Setting up an association or charity and support fund in Lithuania

An association (asociacija) needs at least three founders. They sign a founding agreement, prepare draft articles of association and call a founding meeting, which adopts the articles and forms at least one management body. A charity and support fund (labdaros ir paramos fondas) can be set up by a single person, who then draws up a founding act instead of an agreement. The fund’s name must contain the words “labdaros” (charity) or “paramos” (support), or “labdaros ir paramos”. Both are treated as established from their registration in the Register of Legal Entities, and documents that follow the model forms can be filed without a notary.

How the aims of an association, a fund and a public institution differ

The aim of an association is to coordinate its members’ activities, to represent and defend their interests, or to serve other public interests (Article 2(1) of the Law on Associations of the Republic of Lithuania (AĮ)). The main aim of a charity and support fund is to provide charity and support in fields useful to the public (Article 2(1) of the Law on Charity and Support Funds of the Republic of Lithuania (LPFĮ)). A public institution is set up to serve the public interest by providing public services and/or carrying out other activities useful to the public (Article 2 of the Law on Public Institutions of the Republic of Lithuania (VšĮĮ)). So an association first of all brings its members together, a fund distributes support, and a public institution provides services.

Neither an association nor a fund may distribute profit to its members or participants. An association may not pay a founder or member anything out of its surplus (profit) (AĮ Article 16(2)(2)), and a fund may not make such payments to a participant (LPFĮ Article 18(2)(3)). How the income of an association or a fund is taxed is a separate tax question that this article does not cover.

The association: founders and members

The founders of an association can be legally capable natural persons aged 18 or over and/or legal persons who have signed the founding agreement. The minimum number of founders is three (AĮ Article 4(1)). All the founders sign the founding agreement (AĮ Article 4(2)), and they become members of the association from its registration (AĮ Article 4(3)).

The three-member floor applies later too: the minimum number of members of an association is three (AĮ Article 13(1)). Associations whose activities relate to the needs of children and young people may also have members under 18 (AĮ Article 13(2)).

Founding agreement, founding meeting and articles

The founding agreement must state the founders, the name of the association, its registered office and the date of the agreement (AĮ Article 5(1)). It may also set the founders’ property obligations, how founding costs are reimbursed, who represents the association being set up, and how the founding meeting works (AĮ Article 5(2)).

Before registration, the founders prepare draft articles and call a founding meeting. The meeting adopts the articles and forms at least one management body (AĮ Article 4(4)). The association being set up is represented by the person named in the founding agreement or authorised by the founding meeting (AĮ Article 4(5)). That person must sign the articles within three days of the founding meeting at the latest (AĮ Article 12(4)). However, AĮ Article 12(5) provides that the articles of an association being set up are signed by the single-person management body appointed (elected) by the founding meeting. To meet both rules, appoint the same person to both roles. The signatures of the natural persons who sign the articles are not certified by a notary (AĮ Article 12(7)).

The articles must contain the matters listed in AĮ Article 12(2): the name, legal form, aims, members’ rights and duties, how members join, leave and are expelled, the powers of the bodies and how they are called, how the articles are amended, how funds and income are used, and others. The aims must be described clearly and in full, naming the fields and types of activity (AĮ Article 12(2)(4); Article 2.47(2) of the Civil Code of the Republic of Lithuania (CK)). An association may carry on economic and commercial activity that does not conflict with its articles and aims and is needed to achieve those aims (AĮ Article 11(2)).

Governance of an association and membership fees

An association must have a general meeting of members, or another body holding its rights, and a management body, single-person and/or collegial (AĮ Article 7(2) and (5)). If another body (a conference, congress or similar) holds only part of the meeting’s rights, the general meeting of members is still mandatory (AĮ Article 7(4)). Whether a board is required and whether there can be members without a vote is covered in Does an association need a board, and can it have members without a vote?.

At the general meeting of members, each member has one vote (AĮ Article 8(4)). Amending the articles and decisions on conversion or termination need at least 2/3 of the votes of the members attending (AĮ Article 8(7)).

The amount of entry contributions and membership fees, and how they are paid, are set by the general meeting of members (AĮ Article 8(1)(4)). A member may leave at any time, but entry contributions, membership fees and any other funds and assets transferred into the association’s ownership are not returned (AĮ Article 13(4)(4)). In 2018 the Supreme Court of Lithuania reinstated, in one case, a first-instance judgment ordering a member that had filed to leave in 2016 to pay the membership fees it had left unpaid, and said that the duty to pay fees arises from the membership relationship (case No. e3K-3-90-915/2018). That is the outcome of one case, which also turned on that association’s articles, so it sets no general rule on a former member’s arrears and the point is not settled.

