UAB manager’s pay and removal: who sets it, is it public, what severance

A UAB manager’s pay is set by the same body that elects the manager: the management board, or if there is none, the supervisory board, or if there is none of those either, the general meeting of shareholders. The manager does not set his or her own pay. The salary reaches the public Register of Legal Entities only if it is written into a document filed with the register, so it is worth recording it in a separate decision. A removed manager who worked under an employment contract lasting more than two years receives severance of one month’s average pay, unless the removal was caused by the manager’s own culpable acts. Unused holiday is paid out as compensation, but only for leave to which the right has not yet been lost (DK Article 127(5) and (6)).

Who sets the manager’s pay

Article 37(3) of the Law on Companies of the Republic of Lithuania (ABĮ) says the company’s management board elects, removes and dismisses the manager, sets the manager’s pay, approves the job description, rewards the manager and imposes penalties. If there is no board, the supervisory board does this, and if there is no supervisory board either, the general meeting of shareholders. The board’s powers repeat the rule: the board sets the manager’s pay and other terms of the employment contract (ABĮ Article 34(2)).

Many people assume shareholders always approve the manager’s salary. That is true only in a company with neither a management board nor a supervisory board. If the company has a board, the decision is the board’s.

The manager has an employment contract (ABĮ Article 37(4)). Article 101(1) of the Labour Code (DK) links the duty to sign an employment contract to a manager who works for pay. How the two rules fit together when the manager is unpaid, we discussed in Does the head of a UAB need an employment contract, and who can be one?.

Bonuses, penalties and the job description

The same body does more than set the salary. It approves the manager’s job description, rewards the manager and imposes penalties (ABĮ Article 37(3)). So an annual bonus for the manager is not the manager’s order to himself but a decision of the board or the shareholders. The manager follows the law, the articles, the decisions of the company’s bodies and the job description (ABĮ Article 37(7)), so the job description should say clearly what a bonus is for and how it is awarded.

Shareholders sometimes ask whether a UAB must have a remuneration policy. The ABĮ imposes that duty on a public company whose shares are admitted to trading on a regulated market (ABĮ Article 37³(1)). The general meeting approves a remuneration policy only in such companies too (ABĮ Article 20(1)(6)). A UAB’s shares may not be distributed or traded publicly, unless the law provides otherwise (ABĮ Article 2(4)). So a UAB does not normally have to prepare a remuneration policy.

The manager cannot sign his own contract for the company

The contract with the manager is signed for the company by the chair of the management board or another board member it authorises. If there is no board, the chair of the supervisory board or another member it authorises signs, and if there is no supervisory board either, a person authorised by the general meeting (ABĮ Article 37(4)). If the manager is also chair of the board, another board member authorised by the board signs.

A member of a management body must avoid situations where his personal interests conflict or may conflict with the company’s interests (Article 2.87(3) of the Civil Code (CK)). A decision on the manager’s own pay can be such a situation. So when the manager’s pay changes, the decision should also say who will sign the amendment to the employment contract for the company. A representative may not conclude transactions in the name of the represented person with himself, and such transactions may be declared invalid at the represented person’s request (CK Article 2.134(1)). Relying, among other grounds, on this rule, the Supreme Court of Lithuania held that a company’s manager does not represent the employer when an employment contract is concluded with the manager himself, when his working conditions are changed, when his pay is set or when his leave is granted (Supreme Court of Lithuania, ruling of 19 October 2023 in civil case No. e3K-3-254-684/2023). So even where the manager is also the sole shareholder, the safest course is for him to adopt a shareholder decision that authorises another person to sign the contract for the company.

Does the manager’s salary become public

The data of the Register of Legal Entities, the documents kept in it and any other information filed with it are public (CK Article 2.71(1)). Anyone is entitled, for a fee, to obtain copies of documents kept in the register (CK Article 2.72(3)).

When the manager changes, a decision is filed with the register. A UAB files the document confirming the decision whenever register data change (point 139.2 of the Regulations of the Register of Legal Entities (JAR Regulations)). If the decision electing the manager also states the salary, the amount ends up in the public register. Anyone can order a copy of that document.

There are two ways to avoid this.

1. A separate decision. One decision elects the manager, another sets the pay and the terms of the employment contract. Only the first is filed with the register. We suggest this split as drafting practice: the law does not require it, but it is simple and reliable.
2. An extract of the minutes. The register can be given an extract of the minutes of the meeting or other body. The extract contains all the information in the minutes except decisions that do not have to be filed with the register (point 69 of the JAR Regulations). The pay decision is not needed by the register, so the extract can leave it out.

