Corporate governance

Our law firm advises on all matters related to corporate governance of Lithuanian companies. In particular, we provide legal advise on the following matters:

• on the rights of members of a legal person and their capacity to exercise a control over management bodies
• distribution of competencies between the general manager and the board
• on internal regulations and work procedures for the work of Management Board and the Supervisory Board
• in contentious matters, we collect evidence on identification of a shadow director or shadow corporate structures.

Knowledge & Insights 

Corporate structures in Lithuania

Each legal entity in Lithuania must have: (i) a governing body, which can be one-person or collegial managing body, and (ii) a meeting of members of a legal person, unless the special laws or corporate documents provide for different structures.  

“UAB” and “AB” types of companies are the most popular forms of Lithuanian companies. The mandatory bodies of the UAB and AB type of companies are the General Meeting of Shareholders and the Head of Administration (usually called as Director or General Manager). The Supervisory Board and the Management Board (also called the Board of Directors) may also be formed, but their existence is not mandatory. 

Thus, Lithuanian company law provides for companies a choice between one-tier or two –tier board system. In case, two-tier system is chosen, shareholder's meetings elect the Supervisory Board, which in turn further elects the Management Board. Contrary to other countries, the General Manager is not an ex officio member of the Management Board. The General Manager shall be elected and removed from the office by the Management Board (the Supervisory Board if the Management Board is not formed or the General Meeting of Shareholders if the Supervisory Board is not formed). The Lithuanian company law sets out a requirement that managing bodies of legal persons can be natural persons only. A Lithuanian company may not be appointed as director of a legal person. 

Practical issues

The Lithuanian corporate governance is still struggling to separate ownership and management matters. In practice, the general manager is largely influenced by dominant shareholders and one may sometimes find a shadow or de facto  director in the company, which can be an ordinary employee of the company or has not employment relationship. The recent Lithuanian case law has already acknowledged the reality of shadow directors.