General regulation of Partnerships and companies Comparative approach to French and Lithuanian law.

General regulation of Partnerships and companies Comparative approach to French and Lithuanian law. * Partnership and company, in conducting a business activity, gains momentum. * In France : companies Limited liability companies Joint-stock companies. * Advantage : - A possible limited liability. - The solution to improve firm growth. * Regulation quite important : - 72 provisions of civil code provisions of commercial code. * Two series of provision :- Specific rules. - General rules. * Main rules : - Setting up of partnership and companies. - Organization of partnerships and companies.

* Partnerships : - General partnerships, Limited partnerships and Partnerships limited by shares. * Companies :- Limited liability company, limited or public company and simplified joint-stock company. * General partnership :- Very close to a Lithuanian general partnership. - Require a minimum of two individuals or legal persons. - No initial capital. - Each partner is liable without limitation. - Each partner has the right to conduct their affairs. - Most of the time represented by a manager, a proxy. - Partners shall all be deemed to be merchants. - Partners bear a subsidiary liability. * Limited partnerships :- Very close to a Lithuanian limited partnership. - General partner liable without limitation. - Limited partner liable to the limited amount of his contribution - Represented by a general partner or by a proxy.

* Limited company : - Capital divided into shares. - Members bear losses up to their contributions. - 7 members in the limited company. - Represented by a management Board under the supervision of a supervisory Board, or by a board of directors. * Limited liability companies : - One or more individuals or legal persons. - Not liable for the company’s obligations. - Bear a risk up to the value of shares contributed. - Administered by a manager. * Partnerships and companies are legal entities. - Legal personality with effect from their registration. * Undisclosed partnership : - Not a juridical person. - Partner remains the owner of property. - Contracts in his own name. - Sole one to be bound with regard to third parties. - Close to the Lithuanian Public limited liability company. - Close to the Lithuanian private limited liability company.

Part I : Partnerships and companies setting up. * Article 1832 of French civil code : “A firm is established by two or several persons who agree by a contract to appropriate property or their industry for a common venture with a view to sharing the benefit or profiting from the saving which may result there from. It may be established, in the cases provided for by statute, through an act of will of one person alone. The members bind themselves to contribute to losses. » Section 1 : Ground conditions. * General rules of contract : - The consent of the party that binds themselves; - Its capacity to contract; - A definite object which forms the subject-matter of the undertaking; - And a lawful cause in the obligation. * The consent :- Must exist, be real, not simulated, and given without error, duress or deception. - If not, it gives rise to an action for annulment.

* The capacity : - Capacity of traders for partners and general partner. - Civil capacity for shareholders and limited partners. * The object :- Lawful and formed in the common interest of the members. * The cause :- Not contrary to public morals or to public policy. * 4 main elements :- A number of partners or shareholders, contributions, search of profit and Affectio societatis. 1°) A number of partners or shareholders. * A partnership or a company requires a minimum of two persons. French general partnerships and Lithuanian partnerships. * One individual person : French limited liability companies, and Lithuanian Private and public companies. * Seven members :French limited company. * No more than 100 : French limited liability companies. * No more than 20 : Lithuanian partnership. Lithuanian Private Company. * No more than 249 :

2°) Contributions. - If no contribution, no partnership or companies. a°) Various forms of contribution. * Cash contribution : - Allowed in all partnerships and companies. - Distinction between subscription and payment. Capital must be fully subscribes. Allowed to make only a part of due payments. * Contribution in kind : - Must be evaluated by shareholders. - Carried out by an auditor of the formation proceedings. - Must be fully paid before the registration. * Contribution in industry : - Not allowed in French limited companies. - Always possible in general partnerships. - Possible in French limited liability companies, if the memorandum and articles of association specify the terms and conditions. One fifth or fifty percent of the face value in French companies. One quarter of the nominal value in Lithuanian companies

b°) Initial capital. * Made up of contributions in cash and in kind. * French limited companies : Euros ( Litas). * Law strictly defines rules of decreasing and increasing initial capital. 3°) Search of profit. - Every partner and shareholder can claim profits. - Share of each member in the profits is determined in proportion to their share in the capital. * Lithuanian private limited liability companies : Litas (2.900 €). * Lithuanian public companies : Litas ( €). * French limited liability company : Determined by the memorandum and articles of association. 4°) Affectio societatis. - Particular community of interests between partners or shareholders Community of aim. Will to unify for its realization.

