by the Law on Enterprises, the Law on
the Register of Enterprises, and this Law.
2. The founder of a new enterprise when registering the
enterprise shall submit to the registering body the act on the
founding of the enterprise, its bylaws and other documents
prescribed by law. In other cases the registration documents
shall be submitted by the author of the bylaws.
3. The SSE shall be registered after all the shares have
been subscribed for (distributed) and after the initial
investments have been made.
4. From the day of its registration, the administrative
bodies of the enterprise shall acquire the right to discharge
their functions established by laws and the bylaws of the
enterprise.
Article 9. Liquidation and Reorganisation of the Enterprise
1. The basis for the liquidation of the enterprise may be:
1) An act of the Government of the Republic of Lithuania
(local council) to suspend the activities of the SE or to demand
that the SSE buys out (returns) the capital of the state (local
government);
2) A court order recognising the enterprise as insolvent;
3) A decision of state bodies exercising industrial control
to revoke registration of the enterprise for legal violations
stipulated by the legislation of the Republic of Lithuania. The
decision of the above bodies can be appealed against in court;
4) A resolution of the meeting of shareholders of the SSE to
terminate the activities of the enterprise;
5) A decision of the founder to liquidate the insolvent SSE
in whose authorised capital the share of the nominal share
capital accumulated from the investments of natural persons,
partnerships, joint-stock companies, and private stock companies
accounts for less than 1\10 of the authorised capital of the SSE.
2. The body which adopts the decision to terminate the
activities of the SSE, shall appoint its liquidator. The
liquidator of the SE shall be appointed by its founder. From the
day of the liquidator's appointment, the bodies of the enterprise
shall be deprived of their powers to manage the enterprise, and
their functions shall be performed by the liquidator. He shall
organise the liquidation of the enterprise: re-register the
enterprise as the enterprise in the process of being liquidated,
fix and publicate in the press the date of termination of the
enterprise's functioning, ascertain the creditors and debtors of
the enterprise, draw up the balance of liquidation, make payments
for the liabilities of the enterprise, and transfer the assets
remaining after the liquidation to the founder of the enterprise
or its shareholders.
3. Upon acquiring the status of an enterprise in the process
of being liquidated, the enterprise may conclude only contracts
which concern its liquidation.
4. The employees and shareholders of the SE shall have a
priority within six months from the day of the appointment of the
liquidator to acquire the state capital of the enterprise which
is being liquidated, with the exception of cases when the
enterprise is going bankrupt. If the shareholders and employees
of the enterprise buy out within this time more than a half of
the state capital of the enterprise which is being liquidated,
the enterprise shall be reorganised into a joint stock company, a
private joit stock company or a partnership.
5. In the cases prescribed by this Law, after the
reorganisation of the SSE into a joint stock company or a private
joit stock company, the bodies of state governance and
administration, possessing shares of the company, shall not be
allowed to have more than one-third of the votes for five years
after the reorganisation.
6. The founder shall have the right to reorganise a SE into
a SSE. The share-holders-founders of the SSE shall be natural and
legal persons who have drawn up a certified treaty on the
establishment of the SSE which specifies their rights and duties
to draft the SSE's bylaws, and stipulates their individual
commit- government to acquire an appropriate number of shares of
the SSE. This treaty may be unconcluded, and the rights and
duties of the shareholders-founders shall be established in the
SSE's bylaws drawn up by them.
7. If the enterprise is liquidated or reorganised in
compliance with the request of the shareholders to buy out
(recover) from the SSE or SE the share capital, the rules
regulating the reduction of the share capital prescribed by this
Law shall be applied.
8. If the SE is liquidated or reorganised by a decision of
the Government (local council) of the Republic of Lithuania, the
state (local government) must within six months from the day of
the liquidation of the enterprise refund to the share-holders,
employees, as well as to other natural and legal persons their
share of investment into the enterprise.
Chapter 3
MANAGEMENT OF THE ENTERPRISE
Article 10. Managing Bodies of the Enterprise.
1. Managing bodies of the enterprise shall comprise the
board of directors, the council of observers, and meetings of
employees and shareholders.
2. During the period of construction of the enterprise,
mounting of its equipment and machinery, preparation for its
operation, also during the first year of its operation, the
founder shall appoint the provisional administration. If the SE
or SSE is established through reorganisation of a solvent state
enterprise of a different status, permanent managing bodies shall
be formed immediately.
3. During the period when the enterprise is run by the
provisional administration, the council of observers shall not be
formed.
4. The council of observers may not be formed if:
1) the founder of the SE adopts a corresponding decision in
response to the proposals made by the employees of the
enterprise; or
2) a corresponding decision is adopted by the meeting of the
SSE's share-holders.
In both above cases, the meeting of the employees of the SE
or the meeting of the SSE's shareholders shall form a three
member auditing commission for a period of five years. A member
of the auditing commission shall not be removed or have a
disciplinary penalty imposed on him without the approval of the
meeting of the SSE's shareholders or the meeting of the SE's
employees.
Article 11. The Board of Directors.
1. Commercial-economic activities of the enterprise shall be
directed by the board of directors (hereinafter -- the board). It
shall consist of members-directors whose number shall be not less
than 3 and not more than 9. The board shall be headed by the
chairman.
2. Members of the board shall be appointed for a period of
not less than five years and their salaries shall be fixed by the
council of observers, with the exception of cases established in
Paragraph 2 of Article 34, and also upon the expiration of the
powers of the provisional administration of the enterprise when
one-third of the members of the board are appointed for a period
of one year by the founder of the enterprise. If the council of
observers is not formed, the board shall be formed by the
meetings of shareholders and employees in accordance with the
regulations for forming the council of observers. In such cases
the board must consist of not less than 6 members. Their
salaries, also their share of dividends in the SE shall be fixed
by the founder, in the SSE -- by the meeting of shareholders. A
member of the board, and its chairman may be removed by the body
which has appointed them.
3. An employee of the enterprise who is 18 years of age and
over, and has been appointed a member of the board by the founder
or the council of observers of the enterprise, and who has not
been deprived of the right to hold this post, as well as a person
not employed at the enterprise and who has been appointed by the
council of observers may be a member of the board. A member of
the council of observers may not be appointed to be a member of
the board. The council of observers may appoint its member to be
a member of the board only temporarily, for a period not longer
than six months. If the same member of the council of observers
is appointed repeatedly for temporary work on the board, the
whole term of his office shall not be longer than twelve months
during five successive years. The council of observers by a two-
thirds vote may remove its member for neglect in the performance
of his duties, for unsatisfactory work or failure to carry it out
efficiently. The decision to remove a member of the board may
also be adopted by a two-thirds vote of the shareholders'
meeting.
