Lithuania continues to improve its business environment, making it easier for start-ups to attract investment


2022 06 22


The Government has approved amendments to the Law on Joint-Stock Companies drafted by the Ministry of the Economy and Innovation, which will substantially improve the conditions for growing companies to attract investment, encourage the use of digital tools in decision-making and ensure that shareholders, especially small shareholders, can exercise their rights.  

"The changes will make it easier for businesses to grow, expand, pay taxes and create new jobs. One of the most important proposals in the draft law is that businesses will finally be able to issue preference shares more easily than they have been able to do so until now," said Aušrinė Armonaitė, Minister of the Economy and Innovation. 

The proposal removes the strict regulation of the limit of preference shares in the share capital and provides that non-voting preference shares can represent no more than 1/2 of the share capital. Currently, the maximum proportion of preference shares in the share capital is 1/3. This liberalisation of share classes is particularly relevant for young, high value-added businesses. 

"More flexible share class regulation is very welcome in the Lithuanian venture capital sector. There are success stories in the public domain of start-ups attracting large VC investments in A, B, C and subsequent rounds. This results in different classes of shares with different investor rights. Until now, preference shares have been regulated in Lithuania in such a way that it has been virtually impossible to adapt them to venture capital, which has been a huge obstacle for the Lithuanian investor ecosystem, which executes hundreds of venture capital deals every year. The planned changes will bring Lithuania closer to the most advanced countries in the private equity market and will help to attract more investments to Lithuanian startups and keep them in our country," said Gerda Sakalauskaitė, Head of the Lithuanian Venture Capital and Private Equity Association.  

According to Inga Langaitė, Head of Unicorns Lithuania, an association of start-ups, the current law on joint stock companies does not correspond to today's business needs and discourages foreign investors, so changes are necessary.  

"We have encountered situations where venture capital funds instruct a start-up seeking investment to set up a management company in the West due to the lack of maturity in the Law on Joint Stock Companies. Analysts estimate that the Lithuanian startup sector could lose between EUR 100 and 300 million in investments annually due to the unclear nature of our joint stock company law," says I. Langaitė. 

The amendments to the Law define in more detail the conditions for organizing remote General Meetings of Shareholders (GMs) by electronic means. It is proposed to allow remote voting when requested by shareholders holding at least 1/10 of the total number of votes in the EGM. It is also proposed that the company's articles of association, by unanimous decision of the shareholders, may provide that EGMs are to be organized only by electronic means. 

Statistics show that as many as 76.5% of the private limited liability companies (LLCs) set up in the last 3 years have opted for a minimum authorized capital, and it is therefore proposed to provide for a lower authorised capital for the establishment of LLCs in order to facilitate the start-up of a business. If the proposed amendments are adopted, the minimum authorised capital of a limited liability company would be EUR 1 000 instead of the current requirement of EUR 2 500.  

In order to strengthen the protection of the rights of minority shareholders, it is proposed to introduce a procedure for the redemption of their shares, which will allow to safeguard their interests when it is not appropriate to remain a shareholder, as well as when a shareholder with an absolute majority demands redemption. Until now, only shareholders of listed companies have had this option. 

The amendments to the Companies Act will enter into force after the adoption of the law by the Seimas.