Akcinė Bendrovė (AB) stands as one of Lithuania’s most significant business structures for large ventures. Known as joint-stock companies, these entities provide a formal framework for raising capital through shareholding while offering limited liability to shareholders. This guide will walk you through the essentials of ABs, including their types, legal requirements, governance, and how they differ from the more common Uždaroji Akcinė Bendrovė (UAB), or private limited companies.
Understanding Akcinė Bendrovė and Its Role in Lithuania
An Akcinė Bendrovė (AB) is governed by the Lithuanian Civil Code and the Law on Companies. It requires a minimum share capital of €40,000, which reflects its role in facilitating substantial business investments. Unlike the UAB, an AB can be publicly listed on the stock exchange, allowing shares to be bought and sold freely by the public.
This legal form is designed for businesses that aim for scale and need access to a broad investor base. The corporate income tax rate for ABs is a flat 15%, and the company must comply with specific governance structures. The Board of Directors handles strategic oversight, while the CEO manages daily operations, ensuring clear separation between policy and execution.
Types of Akcinė Bendrovė in Lithuania
Lithuania recognizes two types of joint-stock companies under the same legal framework but with key differences.
Public Akcinė Bendrovė (AB)
Public ABs resemble publicly traded companies found globally. Shares can be freely traded on stock exchanges, making this structure suitable for enterprises seeking wide public investment.
- Minimum capital: Traditionally €40,000, although some 2023 sources suggest it may have decreased to €25,000.
- Shareholder base: Can be started by a single shareholder with no upper limit on the number of shareholders.
- Capital payment: At least 25% of the registered capital must be deposited during registration.
- Governance: Requires a Board of Directors with at least three members and a Supervisory Board of three to fifteen members, including an auditor.
- Regulation: Must register with the Lithuanian Securities Commission, ensuring transparency and oversight for public trading.
Private Akcinė Bendrovė (Uždaroji Akcinė Bendrovė or UAB)
The UAB is the more common corporate form for small and medium enterprises, especially among foreign investors and startups.
- Minimum capital: As low as €2,500, with recent legislative updates lowering it to €1,000.
- Shareholders: Can be founded by one person and accommodate between 100 and 250 shareholders, depending on the source.
- Share transfers: Require approval from other shareholders, restricting free transferability.
- Governance: More flexible management; one director can run the company and be the sole shareholder.
- Auditing: Only mandatory under specific circumstances such as high turnover, large asset values, or employee counts.
Both types ensure limited liability, protecting shareholders’ personal assets from company debts and obligations.
Legal and Financial Requirements of Akcinė Bendrovė
Capital requirements are a key distinction between public and private ABs. Public companies require significantly higher capital than private ones. Both must pay at least 25% of their share capital upon establishment, ensuring the company has financial footing.
Shareholders enjoy several rights:
- Receiving dividends proportionate to shares owned.
- Priority in acquiring new shares when the company issues additional stock.
- Access to company information and participation in shareholder meetings.
- Voting rights aligned with share ownership, with companies able to issue shares with or without voting rights (though non-voting shares cannot exceed 50% of total shares).
Lithuanian law also allows companies to create different share classes with varied property or non-property rights, providing flexibility in corporate structuring.
Public ABs are subject to annual audits, while UABs need audits only if they surpass certain financial thresholds.
Annual general meetings are mandatory within four months after the financial year ends, where shareholders can discuss company performance and make decisions.
Steps to Forming an Akcinė Bendrovė
Forming an AB typically takes 2-3 weeks when all documents are prepared correctly.
- Name Reservation: The process begins by reserving a unique company name at the State Enterprise Center of Registers, valid for six months.
- Documentation Preparation: Key documents include Articles of Association, Constituent Agreement or Act, legal address proof, and identification of founders and directors.
- Capital Deposit: A bank account is opened to deposit the required share capital. For public ABs, this is €40,000 (or possibly €25,000 in 2023), and for private UABs, it ranges from €1,000 to €2,500.
- Notarization: Notary services verify compliance with legal requirements before submission.
- Registration: The Register of Legal Entities processes documents usually within three working days, issuing a certificate that confirms legal entity status.
- Post-Registration: The company must obtain a seal for official documents and register with the State Tax Inspectorate for tax identification and VAT purposes.
Foreign investors can delegate registration tasks through power of attorney but may need to appear in person for banking purposes.
Why Choose an Akcinė Bendrovė?
Choosing an AB structure depends on your business goals and investment strategy. The public AB offers the potential for raising capital from the public via stock exchanges, making it ideal for ambitious growth plans.
The UAB suits smaller ventures or those preferring tighter control over share transfers and simpler management. Both offer limited liability, protecting personal assets, which attracts investors seeking to mitigate risk.
Lithuania’s well-regulated legal environment provides transparency, shareholder protection, and clear corporate governance, fostering confidence among entrepreneurs and investors.
Conclusion
Akcinė Bendrovė is a cornerstone of Lithuania’s corporate world, especially for larger businesses requiring significant capital and governance structures. Whether opting for a public AB or a private UAB, understanding the differences in capital requirements, shareholder rights, and legal obligations is critical.
The decision to establish an AB should align with your financial capacity, investor goals, and management needs. Public ABs enable access to broad investment through stock trading, while UABs offer flexibility and lower capital thresholds.
Both structures protect shareholders through limited liability and require adherence to corporate governance standards, making them reliable choices for investors in Lithuania’s growing economy. With proper preparation, forming an AB is a straightforward process that positions your business for success within the country’s robust legal framework.