Who becomes the MB’s manager after a UAB is converted into an MB

When a private limited company (UAB) is converted into a small partnership (mažoji bendrija, MB), neither the UAB’s manager nor the sole member automatically becomes the MB’s manager. The MB’s regulations (nuostatai) choose the management model: the MB will have a manager, or its only management body will be the members’ meeting. If the MB is to have a manager, the manager is appointed by the conversion decision, because the MB’s bodies must be elected before the MB’s regulations are registered. The MB’s manager has a civil (services) contract, not an employment contract. An MB member can also be the manager.

Two management models for an MB

The MB’s bodies are stated in its regulations (Article 12(1) of the Law on Small Partnerships of the Republic of Lithuania (MBĮ)). There are two options: only the members’ meeting, which is then also the management body, or the members’ meeting and a single-person management body, the MB’s manager (MBĮ Article 12(2)). The regulations must state the MB’s bodies and their powers and how the manager is appointed and removed, if the MB is to have a manager (MBĮ Article 5(2)).

If the only management body is the members’ meeting and there are two or more members, the MB must have a representative (MBĮ Article 21(1)). Only an MB member can be the representative (MBĮ Article 21(3)). Where there is one member, that member performs the representative’s functions, except those in points 2, 3 and 4 of MBĮ Article 21(7) (MBĮ Article 14(4)).

Who appoints the MB’s manager, and when

On the conversion of a UAB, the general meeting’s decision must approve the MB’s regulations and elect the bodies elected by the participants’ meeting (Article 72(6) of the Law on Companies of the Republic of Lithuania (ABĮ)). The MB’s manager is appointed by the MB’s members’ meeting (MBĮ Article 22(2)). So if the MB is to have a manager, the manager is appointed by the same conversion decision. The MB’s regulations are registered only after the management bodies of the entity in its new form are elected (ABĮ Article 72(25)).

The UAB’s manager does not become the MB’s manager by default. A UAB’s manager is elected by the management board, the supervisory board or the general meeting of shareholders (ABĮ Article 37(3)), while an MB’s manager is appointed by the MB’s members’ meeting (MBĮ Article 22(2)). If you want the same person to run the MB, write it clearly into the decision.

Does the sole member automatically become the manager

No. Where an MB has one member, no meeting is convened, and that member’s written decisions are equivalent to decisions of the members’ meeting (MBĮ Article 15(3)). But the members’ meeting and the manager are different bodies of the MB (MBĮ Article 12(2)). In a UAB case the Supreme Court of Lithuania held that the shareholders’ exclusive right to elect the manager does not mean that a sole shareholder acquires the manager’s rights (ruling of 10 March 2021, civil case No. e3K-3-41-421/2021). The ruling concerns a UAB, so it applies to an MB only by analogy; the MBĮ likewise treats the members’ meeting and the manager as separate bodies (MBĮ Article 12(2)).

So the sole member has to choose one of two routes:

• provide for a manager in the MB’s regulations and appoint themselves or another person. An MB member can be the MB’s manager (MBĮ Article 22(1));
• provide in the MB’s regulations that the only management body is the members’ meeting. The sole member then performs the representative’s functions personally, except those in points 2, 3 and 4 of MBĮ Article 21(7) (MBĮ Article 14(4)).

How a manager differs from a representative

The MB’s manager acts in the MB’s name and has the right to conclude transactions alone (MBĮ Article 22(7)). The regulations can specify which decisions and transactions need the approval of the members’ meeting (MBĮ Article 22(9)).

Where the MB is run only by the members’ meeting, the meeting decides on concluding each transaction (MBĮ Article 14(1)). The representative represents the MB in its dealings with others and concludes the transactions the members’ meeting has decided on (MBĮ Article 21(7)). So the model without a manager suits an MB whose members want to decide every transaction themselves, and the model with a manager suits one that wants to entrust day-to-day decisions to one person.

What contract is signed with the MB’s manager

The MB’s manager must be a natural person (MBĮ Article 22(1)). A civil (services) contract is concluded with the MB’s manager, and the members’ meeting decides on the appointment and the terms of the contract (MBĮ Article 22(2)). A person authorised by the members’ meeting signs the contract on the MB’s behalf, and the manager takes office on the day after the contract is signed unless the contract provides otherwise (MBĮ Article 22(3)).

An MB member may conclude civil contracts with the MB, except contracts bearing the features of an employment relationship (MBĮ Article 7(4)). A UAB’s manager has an employment contract (ABĮ Article 37(4)). So on conversion you need to decide in advance how the former UAB manager’s employment contract will end and under what civil contract the MB’s manager will work.

Registration

When a legal entity is registered after conversion, the documents are filed with a notary (point 48 of the Regulations of the Register of Legal Entities (JAR nuostatai)). The registrar receives an application to register the changes and the full text of the amended founding document (point 168 of the JAR nuostatai). The Register of Legal Entities shows the members of the entity’s management bodies (Article 2.66(1) of the Civil Code of the Republic of Lithuania (CK)). Where the management body is the members’ meeting and there are two or more members, the register also shows the MB’s representative (MBĮ Article 6(2)).

The MB’s manager, having taken office, must notify the registrar of their data and file the documents on their appointment no later than within 5 days (MBĮ Article 22(5)). Data on the MB’s members are filed with the Information System of Participants of Legal Entities (JADIS) by the MB’s manager or, where there is no manager, by the representative or the sole member (MBĮ Article 6¹(3)).

More on conversion

• Converting an MB into a UAB: decision, capital, creditors, timing
• Setting up a small partnership (MB) in Lithuania
• Changing the CEO of a UAB

How to start

Send us the UAB’s articles of association, the list of shareholders and the current manager’s contract, and tell us who will run the MB and under which model. We will prepare the decision, the MB’s regulations with the chosen management model and the MB manager’s civil contract.

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

More about this service: Changing the legal form of a legal entity.