4. If the provisions of Paragraph 2 of Article 34 are not
applicable to the enterprise and no provisional administration is
formed, the council of observers (in case it has not been formed
-- the shareholders' meeting) shall appoint the chairman of the
SSE's board, while the chairman of the SE board shall be ap
pointed by the founder on the recommendation of the council of
observers (if it has not been formed, on the recommendation of
the board). Disputes between the council of observers and the
founder concerning the appointment of the chairman of the SE's
board shall be settled by the Government (local government) of
the Republic of Lithuania.
5. The chairman of the board of the SE may be removed by a
two-thirds vote of the council of observers or by the Government
of the Republic of Lithuania, if it has been established that
there is a real threat of insolvency for the SE or the chairman
of the board manifestly fails to discharge his duties.
The chairman of the SSE's board can be removed by a two-
thirds vote of the SSE's council of observers or of the
shareholders' meeting, also by the Government of the Republic of
Lithuania if it establishes that there is a real threat of losing
the state capital for the SSE. After the removal of the chairman
of the board, the board shall be dissolved.
Article 12. Powers of the Board and its Members.
1. The board shall be a collegiate managing body of the
enterprise. It shall adopt the rules of procedure of the board's
work and deal with commercial-economic, organisational and other
questions within its powers. At the expiration of its term of
office, the board shall continue to discharge its duties until
the formation of a new board.
2. Decisions of the board shall be adopted at its meetings.
All its members shall have equal voting powers. The rules of
procedure of the board's work shall be adopted by a two-thirds
vote of the entire membership of the board as established by the
bylaws of the enterprise. Other decisions shall be adopted by a
simple majority vote of the members present at the meeting of the
board. The meeting (voting) shall be regarded as valid if it is
attended by no less than two-thirds of the board's members. If
the draft of the decision under consideration is circulated
before the meeting, the member of the board who is not able to
attend the meeting shall have the right to take part in the
voting before the opening of the meeting by expressing in writing
his will "yes" or "no". Meetings of the board shall be convened
and organised in accordance with the rules of procedure of the
board.
3. The chairman of the board, in accordance with the bylaws
of the enterprise, the rules of procedure of the board and its
decisions, shall have the right to conclude all contracts of the
enterprise. The bylaws of the enterprise or the rules of
procedure of the board may define the spheres of activity in
which other embers of the board shall have the right to engage
and conclude contracts of the enterprise. By the decision of the
board of the SSE, a part of the functions of the board may be
delegated to the head of the enterprise's administration. Other
persons shall act and conclude contracts only when authorised by
the enterprise.
4. The contracts concluded by the chairman of the board or
other members of the board shall not be recognised as invalid
only because, in accordance with the bylaws of the enterprise or
the rules of procedure of the board, said persons had no right to
conclude said contracts at their own discretion, with the
exception of cases, when the contracting party knew or should
have known that he was entering into an unlawful contract.
5. The board shall not:
1) restrict the powers of the council of observers (auditing
commission) or in any other way obstruct it from supervising the
commercial-economic activities of the enterprise and auditing its
financial performance;
2) without the consent of the council of observers dismiss
from work or from the post, or impose disciplinary penalties upon
an employee who is a member of the council of observers; and
3) without the consent of the shareholders' meeting adopt
decisions connected with the rights or interests of the
shareholders, if such cases are provided by this Law.
6. At the end of the business year, prior to the approval by
the council of observers or the shareholders' meeting of the
annual balance sheet of the enterprise, the board shall submit to
the council of observers (in the SSE - also to the shareholders'
meeting) a report with the answers to the questions presented by
the council of observers ( the shareholders' meeting of the SSE)
on:
1) the results of the commercial-economic and financial
activities, and the balance sheet of the enterprise for the
business year;
2) the policy and prospects in the spheres of production,
equipment, research, design and experiment, as well as in other
commercial-economic activity;
3) the organisation of production and management at the
enterprise, its departments and subsidiaries;
4) the projected sources for the accumulation of financial
resources and ways of their use; and
5) new contracts.
7. After the approval by the SE's council of observers of
the annual balance sheet, the board shall approve the
distribution of profit.
8. Members of the board shall be jointly liable for the
losses caused to the enterprise by reason of the decisions of the
board adopted in violation of the enterprise's bylaws or of this
Law. A member of the board who voted against such a decision,
shall be exempt from the liability if his protest has been
entered into the minutes of the board's meeting. A member of the
board who did not attend the meeting shall also be exempt from
the liability if within seven days after being notified of such a
decision or after he was supposed to have been notified thereof,
he submitted his protest to the chairman of the board. The
resignation or removal of a board member shall not exempt him
from the liability for the losses caused through his fault. A
member of the board may be excused from making compensation for
the losses he caused through the discharge of his duties,
provided he was guided by the documents and other information
about the enterprise whose validity he had no grounds to doubt,
or acted within the limits of normal operational or economic
risk.
Article 13. Officers of Administration.
1. The operational commercial-economic activities of the
enterprise shall be managed and run by the administration of the
enterprise. The board shall establish the departments of the
administration, duties of the officers, shall employ the officers
under employment contracts and fix their salaries (with the
exception of salaries of the members of the board).
2. Each enterprise shall have head of the administration
(president, general director, director) and the chief financier
(accountant).
3. The post of the SE's head of the administration may be
held only by the chairman of the board. The employment contract
with head of the enterprise's administration shall be concluded
on behalf of the enterprise by the chairman of the council of
observers; if the council of observers has not been formed, the
contract shall be concluded by the founder of the SE and the
board of the SSE.
4. It shall be prohibited to combine the duties of head of
the administration with the duties of the chief financier
(accountant). Head of the administration shall be prohibited from
holding the post of chairman of the board, and of head of the
administration or representative of another enterprise (
partnership, public or private joint stock company).
5. The chairman of the SE's board (head of the
administration) shall have relations of permanent employment with
the enterprise which shall be laid down in the employment
contract.
Article 14. Formation of the Council.