Section 2 : Partnerships and companies coming into existence. * Firms enjoy juridical personality only from their registration. 1°) Procedure of formation. - Began with a declaration of will of approval of founding a partnership or company. - Memorandum and articles must be drawn up in writing. - Articles determine : - Partners and shareholders may sign the statutes. - Statutes have to be registered within the tax office. - Constitution advert published in a local newspapers. - Registration in the commercial and companies register. - Publication of the registration in the Official Gazette of civil and commercial advertisements. The form, the duration, the name, the objects, the registered place of business, the capital, the contributions of each member and rules of functioning.

2°) Partnerships and companies in organization. * Period between formation and registration. * Generally a short period. * In French law, partnerships or companies in organisation have no legal existence, no status. Not able to acquire right, incur obligation, or be a party in a civil case. Acts made by promoters, in their own name and under their own liability. Might be transferred to the partnership or the company after registration. Acts made before status signatures must be annexed to the status. After signature acts made by a proxy. Decided by general meeting resolution. Until this transfer, only acting promoters bear liability. * In Lithuanian law, articles of association have to be registered within six months from the day of the signing, * In Lithuanian law, memorandum of association shall indicate : Persons who have the right to represent the company being incorporated Their rights and duties. Procedure for concluding contracts in the name of the company. Procedure for the approval. Managing body have the right to approve. If not, obligations have to be discharged by the person who has concluded.

Part II : Partnerships and Companies organization. * Partnerships and companies act through their bodies : - The managers. - The meeting of partners and shareholders. Section 1 : Managers. 1°) Various forms of management. * In French General partnership : - All the partners shall be managers. - Memorandum may appoint one or more managers, who may or may not be partners. * In French limited liability companies : - One or more managers, who may or may not be shareholders. * In French limited company : - Two forms for management. * A board of directors : - Three members, who must be shareholders. - Elect a chairman from among its members. * A management board : - 5 members who may or may not be shareholders. - Supervision of a supervisory board. 3 members who must be shareholders.

2°) Appointment and dismiss of managers. * First managers appointed by the memorandum. Manager,supervisory board and director board appointed by the routine shareholders’ meeting. * In Lithuanian private or public limited liability companies : - Single person management organ. - Supervisory board. 3 and no more than 15 members. - Board composed at least of three members. * In French partnerships and companies : Chairman and general manager appointed by the director board. Management board appointed by the supervisory board. * In Lithuanian partnerships and companies : Partnership agreement state persons authorised to represent and manage the partnership. Supervisory board elected by the general meeting. Board elected by the supervisory board or the general meeting. Manager elected by the board, the supervisory board, or the general meeting.

* Also dismissed by the courts on good grounds. * Normally dismissed by the routine shareholders’ meeting. * Manager office come to an end by resignation or dismissal. * No limitation of duration for the others managers. * 6 years for members of the director board, manager board or supervisory board. * Manager’s term duration : - Members of limited companies board of director or supervisory board must be shareholders. * In French law managers may be chosen within or without partners or shareholders. In French law : In Lithuanian law : * 4 years for members of the board and supervisory board. * No limitation of duration for the manager. In French law :

- In French general partnerships : * Decided by unanimous agreement of the other partners. * Shall cause the dissolution of the partnership. - In French limited liability company : * Decision passed by one or more shareholders representing more than half the company’s shares - In French limited companies : * An ordinary majority. * Board of directors may dismiss the chairman or the general manager at any time. * Supervisory board may dismiss the management board. - Dismissal within due cause : * Partnerships and limited liability companies managers. * Limited companies general manager or members of management board. * If not, gives rise to damage. - Dismissal without due cause : * Members of board of directors or supervisory board.

- In Lithuanian partnerships : 3°) Power and liability of the managers. * Managers assume full partnerships or companies general management under their own responsibility. a°) Dealing between partners. * Invested with the most extensive powers to perform all acts of management. * They assume general management. * They represent the partnership or the company. * Restrictions resulting from other bodies’ legal power. - Not able to amend any provision of the articles of association. Partner expelled from the partnership by unanimous decision. - In Lithuanian companies : Supervisory board removed by the general meeting. Members of the board removed by the supervisory board or the general meeting. Manager removed by the board, the supervisory board or the general meeting

- May prohibit special act or make performing such an act dependent of the consent of the general meeting, the board of directors, or the supervisory board * Restriction resulting from memorandum and articles of association. * In Lithuanian law : - A partner may represent the partnership, perform all acts of management. - Manager of a company act on his own discretion. - In accordance with law and articles of association. b°) Dealing with third parties. * Invested with the most extensive powers in all circumstances. * In French general partnerships : - Bind the partnership only by acts within the purpose of the partnership. * In French limited liability, limited companies : - Bound by acts not covered by the purpose of the company. - Memorandum's provisions limiting the powers of the management shall not be binding on third parties. - Except in cases where the other party acted in bad faith.

