Admitting a new MB member and leaving an MB in Lithuania

A small partnership (MB, mažoji bendrija) may have no more than 10 members, and all of them must be natural persons. A new member is admitted unanimously by the members’ meeting in the way set in the regulations. A person can also become a member by acquiring an existing member’s rights. A member may withdraw by notifying the MB in writing: the MB then settles with them under the regulations, and they stop being a member on the day of settlement. Changes of members are filed with the Information System of Participants of Legal Entities (JADIS, Juridinių asmenų dalyvių informacinė sistema) within 5 days, while the Register of Legal Entities records amended regulations and the MB representative.

How an MB is set up, which documents are signed and how contributions are made is covered in Setting up an MB in Lithuania: members, contributions, documents. Here we cover what happens to members in an MB that is already running.

Who can be an MB member

An MB is a company all of whose members are natural persons (Article 2(1) of the Law on Small Partnerships of the Republic of Lithuania (MBĮ)). There may be no more than 10 members (MBĮ Article 2(2)). A member may be a natural person who has made or undertaken to make a contribution, or a natural person who has acquired a member’s rights (MBĮ Article 7(1)). So there are two ways in: admission with a new contribution, or taking over an existing member’s rights.

Admitting a new member

New members are admitted by the members’ meeting in the way set in the regulations (MBĮ Article 9). This is the meeting’s exclusive right (MBĮ Article 13(4)). The decision is unanimous (MBĮ Article 19(1)(1)), and all members must take part in the meeting (MBĮ Article 19(2)). If the MB has one member, no meeting is held: that member’s written decision counts as a decision of the meeting (MBĮ Article 15(3)).

The new member makes a contribution or undertakes to make it (MBĮ Article 7(1)). A contribution may be money or other property, but not work or services (MBĮ Article 8(1) and (2)). For a non-monetary contribution, the members’ meeting sets its value, terms and deadlines (MBĮ Article 13(5)), also unanimously (MBĮ Article 19(1)(2)).

Before admitting the first new member, check the regulations. They must set the procedure for admitting new members, for voluntary withdrawal and for settling with withdrawing members (MBĮ Article 5(2)(8)–(10)). Where there is one member, the regulations need not set the procedures for convening members’ meetings, voluntary withdrawal, settlement with withdrawing members, members’ access to documents and notice of an intended sale of member rights (MBĮ Article 5(4)), so the regulations of a one-member MB may lack them. Once there is a second member, all these procedures become mandatory (MBĮ Article 5(2)), so the regulations must be amended. This needs at least 2/3 of all members’ votes (MBĮ Article 18(1)(1)). The full text of the amended regulations is drawn up and signed by all members or by a person authorised by the meeting (MBĮ Article 5(7)), and a notary does not certify the signatures (MBĮ Article 5(8)). If the MB has no manager and the members’ meeting is its management body, the regulations must also state that the MB is represented by an MB representative and set the representative’s competence (MBĮ Article 5(3)).

Once there are two or more members and the MB has no manager, it must have an MB representative (MBĮ Article 21(1)). Only a member may be the representative (MBĮ Article 21(3)). In voting each member has one vote, and a different allocation of votes may be set in the regulations only if the MB has a manager (MBĮ Article 16(3)).

Selling or otherwise transferring a member’s rights

A member may transfer their rights in the way set in the regulations and the law. If the contribution has not been made in full, the duty to pay the rest passes with the rights (MBĮ Article 10(1)). A member who undertook to contribute a specific, individually identified item may transfer the rights only after delivering it (ibid.).

Before the rights are sold, the MB follows this procedure (MBĮ Article 10(2)):

1. The member notifies the MB of the intention to sell, in the way set in the regulations.
2. Within the period set in the regulations, the members’ meeting decides unanimously which members will pay the selling member, how and when (MBĮ Article 19(1)). The decision states how much their contributions increase.
3. The payment deadlines may not exceed 30 days from the decision.
4. The selling member stops being a member on the day after all members named in the decision have paid.

If the meeting does not adopt such a decision, the member may sell or otherwise transfer the rights to another natural person, and the new member’s contributions are valued at those of the transferring member (MBĮ Article 10(3)). The acquirer gives the MB the document confirming the acquisition, or an extract of it (MBĮ Article 10(4)). This pre-emption procedure does not apply where the MB has one member (MBĮ Article 10(6)).