What does this look like in practice? Say a sole shareholder elects a new manager. In the first decision the shareholder removes the previous manager, elects the new one and authorises a person to file the documents with the register. In the second decision the shareholder sets the new manager’s salary and other contract terms and names who will sign the contract for the company. Only the first document goes to the register; the second stays in the company’s files with the employment contract.

In addition, documents filed with the register must not contain personal data whose filing is not required by the Civil Code or other laws (CK Article 2.66(7)). The manager’s salary is not among the register data listed in CK Article 2.66(1). So the salary should not appear in documents filed with the register at all.

Note: the manager’s salary is not a secret from the shareholders. The manager is responsible for providing information to shareholders (ABĮ Article 37(12)). The point is only to keep the amount out of the public register.

Who removes the manager, and how

The manager is removed by the same body that elects the manager (ABĮ Article 37(3)). The general meeting elects the manager only where there is neither a supervisory board nor a management board (ABĮ Article 20(1)(3)). It can remove a manager it elected itself (ABĮ Article 20(1)(4)). If the company has a management board, the board removes the manager, not the shareholders.

Once the body decides to remove the manager, the employment contract is terminated (ABĮ Article 37(4)). The Labour Code treats this as a separate ground for the end of an employment contract: the contract with a legal person’s manager ends when the manager is removed in the way set by law or the incorporation documents (DK Article 104(1)). ABĮ Article 37(3) does not tie removal to the end of a term of office or to any particular reason. The Supreme Court of Lithuania has also held that the right to remove a manager is not tied to culpable or unlawful acts, and that removal may follow from other reasons, such as poor results (Supreme Court of Lithuania, ruling of 23 November 2018 in civil case No. e3K-3-477-248/2018).

A person authorised by the body that elected the manager must notify the Register of Legal Entities of the removal and the new election within 5 days (ABĮ Article 37(6)). How to do this, and from when the new manager can sign, we explained in Changing the CEO of a UAB. That article also covers how a manager resigns when nobody decides to remove him.

What severance a removed manager gets

The rule is DK Article 104(2). If the employment with the manager lasted more than two years and the manager is removed in the manner set by law or the founding documents (DK Article 104(1)), the manager receives severance equal to one month of his average pay. It is not paid if the removal was caused by the manager’s own culpable acts.

Three practical points follow:

• Length of employment matters. If the manager worked for two years or less, DK Article 104(2) provides no severance. A contract term may always improve the employee’s position compared with the law (DK Article 33(4)), so the parties may agree on terms more favourable to the manager. Such a term is set by the body that sets the manager’s pay (ABĮ Article 37(3); where there is a board, it also sets the manager’s other contract terms, ABĮ Article 34(2)) and signed for the company by the person named in ABĮ Article 37(4). The Supreme Court of Lithuania upheld a ruling that declared invalid a version of a manager’s employment contract providing for severance of 12 months’ average pay, because it had been signed for the company by a person without authority (Supreme Court of Lithuania, ruling of 27 September 2023 in civil case No. e3K-3-236-943/2023).
• The amount is fixed. DK Article 104(2) provides one month’s average pay, however long beyond two years the employment lasted.
• The company proves culpable acts. If the body with the right of removal removes the manager for fault and does not pay severance, it must prove the manager’s culpable acts. The standard is not as strict as for a gross breach of work duties: culpable acts are assessed first of all by how the manager performed the duties set in CK Article 2.87 (Supreme Court of Lithuania, ruling of 23 November 2018 in civil case No. e3K-3-477-248/2018). The employer may rely on culpable acts even if the removal decision did not mention them, when the dispute arises from the manager’s claim for severance (Supreme Court of Lithuania, ruling of 20 April 2023 in civil case No. e3K-3-129-701/2023; the case concerned the manager of a public institution). Still, it is worth gathering the supporting documents in advance.

