Does an association need a board, and can it have members without a vote?

An association does not have to have a board. The law requires two bodies: a general meeting of members (or another body, such as a conference or congress, holding all of its rights; if such a body holds only part of the rights, the general meeting is still mandatory) and a management body. The management body can be a single-person one, such as a director or a president, a collegial one, such as a board, or both. But an association cannot have members without a vote. Every member has a deciding vote and one vote at the general meeting of members. If you want some organisations to take part in the association’s work but not to vote, they need another status, not membership. Below: how to arrange this in the articles of association.

What the law requires

Article 7(2) of the Law on Associations of the Republic of Lithuania (Asociacijų įstatymas) provides that an association must have a general meeting of members or another body holding all or part of its rights. But if the other body holds only part of the general meeting’s rights, the general meeting of members is mandatory (Article 7(4)). Article 7(5) of the same law requires a management body, single-person and/or collegial.

This means the choice is yours. You can have only a director. You can have only a board. You can have both a director and a board. At least one management body must be formed at the founding meeting (Article 4(4) of the Law on Associations). The structure and powers of the bodies are set by the articles of association (Article 7(7)).

This matches the general rule for all legal entities in Article 2.82(2) of the Civil Code of the Republic of Lithuania (CK): every legal entity must have a single-person or collegial management body and a meeting of participants, unless the founding documents and the laws provide for a different structure of bodies. For associations, the Law on Associations sets that structure.

When a board is useful after all

When we set up an association, we ask clients: is a board needed? If the association will have a director, a board is not mandatory. The most common answer is that a director is enough. That is the case when there are few members and they all attend the meetings.

A board pays off when there are many members and a meeting is hard to convene. Some decisions can then be moved to the board. The general meeting of members appoints and removes the members of the management bodies, unless the articles provide otherwise (Article 8(1)(2) of the Law on Associations). The meeting may delegate this matter to another body (Article 8(3)). In practice this means the board can elect the director.

If a board is formed, the articles need to answer a few questions:

• What powers each management body has. When there are several management bodies, the articles must set this (Article 9(4)).
• Who can be a board member. Members of a collegial management body may be natural persons: members of the association and/or natural persons proposed by them (Article 9(6)). This matters for an association whose members are only companies: the seat on the board is held not by the company but by a person it proposes. Article 2.81(4) CK says the same: only natural persons may be members of management bodies.
• What the quorum is. The board may take decisions when more than 1/2 of its members attend the meeting (Article 9(7)). How many votes a decision needs is worth setting in the articles.
• Whether board members are paid. A member may be paid for work on management bodies (Article 9(5)). But members of collegial bodies that are not management bodies, such as a council, are not paid for their work (Article 7(8)).

What cannot be handed to the board

Some decisions stay with the general meeting of members even if there is a board. Article 8(3) of the Law on Associations allows only three matters to be delegated to other bodies: electing members of management bodies, electing members of other collegial bodies, and decisions to establish other legal entities or to become a participant in them. Everything else listed in Article 8(1) is decided only by the meeting.

In practice, membership fees surprise people most. The amount of entrance fees and membership fees and the order of paying them are set by the general meeting of members (Article 8(1)(4)). This matter cannot be handed to the board.

This also brings good news. Clients ask whether fees must be written into the articles if they will be higher at first and lower later. The law does not list the amount of fees among the mandatory provisions of the articles (Article 12(2)): it is set by a decision of the meeting. So the amount can later be changed by a decision of the meeting, without amending the articles.

What the director does when there is no board

When there is no board, all functions of the management body fall to the director. Article 9(1) of the Law on Associations provides that the management body acts on behalf of the association and enters into transactions. Under Article 9(2) it hires and dismisses employees and concludes employment contracts with them. Under Article 9(3) it is responsible for organising the financial accounting, preparing the set of annual financial statements and filing it with the Register and the meeting, filing data with the Register of Legal Entities (Juridinių asmenų registras), and other matters listed in the law.

The procedure for admitting new members is set by the articles (Article 12(2)(7)). So the articles can provide that applications are considered and members are admitted by the director or the board.

Members without a vote: why not

When an association is set up, people often want two kinds of members. Full members vote. Associate members attend the meetings but do not vote. The law does not allow such a structure.

Article 8(4) of the Law on Associations says it directly: all members of the association have a deciding vote at the general meeting of members, and one member has one vote. Article 13(4)(1) lists the right to attend and vote at the meeting among the rights of every member. The articles may contain other provisions, but only if they do not contradict the law (Article 12(3)). A provision taking away a member’s vote would contradict it.

One case from practice. A client was setting up an industry association whose members could only be companies. It also wanted associate members, who would attend the meetings but have no vote. If such companies are entered as members, they vote from the first day. So the difference has to be drawn not inside membership but outside it.

What to do instead

In practice we suggest several ways to reach the same goal without contradicting the law:

1. A supporter or partner status that is not membership. The articles describe who a supporter or partner of the association is, what services they receive, and whether they may be invited to meetings as observers. Such a person is not a member and therefore does not vote. For this provision not to contradict the law, it must not call such persons members.
2. Different services, the same vote. Members may be given different rights connected with services or fees: the law also mentions other rights set in the articles (Article 13(4)(5)). But each member still has one vote.
3. Taking part through the bodies. Members of management bodies and of other collegial bodies who are not members of the association may attend the general meeting of members without a vote (Article 8(5)). This is the only case in which the Law on Associations itself mentions attending a meeting without a vote.

One more point for an association whose members are companies. A member that is a legal entity may be represented at the meeting only by its own employees, participants or members of its management body (Article 8(4)). An outside consultant with a power of attorney cannot be sent.

How to start

Tell us who the members of the association will be, natural persons or companies, how many there will be at the start, and which decisions you want to leave to all members. We will propose a structure of bodies and prepare draft articles in which the board, if needed, and the supporter status are described so that the Register accepts the documents.

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

More about this service: establishment of legal entities.