We represent banks and other lenders, as well as corporate and individual borrowers on arranging secured and unsecured commercial loans, real estate loans, repurchase agreements, etc. We ensure that the transactional documentation is properly drafted and the interests of parties are reasonably protected. In particular, we advice both lenders and borrowers on the following legal matters:
In particular, we possess extensive experience in assisting companies on debt refinancing transactions. We defend borrowers both in contentious and non-contentious matters in case a credit institution decides to enforce draconic provisions upon a borrower.
Knowledge & Insights
Lithuania does not have any usury laws, which impose upper ceilings on interest rate, default interest or such other restrictions on payments. It is possible however, that the court may revise the agreement between parties insofar it is at odds with reasonableness and other mandatory laws of Republic of Lithuania (for example, the court may intervene when the default interest rate is overtly above the market).
Provided the loan agreement is governed by the Lithuanian laws, some mandatory provisions of the Lithuanian civil code ought to be to be observed. A loan agreement made between two natural persons must be done in writing if the amount of the loan exceeds €579.24. If lender is a legal person, the agreement must be concluded in writing irrespective of the amount of the loan. As of the 1 of January 2015, the loan exceeding €3,000 advanced in cash must be approved by a Lithuanian public notary. In fact, whether or not the loan agreement is drafted properly ordinarily depends on whether the lender is properly protected by reason of debtor's assets or other mechanisms.
Asset based lending
The lender may also advance money on the basis of collateral (inventory, accounts receivables and fixed assets). Lithuanian civil code does not have specific provisions on the secured loan. This means that typical loan contract provisions are supplemented by covenants on security.
The Lithuanian law makes a distinction between a usual pledge and the mortgage by legal charge (Hypotheca). Hypotheca is the security on the current or future obligations, when the real estate is mortgaged and the secured property is not transferred into creditor’s possession. By reason of the Lithuanian law, the hypotheteca (mortgage by legal charge) must be endorsed by a public notary. The notary endorses the entire agreement on the loan, interest, repayment terms, etc. The hypotheteca is registered in the public register by a public notary for validity against all creditors. It is also possible to agree on the maximum principal amount, which is issued to permit some room for to the secondary mortgages.
According to the Lithuanian law, a pledge is understood as a security of movable or proprietary rights. Pledges can be both non-possessory and possessory. It is possible to agree on the security over future debt in Lithuania.
The Lithuanian law has certain specific requirements regarding the form of the secured loan agreement. When the pledged assets are transferred to the security holder, it suffices to have a written agreement, however, if the assets are left to the debtor or transferred to a third person, then such transaction has to be certified by a public notary and filed to the Lithuanian hypotheteca register. The transfer of assets can be performed by transferring the documents to the assets.
By reason of the Lithuanian law, it is also possible to agree on the security over the stock. The debtor who provided security shall have a right to change the pledged stock provided that their value is not reduced.
Sale and repurchase transactions
The sale and repurchase transaction is typically entered between parties, when a borrower (seller) sells its property to the lender with a covenant to resell property after a specific term. The repurchase transactions are used a security for the debt refund. By reason of the Lithuanian law, after the original seller exercises the repurchase right, such assets have to be returned free and clear of any liens to the original seller. A few limitations have to be considered, when the Lithuanian law is chosen to govern this type of transaction:
The law mandatorily sets out that the repurchase option shall be valid for a period of no longer than 5 (five) years. If the parties agree on a longer contractual term, it shall be shortened to 5 (five) years.
By enforcing the repurchase right, the original seller must notify the original buyer about such repurchase in public not later than 20 (twenty) days before the closing if the movable property is repurchased and not later than 60 (sixty) days if the immovable property is repurchased. If the repo agreement was registered, the registrar must be also notified about enforcement of the repurchase.
Šulija Partners Law Firm Vilnius, registered office Jogailos street 4, 3rd floor, Vilnius, LT-01116, Lithuania, fax +370 52051926, e-mail: info@SulijaPartners.com
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