* In all French and Lithuanian partnerships and companies : - Managers, directors and managing directors shall be individually or jointly and severally liable. Section 2 : Rights and duties of partners and shareholders. 1°) Partners’ and shareholders’ rights. * Four categories : - Political rights, financial rights, patrimonial rights, and right to conserve his status. * In Lithuanian partnerships : * In Lithuanian companies : - Transaction concluded on behalf of the partnership create obligations for the partnership where provided for in the partnership agreement. - Contract that is concluded in overstepping manager authority impose obligations on the company. - Except in cases where the other party acted in bad faith.

a°) Political rights. * Partner and shareholder shall be entitled to participate in the decisions. * 2 categories of resolutions : - Ordinary resolution which doesn’t amend any provision of the articles of association. - Extraordinary resolution which amend any provision of the articles of association. * Resolutions might be adopted in a general meeting. * In French and Lithuanian partnerships : - Each partner has got one and only one vote. * In French and Lithuanian companies : - Number of votes equal to that of the company’s shares hold. * Majority rules depend of partnerships’ or companies’ form. * In French general partnerships : - Unanimous agreement of the partners. * May also be taken via written consultation of the members. * Annual general meeting within six months of the close of the financial year in France or five months in Lithuania. * In Lithuanian partnerships : - Simple majority vote.

- Extraordinary resolution; two third of the votes with a quorum of at least one quarter of the initial capital. - Ordinary resolution; more than half the company’s shares. * In French limited liability companies : * In French limited companies : - Ordinary general meeting : Quorum one fifth of the voting shares. Majority of the votes held by the shareholders present. - Extraordinary general meeting : Quorum one quarter or one fifth of the voting shares. Majority of two thirds of the votes. * In Lithuanian private and public companies : - Quorum half of the voting shares. - Ordinary general meeting : Majority of the votes held by the shareholders present. - Extraordinary general meeting : Majority of two thirds of the votes.

* Resolutions adopted by majority have to be complied with by the minority. - Have to respect the law, the articles of the association, the companies’ interest and the shareholders rights. - If not might be pronounced invalid by the court. - In case of misuse of the voting right, resolution might be pronounced invalid by the court. * Partner and shareholder has the right to be informed on management decision and business evolution. Disclosure of documents relating to the last three financial years. Written questions concerning any matter. In case of a lack of response within a month, may apply to the court for one or more experts to be appointed. - In French law - In Lithuanian companies Possibility of limiting a shareholder’s right of supervision. If documents contain a commercial-industrial secret. Shareholder concerned can file an application with the court. - In French law

b°) Financial rights. * Partner and shareholder has right in the profit. * In French law, share in the profits in proportion to the share in the capital. * In French limited companies and Lithuanian companies preference dividend shares might be created. * The distributable profit consists of the profit for the period. * General meeting may decide to distribute sums taken from the reserves. c°) Patrimonial right. * Partner and shareholder may dispose of his share. * Transfer of share might be restricted. * In French general partnerships : - Shares may be sold only with the consent of all the partners. * In French limited liability companies : - Shares freely assigned between members. - Transferable to third parties with the consent of the majority of the members representing at least one half of the shares. - If the company refused to consent to the transfer; three months to purchase or arrange the purchase of the shares. * In Lithuanian Partnerships, agreement indicate the rules for distribution.

* In French limited companies : - Shares may be freely assigned. - Articles may set a priority right to acquire shares. D°) Right to conserve his status. - Partner or shareholder may stay in the partnerships as long as they want. - Articles of the association might include exclusion clause in case of misunderstanding or misuse attitude. - Restriction by requirement of obtaining permission from the management or directory board can result from the articles of the companies * In Lithuanian Partnerships : - Agreement shall state conditions for admitting new partners. * In Lithuanian companies : - Prohibited to introduce any restriction of the shareholders right to hand over the shares to someone else. * In French limited companies and Lithuanian companies : * In French law : * In Lithuanian law : - Partner may be expelled by unanimous decision for serious breach of his duties. - Shareholder shall be entitled to sell the share at his own discretion.

Thank you for your attention. - Might bear a non-competition obligation. Might be excluded from the company. * Make due payment towards shares. * Contribute to losses and they might be liable for the debts. 2°) Partners’ and shareholders’ duties. - In Lithuanian law : Before full payment, cannot exercise his voting right, and participate in profit in proportion to payments towards shares. - In French law : * In French law : * In Lithuanian law : - Partners have no right to engage in the same commercial-economic activity on another enterprise.