If a member’s actions run against the MB’s objectives and it cannot reasonably be expected that they will change, their rights may be sold compulsorily in the way set in the Civil Code (MBĮ Article 10(5)).

Voluntary withdrawal and settlement

A member may also leave without selling anything. The steps are:

1. The member notifies the MB in writing of the intention to withdraw (MBĮ Article 11(1)).
2. The MB draws up financial statements for the period from the start of the financial year to the date of the notice (MBĮ Article 11(3)).
3. The MB settles with the member under the regulations: the contribution is returned or its value is paid, increased by a share of profit or reduced by a share of losses in proportion to the member’s contribution (MBĮ Article 11(4)).
4. The member stops being a member on the day of settlement (MBĮ Article 11(2)).

The law sets no deadline for settlement on withdrawal; the regulations set it. So how long the whole process takes depends on them. If the MB is already in liquidation, settlement with the withdrawing member follows the liquidation rules (MBĮ Article 11(5)): after creditors are paid, the remaining assets are shared among members in proportion to their contributions (MBĮ Article 30(11)).

The voluntary withdrawal rules do not apply where the MB has one member (MBĮ Article 11(6)). A sole member may, for example, transfer their rights to another natural person, admit a new member and, once there are two or more members, withdraw in the way described in this section, or liquidate the MB. Liquidation is covered in Liquidating an MB in Lithuania: who decides, who liquidates, who gets what.

What happens when an MB member dies

The Law on Small Partnerships has no separate rule on a member’s death. A deceased person’s property rights and obligations are inherited (Article 5.1(2) of the Civil Code of the Republic of Lithuania (CK)), and a natural person who has acquired a member’s rights may be a member (MBĮ Article 7(1)). The law does not say directly whether an heir becomes a member without a decision of the members’ meeting, so it is worth settling this in the regulations.

If a member’s rights belong to several heirs in co-ownership, a notarised power of attorney to represent all co-owners is filed with JADIS together with the list of members (JADIS Regulations, point 18). It is not needed where the same person represents all co-owners by law: the document proving this is filed instead (ibid.).

When the sole member dies, there is no member left to take the decisions of the members’ meeting. If the estate includes property that must be managed and the heir cannot do it, the district court appoints an estate administrator (CK Article 5.65). If the management bodies are not formed and cannot take decisions for longer than six months, the register keeper may initiate liquidation of the MB (CK Article 2.70(1)(2)). The law does not say directly whether this rule applies to an MB that has a manager while the heirs are settling the inheritance.

What to file, where and when

Members’ details are not entered in the Register of Legal Entities. They are filed with JADIS: name, surname, personal code, correspondence address, start and end dates of membership, and the amount or value of the contribution (MBĮ Article 6¹(1)). When members change, the data are filed no later than within 5 days after the change (MBĮ Article 6¹(2)). The MB manager is responsible, or, where there is no manager, the MB representative or the sole member (MBĮ Article 6¹(3)). The data are filed electronically only, and the list is signed with a qualified electronic signature (JADIS Regulations, point 11). Beneficial owner data are filed at the same time (JADIS Regulations, point 12).

Where there are two or more members and the members’ meeting is the management body, the Register of Legal Entities records the MB representative (MBĮ Article 6(2)). An application to register changes is filed within thirty days of the change (CK Article 2.66(3)), and amended regulations take effect only from registration (CK Article 2.66(6)). If the regulations follow the model regulations and the other conditions are met, the documents may be filed electronically directly with the Centre of Registers (Registrų centras) (Regulations of the Register of Legal Entities, point 46).

More on shareholders and shares

• Shareholders and shares
• Selling UAB shares to a foreign buyer: signatures and apostille
• Company power of attorney for use abroad: form, apostille, validity
• Setting up a holding company: paying for shares with shares, and tax
• Annual general meeting and filing accounts: deadlines and fines

How to start

Send us the current MB regulations and the list of members with their contributions, and tell us what is changing: a new member is joining, rights are being sold, a member is withdrawing or has died. For a new member, state the contribution and the deadline for making it.

Phone +370 5 212 1506, email info@linden.lt

More about this service: Shareholders and shares.