Where is a dispute about payments heard? ABĮ Article 37(4) says that employment disputes between a company’s manager and the company are heard in court. However, under the Labour Code only disputes about a refusal to conclude an employment contract, the lawfulness of its termination and the manager’s failure to perform, or improper performance of, his civil-law rights and duties go directly to court (DK Article 105(2)); other employment disputes with the manager follow the procedure for employment disputes over rights (DK Article 105(1)). Interpreting DK Article 105, the Supreme Court of Lithuania held that such a dispute is first heard by the labour disputes commission, and treated a former manager’s claim for severance and leave compensation in that way (Supreme Court of Lithuania, ruling of 20 April 2023 in civil case No. e3K-3-129-701/2023). That case concerned the manager of a public institution. For a UAB manager, ABĮ Article 37(4) names the court, and we found no Supreme Court ruling on a UAB manager specifically. So the safest course is to take a payment dispute to the labour disputes commission first. This must be done within three months from when you learned or should have learned of the breach of your rights (DK Article 220(1)). A dispute over whether the removal itself was lawful does not go to the commission: it goes straight to court (DK Article 105(2)).

The rules on the consequences of the end of a fixed-term employment contract do not apply to the manager’s contract (DK Article 104(3)). So even if the manager had a fixed-term contract, the consequences of removal follow DK Article 104.

Removal is not the only route. The parties can agree to end the contract and discuss compensation and payment terms. How to do this and which deadlines apply, see our dismissal from employment service page.

What changes from 1 November 2026

An employment contract that sets monthly pay of at least twice the national average monthly gross wage last published by the State Data Agency may depart from mandatory labour law rules, if a balance of the employer’s and employee’s interests is achieved (DK Article 33(4)). Until 31 October 2026 no departure is allowed from the rules on maximum working time and minimum rest time, concluding and ending an employment contract, minimum wage, occupational safety and health, gender equality and non-discrimination on other grounds. In the edition in force from 1 November 2026 the words “and ending” (ir pasibaigimu) and “minimum wage” are removed from that list, and a term is set aside only where it both conflicts with mandatory rules and fails to achieve a balance of interests.

The law does not expressly provide whether this allows a highly paid manager’s contract to agree something different on severance under DK Article 104(2). If you want such a term, it should be assessed case by case and the balance of interests clearly justified. Such a term is approved by the body that sets the manager’s pay (ABĮ Article 37(3)), not by the manager.

What happens to unused holiday

Annual leave may not be replaced by a cash payment, except when employment ends. Then the employee is paid compensation for unused leave, subject to the DK Article 127(5) limits described below (DK Article 127(6)). This rule applies to a removed manager too, where there was an employment contract.

The manager does not grant himself leave. The Supreme Court of Lithuania held that leave is granted on the employee’s request and by the employer’s decision, and that a company’s manager does not decide on his own leave. If the company cannot prove the manager’s request and a decision granting the leave, the leave is treated as unused and compensation may be awarded for it (Supreme Court of Lithuania, ruling of 19 October 2023 in civil case No. e3K-3-254-684/2023). How many years back it reaches depends on DK Article 127(5) (see below). So record the manager’s leave in writing, as for any other employee.

The right to leave, or to compensation for it, is lost three years after the end of the calendar year in which the right to the full leave was acquired, unless the employee could not in fact use it (DK Article 127(5)). So compensation is not normally paid for leave more than three years past the end of the year it was earned, unless the manager in fact could not use it. That depends on the facts. From 1 November 2026 a collective agreement above employer level may shorten this period to two years (DK Article 127(5)).

When working out what the company will have to pay on removing the manager, add three parts: pay up to the day of removal, compensation for unused leave and, if employment lasted more than two years, the DK Article 104(2) severance.

Drafting tips

• Record the manager’s election and pay in separate decisions. File only the election decision with the register.
• In the pay decision, name who will sign the employment contract or its amendment for the company.
• In the removal decision, name who will formalise the end of employment and file the documents with the register within 5 days.
• Before removing the manager, work out how long the employment lasted and how much leave is unused.
• Record the manager’s leave on his request and by a decision of the body that elects the manager or of a person it authorises.
• If you think severance is not payable because of culpable acts, gather the supporting documents in advance.

Related articles

• Does the head of a UAB need an employment contract, and who can be one?
• Changing the CEO of a UAB
• Who signs company documents: manager, representative or shareholders?
• UAB management board: members and term
• Dismissal from employment: service page

How to start

Send us the company’s articles of association and the manager’s employment contract, and tell us what you want to do: set or change the manager’s pay, or remove the manager. We will draft the decisions so that the salary stays out of the public register, and work out what payments a removed manager is owed.

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

More about this service: drafting legal entity documents.