Liability of directors

We advise on all forms of corporate fraud investigations when an individual or company does something dishonest and unfairly received economic benefits. In particular, we provide legal assistance to all stakeholders when a question of director's liability comes into play:

• Investors, shareholders who were defrauded by dishonest managers and claiming the liability of such managers
• Business partners who were hurt by business fraud, negligence or were otherwise deceived by he company or its managers. 
• Managers who were accused and facing civil claims for damages or dissipating assets.  

Knowledge & Insights

Major duties of a director of the Lithuanian company

The director is required to act in the best of the company with decent standard of competence. The major explicit duties of adirector of a  Lithuanian company are the following:

• Organisation of the daily activity of the company;
• Organisation of preparation of financial reports;
• Calling the meetings of the members of a legal person;
• Submitting required information for the Register of Legal Persons;
• Notification of the members of a legal person on the most important events of that legal entity.

Generally, a director is directly responsible to the board of directors (if it is formed) or the shareholders (if the board of directors is not formed) of the company. However, under certain circumstances when a company is not able to meet its obligations, a director may also become liable to creditors of the company. The director is required to be more active when the company faces financial difficulties, particularly when the company is unable to meet its financial obligations, the overdue amounts are excessive, etc. The Lithuanian case law is developing, and it is possible that liabilities may be incurred by a director even when a person was not appointed as a director, but in fact exercised the management control of the company.

CEO's liability for deepening insolvency

By reason of Lithuanian insolvency laws, a director must file an application for insolvency of a company is not able to meet it financial duties or notified creditors that it is not going to meet its financial duties. The head of the company shall be liable to the creditors for the damage that was incurred when a company was in delay in submitting an application for opening the bankruptcy proceedings. Customarily, the bankruptcy administrator reviews the corporate documents and claims a director if he or she were not prompt in filing a documents to the court for opening bankruptcy proceedings.  

Personal liability for losses

According to the Lithuanian company law, a director is not an ordinary employee, but rather a person who is entrusted specific discretion to act on behalf of a company. In exercising of its duties the head of the company must perform his duties faithfully and in compliance with constitutional documents and resolutions of shareholders’ meetings.

Nevertheless, the Lithuanian case law maintains the restrictive interpretation: a general manager would not be brought to personal liability for exercise of commercially reasonable, but risky decisions.