1. In the cases prescribed by this Law a council of
observers shall be formed for a term of 5 years of the persons
selected at the meeting of the employees or shareholders of the
enterprise to monitor the activities of the board and the ad
ministration. The number of members of the council of observers
shall be established by the enterprise's bylaws : it shall be not
less than 6 and more than 15. A new council of observers must be
formed before the day of expiration of the powers of the
functioning council of observers. If an enterprise of a different
status becomes a SE or a SSE, a council of observers must be
elected not later than within a month of the change in the status
of the enterprise.
2. Members of the council of observers shall be elected by
secret ballot separately by : shareholders, the administration
officers, the working personnel and other employees who do not
belong to the administration.
3. Administrative officers who are employees of the central
management of the enterprise, as well as heads of various
divisions and their deputies shall have the right to elect
representatives to the council of observers. The final decision
in resolving the disputes as to what group an employee belongs to
shall rest with the founder of the enterprise.
4. A SE with the nominal share capital accounting for no
less than 1\20 of the authorised capital, shall reserve one-third
of the seats on the council of observers for its shareholders. A
SE with the nominal share capital accounting for less than 1\20
of the authorised capital shall reserve one seat on the council
of observers for its shareholders.
5. In a SSE shareholders shall be given two-thirds of seats
on the council of observers, irrespective of the amount of the
share capital.
6. The number of seats reserved for the shareholders on the
council of observers of a SE or SSE shall not exceed the number
of shareholders of the enterprise.
7. The seats on the council of observers reserved for the
employees shall be divided into two equal parts - those for the
representatives of the administration, and those for the
representatives of the other employees. The founder of the
enterprise shall have the right to appoint his representative to
the council of observers. In this case the number of seats for
the administrative officers shall be one seat less.
8. The bylaws may specify the qualifications for a member of
the council of observers. The shareholders may elect to the
council of observers persons who are not employed at the
enterprise.
The employees of one category may elect as their
representative to the council of observers a person, who
according to the order established by this Law, belongs to
another category of employees.
Article 15. Resignation and Removal of a Member of the
Council of Observers.
1. A member elected to the council of observers by the
employees shall be removed by a two-thirds vote of an electoral
meeting (voting) of the employees.
2. A member of the council of observers elected by the
shareholders may be removed by the meeting of the shareholders.
3. Upon submitting a written notice to the chairman of the
council of observers, its member may resign at any time. A member
of the council of observers shall forfeit his right to be a
member of the council and must resign, if the council of
observers resigns following the decision of the majority of its
members. A member of the council of observers elected by the
employees shall resign if he breaks off his employment contract
with the enterprise, or loses his right to be elected to the
council of observers.
4. If the council of observers or its member commits a gross
violation of his powers and duties, the court may dissolve the
council or remove its member from the council acting on the
report of no less than three employees having the right to elect
members to the council of observers, or on the report of the
trade union functioning at the enterprise, or of the board
(administration) of the enterprise.
Article 16. Powers of the Council of Observers.
1. The council of observers shall elect from among its
members the chairman and his deputy. Work on the council of ob
servers shall not be remunerated. The bylaws of the enterprise
may provide for the additional remuneration for the chairman and
his deputy for the work on the council of observers payable from
the net profit. The amount of their remuneration shall make up 60
and 50 percent respectively of the average pay of the
enterprise's employee (including various bonuses) during the
preceding business year.
2. The council of observers shall:
1) put forward proposals, appoint or remove the chairman of
the board and its other members (if such right under this Law
does not belong to the founder);
2) taking into consideration the proposals of the chairman
of the board, fix salaries for the members of the board working
at the enterprise under employment contracts for a period not
shorter than two years, but not longer than their term of office,
as well as approve the portion of net profit (the normative)
which is allocated in bonuses to members of the board;
3) at the request of the board, consider the question of
dismissing from work (or the post) persons elected to the council
of observers, or of imposing on them disciplinary penalties;
4) observe and analyse the activities of the board, the use
of financial resources and distribution of profit, organisation
of production and management, profitability of the capital,
remuneration for work, depreciation charges and deductions (in
percentage) for the use of the state capital, competitiveness of
production (services), the prospects of the financial situation;
5) audit the balance sheet and the inventory report;
6) approve the assessment acts of non-monetary (property)
contributions;
7) consider the report of the board on the results of the
enterprise's performance during the business year, approve its
annual balance sheet. The SSE's bylaws may prescribe that the
annual balance be approved by the shareholders' meeting;
8) on behalf of the enterprise institute legal proceedings
to recover from members of the board compensation for damages
caused through their fault; and
9) make amendments and additions to the bylaws of the
enterprise, with the exception of cases specified in Paragraph 6
of Article 7.
3. The council of observers shall have no right to: manage
the enterprise's affairs which fall within the powers of the
other bodies of the enterprise; revoke the decisions of the board
or of its authorised persons; alter the salaries of the members
of the board more often than once every two years; adopt
decisions on the rights and interests of the shareholders without
the consent of the share-holders' meeting.
4. If the council of observers has not been formed:
1) the functions established in subparagraphs 1 and 9 of
Paragraph 2 hereof shall be performed by the board of the SE;
2) the auditing commission of the SE shall exercise the
functions laid down in subparagraphs 5, 6, 7, and 8 of Paragraph
2 hereof;
3) the auditing commission of the SSE shall perform the
functions established in subparagraphs 5 and 8 of Paragraph 2
hereof; and
4) the shareholders' meeting of the SSE shall perform the
functions established in subparagraphs 1, 2, 4, 6, 7 and 9 of
Paragraph 2 hereof.
5. The enterprise's administration, at the request of the
council of observers (the auditing commission), shall present the
documents concerning the enterprise's activities, as well as
provide conditions for auditing the enterprise's securities,
merchandise, material supplies and other assets. Members of the
council of observers (the auditing commission) must keep
commercial secrets which they learn during the inspection of the
enterprise's activities.
Article 17. Meetings of the Council of Observers.
1. When a member of the council of observers cannot be
present at a meeting, he may give a written notice about it in
advance stating his opinion on the question under consideration
which was announced beforehand. In such a case, a member of the
council of observers shall be considered as having been present
and voting at the meeting.
2. Members of the council of observers shall have equal
rights. Each member of the council shall have one vote. In the
event of a tie, the vote of the council's chairman shall be
decisive.
