Does the head of a UAB need an employment contract, and who can be one?

Yes, one is required. Article 37(4) of the Law on Companies of the Republic of Lithuania (ABĮ) states that an employment contract is concluded with the head of the company. Only a natural person can be the head, so a company or any other legal entity cannot be the head of a UAB. Board members, by contrast, do not get employment contracts. The law calls the post “head of the company” (bendrovės vadovas), and you can choose the actual title yourself: director, general director or president. When the shareholders (where there is neither a board nor a supervisory board) remove the head, the employment contract ends under Article 104(1) of the Labour Code.

Whether the head must be a Lithuanian citizen, whether a UAB can have two directors, what the head’s duties are, whether shareholders can remove the head at any time and who sets the head’s pay are already answered in our company law FAQ (in Lithuanian). The severance payment due to a removed head is covered on our dismissal from employment service page. This article deals with the other questions that arise when setting up a company or changing how it is managed.

What to call the post: director, general director or president

The Law on Companies uses a single concept. The head of the company is its single-person management body (ABĮ Article 37(1)). The words “director” and “president” do not appear in the Law.

So you can choose the title. The articles of association may contain other provisions as long as they do not conflict with the law (ABĮ Article 4(6)).

The title changes nothing in law. Whatever you call it, it is the same body: in dealings with other persons, the head of the company acts alone on the company’s behalf (ABĮ Article 19(6)). Our advice is simple. Use the same title in the articles of association, the employment contract, powers of attorney and the details on your contracts. Then no bank or business partner has to ask whether the “president” and the head shown in the register are the same person.

Can a legal entity be the head?

No. The head of the company must be a natural person. A person who is barred by law from holding such a post cannot be the head (ABĮ Article 37(2)).

The same principle applies to every legal entity. Article 2.81(4) of the Civil Code of the Republic of Lithuania (CK) provides that only natural persons can be members of a legal entity’s management bodies, while members of other bodies can be natural or legal persons. The board is also a management body, so only a natural person can be elected to the board (ABĮ Article 33(6)).

This matters when a foreign company sets up a UAB. The parent company can be the founder and shareholder, because the founders of a company may be natural or legal persons (ABĮ Article 6(1)). But a specific individual must be appointed as head, for example the parent company’s director or an employee. If someone else also needs to act for the company, that person is given a commercial power of attorney (prokūra). The rights of a holder of a prokūra are described in our FAQ (in Lithuanian).

When the sole shareholder and the head are the same person

This is allowed. The law sets two requirements for the head: being a natural person and not being barred from the post (ABĮ Article 37(2)). Being a shareholder does not stand in the way.

Must the documents state separately that the shareholder and the director are the same person? No. What matters is that each document is signed in the capacity in which it is made:

• The decision to elect the head is taken as a shareholder decision. If the company has neither a board nor a supervisory board, the head is elected by the general meeting of shareholders (ABĮ Article 37(3)). Where there is only one shareholder, no minutes need to be drawn up (ABĮ Article 29(1)); the sole shareholder’s written decisions have the same effect as decisions of the general meeting (ABĮ Article 29(7)).
• The employment contract is signed on the company’s behalf by the person authorised by the general meeting, where the company has no board and no supervisory board (ABĮ Article 37(4)). The Labour Code says the same: the contract is signed on the legal entity’s behalf by a person authorised by the competent management body (Article 102 of the Labour Code of the Republic of Lithuania (DK)). So state in the shareholder decision who signs the contract for the company.

Why this matters: the company and its shareholder are different persons. A legal entity is not liable for the obligations of its member, and the member is not liable for the legal entity’s obligations, except where the law or the founding documents provide otherwise (CK Article 2.50(2)). When a person signs as head, it is the company that is bound, not that person.

Can the head have a civil-law contract instead of an employment contract?

Not the head of a UAB. ABĮ Article 37(4) says it directly: an employment contract is concluded with the head of the company. The ABĮ provides no exception.

Article 101(1) of the Labour Code (DK) phrases the duty differently. It speaks of a head who works for remuneration, and makes an exception only for the heads of small partnerships (mažosios bendrijos) and sole proprietorships (individualiosios įmonės). A UAB is not among these exceptions. The DK ties the duty to paid work, so it might seem that a head who works unpaid needs no employment contract. ABĮ Article 37(4) sets no such condition, so in our view an employment contract must always be concluded with the head of a UAB. The Supreme Administrative Court of Lithuania reached the same conclusion in 2025: an employment contract must be concluded with the head of a legal person and the legislation provides no exception, so a company was rightly fined even though its head officially received no pay (the court noted that the head’s work was in substance remunerated, as the head was the company’s ultimate beneficial owner; case No. A-477-552/2025, paras 26–28).

