Mergers and acquisitions is not an option for many businesses. There is a risk of losing corporate identity, owned trademarks and many other factors. On the other hand, there is a variety of forms and methods of expanding by means of joint activity or creating partnerships. Such joint activity may permit achieving very similar objectives. In this connection, we advise on the following issues:
Knowledge & Insights
Joint ventures in Lithuania
The Lithuanian Civil Code entails some requirements for establishing joint ventures (partnerships). This may be relevant if the partnership is governed by the Lithuanian laws.
Lithuanian law considers joint venture (partnership) agreement as an agreement when two or more persons cooperate with their own assets, work, knowledge, and agree to act jointly for achieving a specific lawful purpose. If the joint activity is set up for non-profit purposes, such agreement is called association agreement. The joint activity (partnership) agreement must be concluded in writing.
The contribution to the partnership can be money, other assets, professional and other knowledge, skills, professional reputation and business relations. It is assumed that each contribution shall be equal, unless the partnership agreement sets out otherwise. The contribution of each partner is assessed on a basis of consensus of all partners. The distribution of costs shall be agreed by a joint agreement of all partners as well. In cases where no written agreement regarding the assets is specified, each partner is responsible by its share in the partnership. The agreement which releases a partner from participation in cost sharing shall be null and void by reason of the Lithuanian civil laws.
The profit out of partnership agreement shall be distributed proportionally to each partner’s contribution in the joint activity, unless the partnership agreement specifies otherwise. The agreement that inhibits a partner from participation in the cost sharing shall be null and void.
The parties may agree that the partnership may not be disclosed to third parties (so-called undisclosed partnership). Such closed partnership is regulated by general provisions of the Civil Code that are relevant for the partnership arrangements. If a partnership assumes obligations in respect of third parties, the relevant partner of the undisclosed partnership is liable with full assets for the transactions that have been made in its own name, but for the interests of all partners.
In cases, where the partnership is not directly linked with exercise of commercial activity, each partner is jointly responsible with all assets proportionally to their share in the partnership. With regards to joint non-contractual liability, partners are liable jointly and severally.
In cases the partnership is linked with commercial activity of partners, all partners are co-responsible for joint liabilities jointly and severally, irrespectively on what basis such obligations arose.
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