UBO register changes and an overall companies law overhaul to protect shareholder rights are on the agenda in Lithuania, according to Sorainen Partner Evaldas Dudonis.
“This January saw the introduction of the UBO register, with a rather rudimentary initial version only applying to entities owned by one single natural person,” Dudonis begins. “Subsequently, in May, new aspects were added to it that made it a bit too inquisitive – requiring information on every ownership chain member entity and CEOs, including addresses, passport copies, and tax residence info.”
Dudonis reports that, during the summer, there has been a “vibrant public debate about whether or not the UBO register is too harsh.” According to him, the debate was so intense that it, in effect, “pushed back on the date of the implementation of sanctions for failure to file information to the UBO register by the end of September. The companies were not very eager to be handing over all on this date, and they are still expectant of a change to the regulations which would ease the requirements,” Dudonis explains.
Furthermore, Dudonis shares that the overall company law framework is set to have a quite important overhaul which might have gone under the radar for many. “The Ministry of Economy and Innovations drafted a number of changes to the Law on Companies, all of which are important and innovative,” he says. For example, the amendments will allow for shareholder meetings and general assemblies to take place via video conferencing tools. “The change will allow for those shareholders that (jointly) own at least 10% of the company to demand to be allowed to participate remotely, which is a great win for minority shareholder rights.”
Additionally, Dudonis reports that squeeze-out and buyout rights are to be put in place for private companies. “In essence, these too are shareholder protection mechanisms and will lead to more market liquidity.” Moreover, he reports that issuing of privileged classes of shares will have a more liberal regime. “The law introduced changes that allow for different classes of shares with the only limitation being that the privileged shares must not represent more than 50% of all shares issued,” he adds. “Also, the upcoming lowering of the initial incorporation capital requirement threshold – coming down to EUR 1000 from EUR 2500 – should only help this further.”
Dudonis feels that these changes will not only increase overall shareholder protection but will also attract new investors. “In general, these changes will increase market flexibility – especially privileged share classes – which should foster an even greater growth of the start-up sector.” Dudonis reports that all of these changes have “passed various clearance stages,” and hopes they “will get enacted by the end of the year, if any part of them, e.g., the minority shareholder parts, do not get blocked.”