3. The council of observers shall adopt its decisions by a
simple majority of the number of members of the council of
observers established in the bylaws, with the exception of the
decisions on the amendments and additions to the enterprise's
bylaws or on the removal of a member of the board. Said decisions
shall be adopted by a vote of two thirds of the entire membership
of the council of observers prescribed by the bylaws. The first
council of observers of the SE shall adopt decisions on the
amendments and additions to the enterprise's bylaws by a simple
majority.
4. Meetings of the council of observers shall be held
according to the schedule, not less frequently than once every
three months. In the event of an exigency, special meetings may
be held and each member of the council shall be given a written
notice thereof five days in advance. The meetings shall be called
by the chairman of the council of observers and, in his absence,
by deputy chairman. One third of the number of members of the
council of observers as prescribed by the bylaws of the
enterprise, but no less than three persons, shall also have the
right to demand a meeting be called. The agenda of the meeting
announced beforehand may be changed or supplemented if such a
proposal is approved by all the members of the council of
observers present at the meeting.
Article 18. Electoral Commission.
1. The electoral commission shall be formed for the election
of the council of observers (the auditing commission of the SE)
or members of the board. Members and the chairman of the
electoral commission shall be appointed by the council of
observers.
In its absence, members of the electoral commission shall be
appointed by the board or the administration of the enterprise,
taking into consideration the proposals of the employees.
2. No less than three members of the enterprise's employees
shall be on the electoral commission. It shall also include at
least one member of the administration and other employees who
are not officers of the administration. A representative of
public organisations may also be a member of the electoral com
mission.
3. Upon its formation, the electoral commission shall
immediately set the time and place of the electoral meetings
(separate votings), organise the election, and sum up, approve
and announce its results.
4. The council of observers or, in its absence, the board or
the administration of the enterprise shall be responsible for the
timely formation of the electoral commission and its efficient
functioning. If the management of the enterprise fails to appoint
timely the electoral commission, it may be appointed by the
founder of the enterprise at the request of no less than three
employees having the right to elect the members of the council of
observers.
Article 19. Election of the Members of the Council of
Observers from among the Employees.
1. Members of the council of observers shall be elected
(removed) by secret ballot at annual general meetings or separate
elections of the employees which shall be held not earlier than
one month before the expiration of the powers of the council of
observers.
2. All employees of the enterprise who are of full age, and
have been working at the enterprise for at least six months,
shall have the right to elect (remove) members of the council of
observers. The requirement of an uninterrupted work record at the
same enterprise shall be not applied if the enterprise has been
functioning for less than one year.
3. Members of the council of observers from among the
employees of the enterprise who under Paragraph 3 of Article 14
do not belong to the administration, shall be elected (removed)
not at the meeting of the administrative officers. If all the
employees cannot gather at one and the same time because of the
specific character of production, separate polls shall be held.
4. Candidates to the members of the council of observers not
from among the administrative officers shall be nominated at the
meeting of this group of employees (conference of its
representatives). Delegates of separate divisions of the
enterprise, that differ in the manner of their organisation and
are located at different territories, shall be elected to the
conference in proportion to the number of employees of those
divisions. The norm of representation at the enterprise's
conference shall be established by the electoral commission, yet
it must guarantee that no less than one-tenth of the employees is
delegated to the conference. The number of candidates nominated
to the council of observers must exceed the number of seats on
the council of observers established for the given group of
employees by the electoral commission. The maximum number of
candidates shall not be limited. The candidate shall be nominated
by open voting if his candidature is supported by not less than
one-fifth of the participants of the meeting (conference). The
employees who have the right to take part in the election may
submit to the electoral commission a list of candidates signed by
not less than one-tenth of the members of the given group of
employees but by not less than ten persons. In any event, it
shall be enough if a list of candidates is signed by 100
employees of said group having the right to take part in the
election.
5. Candidates from the administrative officers shall be
nominated and members shall be elected to the council of
observers at a general meeting of this personnel in accordance
with the provisions hereof.
6. Public notice of the time of the electoral meetings
(voting) shall be given in each division of the enterprise ten
days in advance, and in the event of a repeat election - five
days in advance.
7. At the beginning of the meeting a list of the
participants of the meeting (conference) of employees who have
the right to vote must be made. The first and second name of the
participant shall be given in the list. If members of the council
of observers are elected not at the meeting (conference) and a
special voting is held, a list shall be made of the employees who
have the right to vote. The list shall be signed by all the
members of the electoral commission. The electoral meeting
(conference) of the employees shall have the right to adopt
resolutions (the voting shall be valid) if not less than a half
of the employees (representatives) of a given group (either the
administration or non-administration) take part in it. If the
required number of employees (representatives) fail to turn up at
the meeting (conference) or to take part in a separate voting,
another meeting (separate voting) shall be called within 15 days.
The repeated meeting (separate voting) shall be valid
regardless of the number of employees (representatives) taking
part in it.
8. The minutes of the meeting (separate poll) must be taken.
9. A participant of the meeting (separate voting) shall have
as many votes as the number of members planned to be elected to
the council of observers. The returns of the election shall be
established according to a larger number of votes given for a
candidate.
10. The electoral meeting (separate voting) held with the
aim of removing or reelecting members of the council of observers
shall be convened not later than within two months after such
necessity arises. The election of a member of the council of
observers in the place of the member who has terminated his
activities (has resigned) shall not be held if the expiry of his
term of office is less than one year away.
11. Disputes concerning the election shall be settled by the
founder of the enterprise whose decision may be appealed against
at the court. No less than three employees having the right to
elect members of the council of observers, any trade union
functioning at the enterprise, or the board (administration) of
the enterprise shall have the right to submit an appeal to the
court protesting the validity of the election.
Article 20. Annual General Meetings.
1. Annual general meetings (conferences) of the employees
shall be called not less frequently than once a year.
Participating in them shall also be members of the council of
observers, auditing commission and the board. At the meetings the
employees shall be informed about the economic policies of the
enterprise, economic and financial performance, social problems;
proposals and requests shall be considered.
2. Annual general meetings shall be organised by the council
of observers or the board of the enterprise in accordance with
the procedure for organising meetings (conferences) established
by Article 19 of this Law.
Article 21. Meetings of Shareholders.
1. Meetings of shareholders shall be called not less
frequently than once a year. The first meeting of shareholders of
a newly founded SSE shall be, at the same time, the constituent
meeting and shall be convened by the shareholders-founders not
later than within three months from the day of the subscription
to the last share. The right to attend shareholders' meetings
shall belong to:
1) shareholders; and
2) members of the council of observers and the board,
representatives of the administration.