Suppose the head lives abroad, does little work for the company and only signs documents that need the head’s signature. The head receives no pay and has no employment contract, because they “do not really work”. This is risky: the ABĮ requires an employment contract without exception, so in an inspection or a dispute the company would have to explain why there is none. The way out is not to drop the contract but to fit it to the real workload. The head’s employment contract can be concluded on a part-time basis (DK Article 101(1)). The head organises their own working time, without breaching the rules on maximum working time and minimum rest (DK Article 103(1)). The terms of the contract, including pay, must meet the requirements of labour law. How soon Sodra must be notified of the head’s hiring is covered in our labour law FAQ.

An employment contract does not mean the head is liable only as an employee. For damage caused as an employee, the head is liable under labour law and the contract (DK Article 103(2)). For damage caused by failing to perform civil-law rights and duties, the head is liable under civil law (DK Article 103(3)).

Board members: no employment contract

No employment contracts are concluded with members of a legal entity’s collegial management or supervisory bodies (DK Article 101(2)). There is one exception: where a board member also performs other work functions in the company for pay. An employment contract is then concluded for those functions, and the person may combine them with the board duties.

Board members may be paid bonuses from profit (tantjemos) for their work on the board, in the manner set by the Law (ABĮ Article 33(12)).

What else to know before forming a board:

• A UAB does not have to have a board. A company may form a board (ABĮ Article 19(2)). Where there is no board, its functions are performed by the head (ABĮ Article 19(4)).
• It must be provided for in the articles of association. The articles set out the company’s bodies, their powers and how their members are elected and removed (ABĮ Article 4(2), point 8). The articles set the number of board members, but there must be at least 3 (ABĮ Article 33(2)). If the board’s powers are the same as those set in the Law, they need not be written out in the articles; it is enough to say so (ABĮ Article 4(7)).
• Members start after the articles are registered. Where the articles are amended to form a board, the newly elected members may start only from the day the amended articles are registered (ABĮ Article 33(9)).
• The head remains the head. A company always has a single-person management body, the head (ABĮ Article 19(1)). As a general rule the head acts alone on the company’s behalf (ABĮ Article 19(6)), so board members do not sign contracts for the company unless they hold a power of attorney or the articles provide for joint representation (ABĮ Article 19(7)). If the articles provide for joint representation, board members sign together with the head, and the head must always be one of the signatories (ABĮ Article 19(7)). Some larger transactions can be concluded by the head only with a board decision (ABĮ Article 37(10)).

On what ground the head’s employment contract ends after removal

The ground for ending the contract is not the head’s own request to leave. The employment contract with the head of a legal entity ends when the head is removed in the manner set by law or the founding documents (Article 104(1) of the Labour Code, DK Article 104(1)). The Law on Companies says the same: once the body that elected the head decides to remove them, the employment contract is terminated (ABĮ Article 37(4)). So the ground is DK Article 104(1), and the document is the decision of the body that elected the head (the shareholders, the board or the supervisory board).

The other option is to agree. Either party may propose ending the contract by agreement of the parties (DK Article 54(1)). The proposal is made in writing and states when the employment ends, the amount of compensation and how unused leave will be granted (DK Article 54(2)). The severance payment on removal of the head is covered on our dismissal service page.

The practical order when changing the head:

1. The body that elects the head (the board; if there is none, the supervisory board or the general meeting, ABĮ Article 37(3)) decides to remove the old head and elect a new one.
2. The new head takes up the post from the day of election, unless the contract with them states otherwise (ABĮ Article 37(3)).
3. The old head’s employment contract is terminated by the decision of the body that elected the head (ABĮ Article 37(4)), so that decision should state who will formalise the end of employment for the company and notify Sodra.
4. The person authorised by the body that elected the head notifies the registrar of the removal and election no later than within 5 days (ABĮ Article 37(6)).

We also checked the future versions already published. Articles 101–104 of the Labour Code do not change in the versions in force from 1 November 2026 and from 1 January 2027. In the version of the Law on Companies in force from 1 November 2026, Article 37 changes only in wording: “the registrar of legal entities” (juridinių asmenų registro tvarkytojas) becomes “the manager of the Register of Legal Entities data” (juridinių asmenų registro duomenų tvarkytojas). The rules stay the same.

More on setting up a company

• Establishment of legal entities: service page
• Centre of Registers extract with no signature: valid, and what it says
• Documents the register rejects, and when you need a new extract
• Who signs company documents: manager, representative or shareholders?
• Does an association need a board, and can it have members without a vote?
• UAB, MB, IĮ or VšĮ: which legal form to choose in Lithuania
• UAB manager’s pay and removal: who sets it, is it public, what severance

How to start

Send us the company’s articles of association and tell us what you want to change: elect a head, form a board or change the title of the post. We will prepare the shareholder decision, the amendments to the articles and the head’s employment contract.

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

More about this service: drafting legal entity documents.