Can a UAB have two directors? Procuration and joint representation

No. A private limited company (UAB) has one manager, and the manager alone acts on the company’s behalf. The law does not provide for a second director with the same powers. If one more person needs to act for the company on a standing basis, there are three routes: grant that person a procuration (prokūra), write joint representation into the articles of association, or give an ordinary power of attorney for specific acts. Below we explain how they differ, what a procurator may not do and where a procuration is registered.

One manager, one person who acts alone

Article 19(1) of the Law on Companies of the Republic of Lithuania (ABĮ) says a company must have a general meeting of shareholders and a single-person management body, the company’s manager. In dealings with other persons the manager acts for the company alone (ABĮ Article 19(6)). The manager has the right to enter into transactions alone, except where the articles provide for joint representation (ABĮ Article 37(10)).

So “two directors” can exist in a UAB only as job titles. The company may employ a chief executive and a finance director, for example. But there is only one single-person management body, and only that person is shown in the register as the company’s manager. A finance director or commercial director is an employee. To sign on the company’s behalf, they need a procuration or a power of attorney.

Only natural persons can be members of a management body (Article 2.81(4) of the Civil Code (CK)). The manager must be a natural person who is not barred by law from holding the post (ABĮ Article 37(2)). A company cannot be the manager of a UAB.

Must the manager be a Lithuanian citizen or live in Lithuania? No. ABĮ Article 37(2) sets no citizenship or residence requirement. The country where the manager lives can matter for tax and social insurance, so check that separately. A candidate for manager must tell the electing body where and in what positions they work and how their other activities relate to the company and to other legal persons connected with the company (ABĮ Article 19(9)).

Route one: procuration

A procuration is a power of attorney by which a legal person authorises its employee or another person to perform, in its name and in its interest, all legal acts connected with its business (CK Article 2.176(1)). It also allows the procurator to represent the company in court and before other bodies (CK Article 2.176(2)). The person holding a procuration is the procurator (CK Article 2.176(3)).

This is the nearest thing to a “second director”. The difference from an ordinary power of attorney is scope. A power of attorney lists specific acts. A procuration covers everything connected with the business, except the exceptions the law lists.

The procuration rules apply to the powers of attorney of profit-making companies (CK Article 2.140(3)). So if a company gives an employee a broad power to act in all business matters, consider straight away whether this is in fact a procuration that has to be registered. The Supreme Court of Lithuania treated company powers of attorney whose content matched a procuration as procurations: towards third parties they take effect only from registration, and the parts that made them irrevocable and granted a right to delegate were held void (Supreme Court of Lithuania, ruling of 13 June 2008 in civil case No. 3K-3-298/2008).

Who grants a procuration

A procuration is granted by the relevant management body, the owner or a person they authorise, in the way set by the incorporation documents (CK Article 2.177(1)). Because the manager acts for a UAB alone (ABĮ Article 19(6)), the manager usually signs it. The articles can set a different procedure, for example that a procuration needs a decision of the shareholders or the board. Read the articles before granting one.

A procuration can be granted to several people. This is a joint procuration, and the procurators must then act together (CK Article 2.177(2)).

Form and registration

A procuration must be in writing and signed by the person entitled to grant it (CK Article 2.178(1)). It can also be made electronically by registering it in the Register of Powers of Attorney (Įgaliojimų registras) (CK Article 2.178(2)).

A procuration is registered in the Register of Powers of Attorney, not in the Register of Legal Entities (CK Article 2.178(3)). Procurations must be registered in the public Register of Powers of Attorney (CK Article 2.138¹(1)). The register is kept by the Centre of Registers (Registrų centras) (point 8 of the Register of Powers of Attorney Regulations). Until 31 December 2022 procurations were registered in the Register of Legal Entities (point 15¹ of the Register of Powers of Attorney Regulations), which is why older advice says so. Under the current text that is no longer correct.

You will still see data on the procuration and the procurator in the Register of Legal Entities: its type and the dates of its registration and deregistration in the Register of Powers of Attorney (point 18.8.2 of the Regulations of the Register of Legal Entities (JAR Regulations)). So a business partner looking at the company’s register extract will see that it has a procurator.

When does a procuration take effect? Between the company and the procurator, from the moment it is granted (CK Article 2.181(1)). Towards third parties, only from its registration in the Register of Powers of Attorney (CK Article 2.181(2)). An electronic procuration is registered at the moment it is filed, and its lawfulness is not checked (point 54⁴ of the Register of Powers of Attorney Regulations). So the company itself is responsible for granting it in line with its articles.

What to put in a procuration

For each procuration the Register of Powers of Attorney holds, among other things, its term, the rights it grants and any limits stated (point 15¹ of the Register of Powers of Attorney Regulations). So it is practical for a procuration to state clearly:

who grants it and who signs it for the company;
who receives it: one procurator, or several who will act together;
the term, if it should not run indefinitely;
any limits you want, such as a branch or a field of activity, bearing in mind that they do not bind third parties.

CK Article 2.178(1) requires written form for a procuration. If you make it electronically, it is registered at the moment it is filed (point 54⁴ of the Register of Powers of Attorney Regulations), so it can be relied on with business partners the same day. For a paper procuration, the company itself files the application with the original or a notarised copy (point 54⁶ of the Register of Powers of Attorney Regulations). Such a procuration is registered by the register keeper within 2 working days of receiving the application (point 54⁷ of the Register of Powers of Attorney Regulations).

