Basic Business Law
Types of companies
The following types of legal entities are permitted to operate in the Republic of Lithuania:
- individual enterprise (sole proprietorship) (PĮ);
- general partnership (TUB);
- limited partnership (KUB);
- public limited liability company (AB);
- private limited liability company (UAB);
- state enterprise;
- municipal enterprise;
- non-profit organization (VŠĮ);
- agricultural company;
- co-operative enterprise;
- European company;
- European Economic Interest Grouping.
The most common method of investment in the Republic of Lithuania is through the incorporation of a private or public limited liability company (UAB or AB) under the Law on Companies of the Republic of Lithuania or acquisition of shares in existing Lithuanian companies. Still, the most popular form of doing business in Lithuania is through a UAB. A comparison of the main features of both types of companies is presented in the table below:
Requirements for the formation of business
|
Private Limited Liability Company - UAB
|
Public Limited Liability Company - AB
|
|
|---|---|---|
|
Minimum authorized (share) capital
|
approx. EUR 2,900
|
approx. EUR 43,450
|
|
Maximum number of shareholders (if any)
|
249
|
Not established
|
|
Minimum number of shareholders (incorporators)
|
1
|
1
|
|
Liability of shareholders
|
Limited
|
Limited
|
|
Audit
|
Not mandatory
|
Mandatory
|
|
Public trading in securities
|
Prohibited
|
Allowed
|
Company registration
Registration of a UAB requires taking the following five steps:
- lodging of an application for reservation of the UAB name;
- preparation of the incorporation documents;
- opening of an accumulative bank account;
- submission of documents for certification by a notary public;
- registration of the UAB with the Company Register Office.
The estimated time for incorporating a UAB is about 3 weeks after all the incorporation documents are duly executed.
Shareholders
The shareholders of AB or UAB may be Lithuanian or foreign individuals or legal entities. There are no restrictions or special encumbrances set forth in respect to foreign shareholders under the Law on Companies of the Republic of Lithuania. Lithuanian laws do not restrict in any way the participation of foreigners in the management of Lithuanian companies. Foreign citizens may be freely elected either to the supervisory council or the board or the position of CEO. However, if such foreign citizens are employed in the company (employment is mandatory only for the CEO), they must obtain temporary residence permits. Such permits are normally valid for up to one year, but for EU citizens they may be issued for up to five years (permits are renewable).
Employment Law
Conclusion of an employment contract
The employment contract must be in writing, and in accordance with the model form established by the law, and it must contain essential provisions, i.e. those on which parties must agree to validate the employment contract, and other provisions. The essential provisions are: the place of work and work functions. Separate types of employment contracts can also provide for other essential provisions (e.g. term of contract, seasonal work, etc.). It is forbidden to enter into a fixed-term employment contract, if the work is of a permanent nature. Besides the essential provisions, in every employment contract both parties are required to agree on the conditions of payment for work.
Termination of an employment contract
The Labour Code of the Republic of Lithuania (Labour Code) regulates the dismissal of an employee. The main bases of employment termination are the following:
- expiry of an employment contract;
- liquidation of an employer without a legal successor;
- death of an employee.
An employment contract is terminated by:
- agreement between the parties;
- notice of an employee;
- notice of an employer;
- initiative of an employer without notice;
- other cases provided for by the law.
If there is no fault of the employee, the employment contract may be terminated by the employer for good reason, e.g. due to circumstances related with the employee’s qualifications, professional competence or behaviour at work. The contract may be also terminated for economic or technological reasons, due to structural changes at the work place etc. The employer dismissing an employee at the employer’s initiative without fault on the part of employee must give him a written notice at least 2 months before the termination date.
Work hours, overtime work, renumeration
The normal work hours for an employee may not exceed 40 hours per week. The daily period of work should not exceed eight working hours. A five-day workweek is standard, but it may be extended to six days. Generally overtime is prohibited. An employer may apply overtime hours only in exceptional cases, which are specified in the Labour Code of the Republic of Lithuania. In any case the employee’s overtime hours shall not exceed four hours in two consequent days and 120 hours per year for each employee. A different annual duration may be established in the collective agreement for overtime hours, however, not exceeding 180 hours per year. The pay for overtime and night work shall be at least one and a half times the hourly pay/monthly wages established for the employee.
The general minimum monthly wage is approx. EUR 232.
Vacation
The minimum annual paid vacation is 28 calendar days, but is increased to 35 calendar days for employees under the age of 18, a single parent raising a child under the age of 14 or a disabled child under the age of 18. Normally, all employees are entitled to their annual paid vacation leave after they have worked in the company continuously for an initial period of six months.
Work permits for non-residents
Foreign citizens (except EU citizens) who are not permanent residents of Lithuania may work temporarily in Lithuania under an employment contract, provided they have a work permit issued by the Lithuanian Labour Exchange at the Ministry of Social Security and Labour. EU citizens are released from the obligation to obtain a work permit, but those who intend to reside in Lithuania for more than three months within a half-year period must obtain a temporary residence permit. It is not possible to apply for a residence permit while staying in Lithuania on a short-term visit visa.