To represent his interests at the meeting, a shareholder may
delegate his power to vote to another person under an
authorisation certified in the established manner.
2. A shareholders' meeting shall have the right to:
1) elect and remove members of the council of observers; if
the council is not formed, elect or remove members of the board,
with the exception of the members elected by the employees;
2) at the request of the board, confer on it the right to
issue preference shares; and
3) in the cases provided by this Law, consider the question
of liquidation (reduction) of share capital or of buying out
(returning) the state's (local government's) share of capital.
3. A meeting of the SSE's shareholders shall also have the
right to:
1) amend and supplement the bylaws of the enterprise, if the
meeting has not authorised the council of observers therewith;
2) remove members of the board;
3) adopt a resolution on the distribution of profit and, if
the bylaws contain a provision therefor, approve the annual
balance sheet;
4) liquidate or reorganise the enterprise; and
5) revoke the decisions of the council of observers.
4. At the meetings members of the council of observers shall
inform the shareholders about the commercial-economic and
financial performance of the enterprise, its state and prospects,
as well as present a report on the activities of the council and
its implementation of the instructions of previous meetings.
5. A shareholders' meeting shall be called by the board.
Initiative to call a meeting shall be also vested in the council
of observers or a group of shareholders with the nominal value of
shares in their possession no less than 1\20 of the nominal share
capital.
6. A public notice about the meeting shall be made in the
manner specified by the bylaws, not later than fifteen days prior
to the meeting and not later than seven days prior to a repeated
meeting. The notice shall indicate the name of the enterprise
(name of the firm) and its location, the date and place of the
meeting, its agenda and the organisers of the meeting.
7. Prior to the opening of the meeting, a list of
shareholders (their proxies) attending the meeting shall be made,
indicating the number of votes held by each participant. The list
shall be signed by the chairman and the secretary of the meeting.
8. At the meeting its chairman and secretary shall be
elected from among the shareholders. The meeting may consider
issues which are not on the agenda and adopt decisions if the
participants of the meeting represent shareholders with not less
than three-fourths of all the votes.
9. A meeting of shareholders may adopt resolutions if it is
attended by share-holders (their proxies) with more than a half
of all the votes. If the required number of shareholders fails to
turn up, another meeting shall be called within fifteen days.
This meeting shall have the right to adopt resolutions regardless
of the number of the shareholders present.
10. A meeting of shareholders shall adopt resolutions by a
simple majority vote of those present at the meeting, with the
exception of resolutions on the removal of the council of
observers or the board elected by the shareholders, and with the
exception of resolutions concerning issues prescribed by
subparagraphs 1, 2, 4 of Paragraph 3 hereof, and by subparagraph
2 of Paragraph 3 of Article 10 of this Law. In said cases
resolutions shall be adopted by a two-thirds vote.
11. The proceedings of the shareholders' meeting shall be
recorded in the minute.
Chapter 4
STATE CAPITAL
Article 22. Ownership of the State Capital Entrusted to the
Enterprise.
1. The capital of the Lithuanian State entrusted to the
enterprise and comprising the state's investments of capital and
interest on the use of the state capital, shall belong by
ownership right to the Republic of Lithuania. If the state
capital used by the enterprise is created out of the funds or
property of the local government, the right of ownership of this
capital shall belong to the local government. A certain portion
of depreciation charges proportionate to the share of the state
capital in the enterprise's capital, shall also belong to the
state (local government) by ownership right.
2. The enterprise shall have no right to use the state
capital for the payment of wages, bonuses, dividends and other
payments, or for financing non-commercial activities.
3. The enterprise must ensure the safety and profitable use
of the state (local government) capital entrusted to it. The
state capital may be reduced only in cases prescribed by law.
Article 23. Interest on the Use of the State Capital.
1. The enterprise shall use the state capital for the
interest which shall be deducted from the profit of the
enterprise less the taxes payable to the budget.
2. The rate of the interest on the use of the state capital,
uniform for all enterprises, shall be approved by :
1) the Government of the Republic of Lithuania or, at its
behest, the Ministry of Finance, if the capital, by the right of
ownership, belongs to the Republic of Lithuania;
2) the local council or, at its behest, by the board, if the
capital, by the right of ownership, belongs to the local
government.
3. The enterprise which has failed to produce interest on
the use of the state capital at the prescribed rate shall be
considered as having violated its monetary obligations, and
sanctions stipulated by this law shall be applied to it.
Investment of the enterprise's state financial funds into social
and cultural objects shall not exempt it from payment of interest
on the state capital used for said purposes.
4. The board of the SE shall have the right to leave at the
enterprise not less than 2\3 of the amount of the interest on
state (local government) capital and to increase thereby the
state capital used by it. The Government of the Republic of
Lithuania (local government) shall have the right to specify
separate enterprises (enjoying special status) which shall be
financed from depreciation charges and which shall transfer
deducted sums of interest on state capital to the budget.
5. Sums of interest on the use of the state (local
government) capital shall be transferred to the budget of the
Lithuanian State (local government). The Government of the
Republic of Lithuania (local government) may, at the request of
the enterprise, leave (invest) a portion of the amount of
interest at the enterprise and increase the enterprise's state
capital thereby.
6. The interest on the use of the state capital shall be
deduced (paid) each month in the manner established by the Minis
try of Finance of the Republic of Lithuania.
Article 24. Insurance of the State Capital.
1. The enterprise must insure the state capital in its
possession with the insurance agency registered in the Republic
of Lithuania and recognised as reliable by the Bank of Lithuania,
or pay an equivalent insurance premium to the state (local
government).
2. The amount of premium payable to an insurance agency
shall be established by the insurance contract. If insurance
premiums on state capital are paid to the state (local
government), their uniform rates in each sphere of commercial
activities shall be established by the Ministry of Finance of the
Republic of Lithuania (the local council or, at its behest, the
board).
Article 25. The Increase of the State Capital.
1. The state capital at an enterprise may be increased by:
1) leaving at the enterprise the amounts of interest on the
use of the state capital;
2) appropriating investments from the budget;
3) merging the state capital of another enterprise; and
4) taking over or receiving other monetary and non-monetary
(property) contributions from the state (local government).
2. With the increase of state capital the enterprise must
increase the nominal state capital and register all the state
capital it uses as the nominal state capital only if the
enterprise increases or reduces the nominal share capital. The
increase of the nominal state capital shall become valid only
from the moment of its registration.