What a procurator may not do

A procurator has no right to do, and may not be instructed to do, the following (CK Article 2.179(1)):

transfer the company’s immovable property or business, or encumber rights in them;
sign the company’s balance sheet and tax returns;
declare the company bankrupt;
grant a procuration;
admit members to the business.

A procurator also cannot pass their powers to anyone else (CK Article 2.179(2)). If the procurator is unavailable, nobody can act in their place, even with a power of attorney signed by the procurator.

These acts are for the manager or another body named by law or the articles. For example, the manager is responsible for preparing the annual financial statements (ABĮ Article 37(12)).

Limits do not bind third parties

A procuration can be limited to a branch, fields and types of activity, circumstances, time or territory (CK Article 2.180(1)). But these limits have no effect on third parties (CK Article 2.180(2)).

What does this mean in practice? If the procuration says the procurator may sign contracts only up to a certain amount, and the procurator signs a larger one, the company cannot rely on that limit against the other party. The limit works between the company and the procurator. A procurator is liable to the company and to third parties in the same way as a commercial agent (CK Article 2.183). So grant a procuration only to someone you fully trust.

How a procurator signs

When signing for the company, a procurator must show that they act as procurator, by writing the word prokuristas or the abbreviation “pp” (CK Article 2.182). Build this into your contract templates.

When a procuration ends

A procuration ends when the company revokes it, the procurator renounces it, bankruptcy proceedings are opened against the company, the company is liquidated or reorganised, the procurator dies, is declared legally incapable or of limited capacity in that field, or is declared missing, or its term expires (CK Article 2.184(1)). Note: a procuration ends when it is deregistered from the Register of Powers of Attorney (CK Article 2.184(2)). The exception applies only to liquidation, reorganisation and the procurator’s death, incapacity, limited capacity or being declared missing.

So when an employee with a procuration leaves, dismissing them is not enough. Revoke the procuration and deregister it from the Register of Powers of Attorney. Until it is deregistered, the procuration has not ended (CK Article 2.184(2)).

Route two: joint representation

If you want the opposite of adding a person, namely that the manager does not sign important documents alone, joint representation (kiekybinis atstovavimas) fits. It is a rule in the articles under which several persons act together for the company. ABĮ Article 19(7) requires that the manager always acts together with the others under such a rule. So the articles cannot set a joint-representation rule under which two people sign without the manager.

For a UAB the JAR Regulations provide this option: the manager together with a member or members of the collegial management body, or with a procurator or procurators, where joint representation is set in the articles (point 18.9.2.3 of the JAR Regulations). A UAB’s collegial management body is the management board, so without a board or a procurator the manager would have no one to act with. CK Article 2.83(2) defines joint representation more broadly, but for a UAB the JAR Regulations provide for registering only the manager together with a board member or a procurator.

Joint representation must be set in the incorporation documents, shown in the register and published (CK Article 2.83(2)). Then it has real force. Normally a transaction made by a management body in excess of its powers still binds the company, unless it is proved that the third party knew the body lacked the power, or in the circumstances could not have been unaware of it (CK Article 2.83(1)). Once joint representation is registered, that protection does not apply (CK Article 2.83(2)). The partner has to check the register, and a contract signed by the manager alone may not bind the company.

This is a strong tool, but it has a day-to-day cost. Every contract, application or bank form needs two signatures. When one signatory is on holiday, work stops. That is why it is mainly chosen by companies where several shareholders want to keep a check on each other.

Route three: an ordinary power of attorney

When an employee needs to sign only certain documents, a power of attorney is enough. The company’s power of attorney is signed by its manager (CK Article 2.140(1)). List the specific acts in it. How to draft one, when it needs a notary and how to revoke it, we explained in Who signs company documents: manager, representative or shareholders? and Company power of attorney for use abroad.

For everyday routine acts, sometimes neither a procuration nor a separate power of attorney is needed. A company may instruct its employees to perform acts that are everyday and routine in a given line of business (CK Article 2.185(1)). The procuration rules apply to such acts by analogy (CK Article 2.185(1)). For example, staff working in a shop or warehouse are presumed to be entitled to sell, issue or receive goods (CK Article 2.185(2)). When signing, such employees state their position, name and authority (CK Article 2.185(3)).

Which route to choose

A procuration fits when a person must act in all business matters on a standing basis, such as a finance or commercial director. It is registered and visible in the register.
Joint representation fits when the most important documents must be signed by two people together. It requires amending the articles.
An ordinary power of attorney fits when a person signs only certain kinds of documents, such as filings with authorities or procurement contracts.

Whichever route you choose, the manager remains the manager.

The manager’s duties do not pass to the procurator

Granting a procuration does not reduce the manager’s responsibility. The manager organises the company’s daily business and hires and dismisses staff (ABĮ Article 37(8)). The manager is responsible for organising the company’s activity, preparing the annual financial statements, providing information to shareholders and filing documents with the Register of Legal Entities (ABĮ Article 37(12)).

A member of a management body must act in good faith and reasonably, be loyal to the company and avoid conflicts of interest (CK Article 2.87(1)–(3)). One who fails to perform these duties, or performs them badly, must compensate the company for the loss caused (CK Article 2.87(7)). So there is no such thing as a “nominal” manager who is registered only on paper. All these duties fall on the person registered as manager, even if the procurator makes the daily decisions.

How to start

Send us the company’s articles of association and a recent register extract, and tell us who needs to act for the company and in which matters. We will advise whether a procuration, joint representation or a power of attorney fits, and prepare the documents.

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

More about this service: drafting legal entity documents.

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Can a UAB have two directors? Procuration and joint representation

One manager, one person who acts alone