The charity and support fund: founders, aims and governance

The founders of a fund can be natural and/or legal persons who have signed the founding agreement and, before registration, undertaken to give the fund contributions in money or property. Where there is a single founder, that founder draws up a founding act (LPFĮ Article 4(1)). Persons who may not be donors under the Law on Charity and Support may not be founders (LPFĮ Article 4(2)). From registration, the founders become participants (dalininkai) of the fund (LPFĮ Article 4(4)).

The founding agreement must state the founders, the name and registered office, the founders’ property and non-property obligations, the aims and the date of the agreement (LPFĮ Article 5(1)). As with an association, the founding meeting adopts the articles and forms at least one management body (LPFĮ Article 4(5)). The content of the articles is set by LPFĮ Article 14(2), and the articles can be based on the model articles (LPFĮ Article 14(3)).

A fund must have a general meeting of participants and a management body (LPFĮ Article 7(1)). Each participant has one vote, unless the articles link votes to the size of the contribution (LPFĮ Article 8(4)). A participant may leave at any time, but their contributions are not returned (LPFĮ Article 15(1)(3)). Under the procedure set by the Government, no more than 20 per cent of the fund’s income for a year may be used for administrative costs in that year (LPFĮ Article 18(6)).

A fund may manage an endowment (neliečiamasis kapitalas), that is, funds kept separate from its other assets, with the investment income used for the fund’s aims (LPFĮ Article 2(2)). If the fund will manage one, the founding meeting’s decision to start managing the endowment is also filed with the register (point 83 of the Regulations of the Register of Legal Entities (JAR nuostatai)).

Where a fund is a non-governmental organisation, data on its participants are filed with the manager of the Information System of Legal Entities’ Participants (JADIS) within 5 working days of registration at the latest (LPFĮ Article 6¹(1) and (4)). Associations are not among the legal entities whose participants’ data JADIS collects (JADIS Regulations, point 5.1). JADIS does, however, collect beneficial-owner data on legal entities of all legal forms (JADIS Regulations, point 5.2). How that works is covered in Beneficial owners in JADIS: who files the data and how to get an extract.

Name requirements

A fund’s name must contain the words “labdaros” or “paramos”, or “labdaros ir paramos” (LPFĮ Article 3(1)). An association’s name may contain the words “asociacija”, “visuomeninė organizacija”, “susivienijimas”, “konfederacija”, “sąjunga”, “draugija” or others (AĮ Article 2(2)). In both cases the name must follow the norms of standard Lithuanian and may not be just a common word for the type of activity or a place name (CK Article 2.40(2)). The short name of the State, “Lietuva”, may be used only if at least one of the conditions in point 105 of the JAR nuostatai is met.

The registered office of an association and of a fund must be in the Republic of Lithuania (AĮ Article 2(3); LPFĮ Article 3(2)).

Registration

An association can be registered once the founding agreement has been signed, the founding meeting has been called, the articles have been adopted, at least one management body has been formed and the other obligations in the founding agreement have been met (AĮ Article 6(2)). The same rule applies to a fund (LPFĮ Article 6(2)). The register receives an application, the founding agreement or founding act, and the founding document (JAR nuostatai, point 82). The founding documents lapse if they are not filed with the register within six months of the date they were made, unless other laws set a different deadline (CK Article 2.46(5)).

The general rule is that when a legal entity is set up, the documents go to a notary (JAR nuostatai, point 45.1). The notary certifies the documents confirming that the data are accurate and that the founding documents comply with the law (CK Article 2.64(2)(4)). Without a notary, the documents can be filed electronically and directly with the Centre of Registers (Registrų centras). For that, all the conditions in point 47 of the JAR nuostatai must be met:

• the founding transaction and the articles follow the model forms;
• the name will not use the short name of the State, “Lietuva”;
• the fields and types of activity are chosen from the Classification of Economic Activities;
• the fund does not manage an endowment.

Once it has the documents and confirmation that the registration charge has been paid, the registrar checks them within one working day at the latest where they were filed directly and electronically, and otherwise within three working days (JAR nuostatai, point 128; CK Article 2.64(3)). An association and a fund are treated as established from registration (AĮ Article 6(4); LPFĮ Article 6(4)).

More on setting up a company

• Establishment of legal entities: service page
• Branch, representative office or subsidiary: starting out in Lithuania
• Converting an MB into a UAB: decision, capital, creditors, timing
• Reducing a UAB’s share capital in Lithuania: purposes, creditors, deadlines
• Non-cash contributions to a UAB’s capital: assets, valuation and loans
• Amending UAB articles in Lithuania: votes, notary and registration

How to start

Send us the list of founders with their details, the planned name, registered office, aims and management body. For a fund, also give each founder’s contribution and say whether the fund will manage an endowment.

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

More about this service: Establishment of legal entities.