Article 26. The Right of the Enterprise to Invest State
Funds.
1. If an enterprise wishes to invest the state (local
government) capital on the territory of another country (on the
territory of another local government) it must obtain a licence
therefor from the Ministry of Finance of the Republic of
Lithuania ( the local government). The state capital which is
being invested in other countries must be insured with a banking
institution or an insurance agency recognised as reliable by the
Bank of Lithuania. An application for a licence shall be filed
together with a certificate from the Ministry of Finance of the
Republic of Lithuania on the economic and financial state of the
object of investment, and the economic and financial state of the
investing enterprise, as well as a state property (local
government property) insurance certificate in the from
established by the Ministry of Finance of the Republic of
Lithuania. The licence must be issued or a motivated refusal to
issue said licence must be given within thirty days from the
filing of the application. A refusal to issue a licence may be
given if the established procedure for filing the application
documents has been violated, or if the enterprise or other object
of investment is unprofitable and is not able to ensure a fixed
rate of interest on the use of the state capital, or if the
investment runs counter to the interests of the state (local
government).
2. If the capital of the state (local government) is being
invested in another country (on the territory of another local
government), the interest on the use of this capital shall be
paid at the established rate into the budget of the Lithuanian
State (local government).
3. The amount of state capital which is invested in other
enterprises (partner-ships, public or private joint stock
companies), deposited with banking institutions or given on loan
in other forms, must not exceed 1/2 of the state funds possessed
by the enterprise or its subsidiaries. If the enterprise violates
said rule, the founder must compel refundment to the state (local
government) of the appropriate share of the state capital
invested in other enterprises.
4. Annual investments in long-term (exceeding 12 months)
construction projects and the mounting of the equipment shall be
discounted by reassessing the value of said investments at the
completion of the project in accordance with the norms of
interest on the use of the state capital. During the period when
construction projects (the mounting of the equipment) are under
way, but not longer than for three years, the enterprise shall
have the right not to deduce from its profit the interest on the
invested state capital, but this interest shall be deposited in
the enterprise's state capital account.
Article 27. Reduction of State Capital.
1. The state capital in the possession of the enterprise
shall not be returned to the budget of the Lithuanian State, with
the exception of the following cases:
1) if the activities of the enterprise are terminated or the
state capital is reduced (liquidated); and
2) if the enterprise reduces the amount of the state capital
in its possession
2. If the SE cannot effectively use the state financial
funds in its possession, it may transfer a portion of the
interest on state capital or of the depreciation charges to the
budget of the State (local government), or, with the consent of
the Ministry of Finance of the Republic of Lithuania (local
council or, at its behest, the board), transfer same without
refundment to other state (local government) enterprises.
3. If, in accordance with this Law and other legislative
acts of the Republic of Lithuania which regulate privatization,
the Government of the Republic of Lithuania (the local council)
compels liquidation the SSE's state capital or reorganisation of
the SE into the SSE, the shareholders or employees, based on the
prescribed rates of depreciation of fixed assets, must buy out
(return) the state capital within the period of depreciation of
the appropriate volume of fixed assets. If the enterprise fails
to comply with said requirements, it may be liquidated on the
decision of the Government (the local council).
Chapter 5
SHARE CAPITAL
Article 28. Composition and Ownership of Share Capital
1. The share capital of the enterprise shall be formed from
monetary and non-monetary (property) contributions of natural and
legal persons, as well as from the portion of profit which is
assigned to the share capital in the manner prescribed by this
Law.
2. The share capital shall consist of:
1) the nominal share capital which equals the nominal value
of the issued shares;
2) the reserve fund of the nominal share capital; and
3) the profit reserve fund.
3. The reserve fund of the nominal share capital shall be
formed from the income which is not attributed to profit; said
income shall be received from selling new shares of the
enterprise at a higher price than their nominal value. The income
channeled to said fund shall be exempt from taxation.
4. The profit reserve fund shall be formed from the portion
of profit which has not been paid in dividends and bonuses, or
has not been used in any other way, and is invested in this or
other enterprises.
5. The reserve fund of the nominal share capital and the
profit reserve fund may not exceed 1\10 of the enterprise's
authorised capital. If this provision is violated, the surplus
amounts of the reserve funds shall be apportioned to the
authorised capital within three months after the approval of the
annual balance sheet and, in accordance with the provisions of
Article 31 of this Law, the nominal share capital shall be
increased. If these regulations are not complied with, the
founder of the enterprise may direct the surplus amounts of the
reserve funds to the authorised capital upon a written request
therefor from any of the share-holders or employees of the SE. If
the founder of the enterprise does not adopt such a decision,
said persons shall have the right to appeal to the court.
Article 29. Shares and the Rights Incident to Them.
1. The issuance and circulation of the enterprise's shares,
share certificates, and temporary shareholder's certificates
shall be regulated by the Law of the Republic of Lithuania on
Stock Companies and other laws on the issuance and circulation of
securities.
2. The property and personal non-property rights of the
shareholders of the enterprise shall be defined by the Law of the
Republic of Lithuania on Stock Companies, if this Law does not
provide otherwise.
3. The enterprise shall have no right to issue nonvoting
shares.
Article 30. Increase of the Share Capital.
1. The enterprise may increase the nominal share capital by
issuing new shares or increasing the nominal value of the issued
shares. The increase of the nominal share capital through
additional investments shall be allowed only by issuing new
shares.
2. The enterprise may issue new shares for capital
investments if the nominal share capital has been fully paid. In
other cases the nominal share capital may be increased through
non-monetary (property) contributions.
3. The SSE which has been found insolvent in the manner
established by law, shall have no right to increase the share
capital by issuing and offering new shares to persons who are not
its shareholders or employees. If the SE is insolvent, it shall
have no right to issue shares.
4. The nominal share capital of the enterprise may be
increased on the decision of the board when, based on this Law,
the council of observers or the meeting of shareholders approves
the appropriate amendments to the bylaws. In the instances when
it is planned to issue new preference shares, the approval of the
share-holders' meeting shall be necessary.
5. The amendments to the bylaws shall be registered together
with the registration of the increase of the capital.
6. An appropriate state body shall register, in the manner
prescribed by law, the amendments to the bylaws and the increase
of the nominal share capital if:
1) all the shares have been subscribed to in the established
manner, and the initial investments have been made;
2) in the instances established by law a permission to
expand production has been received from the state (local
government); and
3) other requirements under laws have been met.
If a state body refuses to register the increase of the
nominal share capital and the amendments to the bylaws, it shall
notify the applicant of the reasons therefor within the
established period. The nominal share capital shall be considered
as increased only after its registration.
7. If, through the fault of the enterprise, the increase of
the nominal share capital was not registered within three months
from the termination of subscription for shares, the paid sums
must be returned to the subscribers for shares without any
deductions. The enterprise that causes a delay in the refunding
of the paid sums must pay the shareholders a fine in the amount
of 10 percent of the unreturned sum, unless the bylaws of the
enterprise prescribe other fines.
8. The shares (share certificates and temporary
shareholder's certificates) may be issued only after the
registration of the increase of the share capital. Prior to that
it shall be prohibited to transfer to other persons the rights to
subscribed shares.
Article 31. The Increase of the Nominal Share Capital from
the Income of the Enterprise.
1. The enterprise shall have the right to issue new shares
and transfer them to shareholders free of charge, or increase the
nominal value of shares by transferring the reserve funds of the
share capital and profit (its portion) belonging to the
shareholders and employees of the enterprise to the nominal share
capital. Such a transfer of the reserve funds to the nominal
share capital shall be prohibited before the losses of the
enterprise assessed in the balance sheet have been compensated
for.
2. The share of the profit reserve fund belonging to the
employees of the SE, as well as to the employees who are
shareholders shall be equal to the share of the nominal state
capital in the authorised capital of the enterprise. An
employee's portion of the income in this fund accumulated during
the accounting year shall be proportionate to his actual pay
(including bonuses) during said period. A shareholder's right to
the surplus of the profit reserve fund and to the reserve fund of
the nominal share capital shall be established in proportion to
the nominal value of the shares held by him.
3. In the manner established by the bylaws, the enterprise
shall notify each shareholder and employee having the right to
obtain the shares issued by the enterprise from its own income,
of the bonus shares or partly paid shares issued in the above
manner, and inform him about the procedure for obtaining the
shares. If a shareholder or an employee does not acquire the
shares belonging to him within one year after the above
notification, the enterprise shall have the right to realize the
shares at its own discretion.
Article 32. Reduction of the Share Capital.
1. The enterprise shall have the right to reduce the nominal
share capital in the cases and manner prescribed by this Law and
the bylaws of the enterprise. Within 10 days from the adoption of
said decision the board must notify the founder, creditors and
shareholders thereof in the manner prescribed by the bylaws.
2. If the SE is reducing its nominal share capital, its
creditors shall have the right to request guarantees.
3. The amendments to the bylaws and the reduction of the
nominal share capital may be registered not later than 30 days
after the notification of the decision concerning the reduction
of the capital in the manner prescribed by the bylaws of the
enterprise.
4. Until the reduction of the share capital has not been
registered, the enter-prise shall have no right to pay out money
or transfer material assets to the shareholders. Upon the
reduction of the share capital the shareholders may be not exempt
from the payment for the shares in their possession.
5. The SE may not reduce the nominal share capital on its
initiative, if it has been declared insolvent according to the
procedure established by this Law. The enterprise shall be
prohibited from reducing the nominal share capital if this may
result in its insolvency.
6. If the nominal share capital is reduced not according to
the procedure established by the bylaws of the enterprise, or if
same is done under different conditions for separate classes of
shares, the consent of the shareholders' meeting must be had
therefor. If the nominal share capital of the SE is being
reduced, a permission from the founder must be received. The
founder's permission to reduce the nominal share capital of the
SSE shall also be required if after the planned reduction the
nominal share capital would amount to less than 1\5 of the
authorised capital.
7. The enterprise may effect the reduction of its nominal
share capital by:
1) purchasing or acquiring in any other way its own shares
which are retired thereafter; or
2) reducing the nominal value of its shares.
8. If after the notice about the retirement of the shares
the shareholders do not return them by the fixed time, the
enterprise may declare said shares invalid.
9. When reducing the nominal share capital, the shares owned
by the enterprise shall be retired in the first place.
10. When the enterprise reduces its nominal share capital in
a way different from the provisions of this Law, its creditors
shall have the right to bring an action against the enterprise.
The court may issue an order charging the enterprise with
compensation for the losses sustained by a creditor, but the
amount of the compensation shall not exceed the sum paid to the
shareholders.
11. The enterprise shall not be bound to purchase the shares
submitted by the shareholders with the exception of cases
prescribed by law.
Chapter 6
FINANCES OF THE ENTERPRISE AND THE DISTRIBUTION
OF PROFIT
Article 33. Finances.
1. The enterprise shall make use of internal and external
sources of finance. The internal sources shall embrace
depreciation charges, interest on the state capital if it remains
at the enterprise, and the profit. The external sources shall
embrace shareholders' investments, one-time non-repayable
contributions of other natural and legal persons, and the loan
capital. For large-scale investments a solvent state enterprise
may obtain additional funds from the state (local government)
budget.
2. The economic rates of depreciation charges for the
physical and functional replacement of the equipment, machinery,
facilities and other fixed assets shall be established by the
enterprise which assesses real changes in the efficiency of said
assets during a fixed period of time. The amount of actual
depreciation charges of the enterprise shall not be smaller than
the established tax rates of depreciation charges which, together
with the procedure for their application, shall be established by
the Government of the Republic of Lithuania. Further depreciation
of the equipment, facilities and other fixed assets completely
depreciated in value as against their original cost shall be
discontinued. In the event of a premature writing off of the [not
fully depreciated] assets, their residual cost shall be included
into the losses of the enterprise.
3. For the failure to deduct (pay) by the fixed time the
interest on the use of the state capital, the enterprise shall
pay to the budget a 0.5 percent fine per day. If the enterprise
conceals or reduces the interest or depreciation charges
(payments), a fine equal to the amount of the concealed income
shall be paid into the budget.
4. If the enterprise violates repeatedly or heavily the
established procedure for the payment of depreciation charges and
interest on the use of the state capital, also if it loses in any
other manner the state property entrusted to it, the founder may
dissolve the board of the enterprise, or apply to the enterprise
the regime of a special supervision, or reduce the share of the
state capital in the possession of the enterprise, or liquidate
(reorganise) the enterprise.
5. The enterprise shall form a reserve (obligatory profit
reserve) fund. It shall be formed by appropriating thereto not
less than 5 percent of the amounts of annual deductions from the
profit remaining after the payment of required taxes. Every year
sums shall be appropriated to the fund until, together with the
reserve fund of the nominal share capital, it amounts to 1/20 of
the enterprise's authorised capital. If the profit is not
sufficient for making mandatory payments (interest on the state
capital and insurance, as well as minimal dividends), deductions
into the profit reserve fund shall be reduced accordingly.
6. The losses and debts sustained in the commercial-economic
activities of the enterprise shall be covered from:
1) the share of profit belonging to the employees and
shareholders of the enterprise, also from the resources of the
reserve fund of the nominal share capital and the profit reserve
fund;
2) the share of the profit appropriated for the payment of
mandatory and minimal dividends;
3) the resources of the nominal share capital of the SSE
(this provision shall not apply to the SE); and
4) the subsidies received by the SE fom the state (local
government) if the sums under subparagraphs 1, 2, 3 hereof prove
insufficient.
7. The losses resulting from bankruptcy of the SE or from
other causes, shall be covered proportionately from the state
capital and share capital.
8. When the SSE goes bankrupt, the losses shall be covered
from the share capital. If this amount is not sufficient, the
losses shall be covered from the funds of the state capital.
Article 34. Insolvency of the Enterprise.
1. At the request of the founder, insolvency of the SE shall
be established and recorded in the insolvency act by an agency of
the Ministry of Finance of the Republic of Lithuania based on the
analysis of the results of the financial performance of the
enterprise, established according to the documents of financial
ac counting and inventory inspection. The enterprise may also be
declared insolvent if it fails to make the mandatory payments
within more than three months from the deadline fixed for making
said payments, or if a real (supported by evidence) insolvency is
being expected.
2. If the SE is insolvent, as well as for a year after the
enterprise became solvent or profitable, the founder shall have
the right to:
1) remove or appoint the chairman of the board;
2) remove or appoint members of the board on the
recommendation of the council of observers;
3) set the size of salary and bonuses for the chairman and
other members of the board, also for head of the administration;
4) establish the order of using the enterprise's financial
resources; and
5) liquidate or reorganise the SE.
3. The enterprise may appeal to the court against the act on
its unprofitability or insolvency.
4. A person dismissed from the post of the chairman of the
board on the grounds of unprofitability or insolvency of the
enterprise headed by him, shall not be appointed a member of the
board of another SE or SSE, its chairman or head of its
provisional administration for five years since the day of his
dismissal.
5. Regulations provided in this article may be applied to
the SSE when, upon the reduction of its net assets, the remaining
nominal share capital amounts to less than 1\10 of the authorised
capital of the enterprise.
Article 35. Dividends.
1. Dividends to the owners of ordinary shares shall be paid
from the profits less taxes and other mandatory payments.
Dividends shall be paid in view of the time (during a year) of
the acquisition of the share, its nominal value and the received
profit. Dividends on preference shares shall be paid after the
payment of profit taxes, interest on the state capital and
insurance deductions. The sum of dividends paid to one person
shall not be limited.
2. The rate of dividends shall be planned and paid so that
the expected profit is sufficient to make the mandatory payments.
Final payments to the shareholders shall be permissible only
after making the mandatory payments and also after meeting the
liabilities to the creditors.
3. Together with the additional dividends paid with the
shares the rate of the planned and paid dividends shall not be in
excess of the rate of the comparative profitability achieved by
the enterprise during the accounting year (the ratio between the
balance profit and the enterprise's paid authorised capital less
the investments in the unfinished capital construction).
4. The minimal dividends on ordinary shares of the SE paid
in cash or in property shall not be less than the minimal amount
established by the Government of the Republic of Lithuania and
equal for all the SEs, maximized by the rate of payments out of
the profit per one rouble of the authorised capital of the
enterprise to the employees of the enterprise.
5. If the profit of the SE is not sufficient for paying the
minimal dividends, the unpaid amount shall be transferred to the
following (one) year. No distribution of profits shall be made,
with the exception of taxes and other mandatory payments, if the
minimal dividends have not been paid. If the debt is not met
within one year, the SE may be declared insolvent. In that event,
a meeting of share-holders may compel the liquidation of the
nominal share capital of the SE with the enterprise purchasing
its own shares. If the SE refuses to purchase the shares, it must
be liquidated within one year. The founder, wishing to prolong
the functioning of the enterprise, may, within the liquidation
period, purchase the shares with his own money.
6. The share capital of the SE shall be liquidated from the
depreciation income of the share capital, and, with the consent
of the founder, from the deductions of interest on the state
capital. The shares of the share capital under liquidation must
be purchased not later than within the average term of
depreciation of fixed assets owned by the SE. The value of
capital purchased annually must not be less than the annual
average nominal value of shares subject to being purchased during
a fixed (announced) period, this proportion being computed in an
increasing (accumulative) order. The shares shall be purchased in
accordance with the provisions of this Law and the bylaws of the
enterprise.
Article 36. Distribution of Profit.
1. The following mandatory payments shall be made out of the
enterprise's balance profit:
1) taxes to the budget;
2) deductions of interest on the state capital;
3) insurance premiums for the state capital accumulated at
the enterprise;
4) mandatory and minimal dividends; and
5) payments into the profit reserve fund of the enterprise.
The residual profit shall be used for the payment of
dividends and bonuses, formation of the reserve fund, and for
financing additional social, cultural and other programmes.
2. Prior to the discharge of the enterprise's liabilities to
its creditors or to the state (local government), the payment of
dividends to shareholders, or bonuses to the employees, or any
distribution of the profit to the employees and shareholders
shall be prohibited.
3. At the termination of the business year, dividends may be
paid in advance, if the preliminary annual balance for the
accounting year envisages a profit sufficient therefor. The sum
paid in advance may not exceed 1\2 of the profit of the preceding
year which remained after making mandatory payments.
4. Bonuses for the employees of the SE may be paid in
advance every three months if, on the evidence of the current
financial results of the economic performance, a sufficient
amount of profit is expected. Not more than 2\3 of the bonuses
which are planned to be paid for work for a corresponding period
shall be paid in advance. The remaining amounts shall be paid at
the termination of the business year on the basis of the received
profit. Not more than 2\3 of the amount of bonuses factually paid
for the preceding year shall be paid in advance.
VYTAUTAS LANDSBERGIS
President
Supreme Council
Republic of Lithuania
Vilnius
25 September 1990
No. I-604