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LAW ON PUBLIC INSTITUTIONS, July 3, 1996. No. I–1428 (as amended June 17, 1997) (official translation)

ARTICLE 1. Purpose of the Law

1. This law establishes the procedure of founding, management, operation, reorganisation and liquidation of public institutions.

2. The law shall not apply to the state and municipal institutions financed from the budget.

ARTICLE 2. The Concept of a Public Institution

1. A public institution is a non-profit organisation, founded according to the procedure established by this law from the assets of partners (owner) engaged in social, educational, scientific, cultural, sport or any other analogous activities and public to the members of the community as regards to the services it provides.

2. A non-profit organisation is an entity with the rights of legal person, established in accordance with the procedure prescribed by laws for a purpose other than profit-making. Its profit can not be distributed to its founders, members, partners (owner).

ARTICLE 3. The Status of a Public Institution

1. A public institution shall have the freedom of action, freedom of initiative and freedom of decision-making granted by the Constitution of the Republic of Lithuania, this Law and other laws, and shall develop its activities pursuant to the bylaws registered in accordance with the procedure established by this Law and other laws.

2. The specific requirements for the activity of a public institution shall be regulated by the law on the appropriate sphere of activities engaged in by the public institution.

3. The name and symbols of the public institution must be in compliance with the requirements on the regulations, approved by the Government, concerning the names of firms, and legal acts on the appropriate sphere of activities wherein the public institution is engaged.

ARTICLE 4. The Rights and Obligations of a Public Institution

 1. In order to perform the activities provided for in the bylaws, a public institution may:

1) hold bank accounts in accordance with the procedure established by laws;

2) purchase or otherwise acquire property, manage it, use it and dispose thereof in accordance with the procedure established by laws and institution bylaws;

3) conclude contracts and assume obligations;

4) provide paid services, perform contractual work and set the costs thereof;

5) provide and obtain charity and sponsorship;

6) establish branches;

7) reorganise, establish non-profit organisations and enterprises in accordance with the procedure established by laws;

8) use funds for the purpose of implementing the goals established in the bylaws;

9) announce public tenders for the purpose of implementing measures;

10) establish international connections, exchange experts, students and pupils; and

11) join non-profit organisation associations, including international associations, and take part in their activities.

2. A public institution shall conduct accounting, furnish state institutions with financial accounting and statistical information and pay taxes in accordance with the procedure established by laws.

ARTICLE 5. The Founding of Public Institutions

1. The founders of public institutions shall be natural and legal persons who have concluded a public institution contract of founding, or a person who has concluded a contract of founding. Natural and legal persons of the Baltic Republic of Lithuania and foreign states may become founders of public institutions.

2. State and municipal institutions shall have the right to transfer state (municipal) property to a public institution only on a use basis.

3. The legal grounds for the establishment of a public institution shall be the contract of founding of an institution formed by legal or (and) natural persons in accordance with the procedure established by this Law. The number of founders shall be unlimited. Should one person become the founder of a public institution, a deed of founding rather than a contract of founding shall be drawn up, to which requirements of a contract of founding shall be applied.

4. The contract (act) founding of a public institution must indicate:

1) founders (forenames, surnames, names of legal persons) and their addresses;  

2) name of public institution;

3) sphere of activities and objectives of public institution;

4) liabilities of founders;

5) compensation of founding expenses;

6) duration of activity of the public institution;

7) procedure of resolving the disputes among founders; and

8) founders by which the public institution may be represented.

5. The contract of founding of a public institution shall be signed by all of its founders or their authorised representatives. If at least one founder is a natural person, the contract of founding must be certified by a notary. If the founder is an enterprise or a legal person, the signature of the chief or authorised person shall be approved with a seal. A foreign legal person, not having a seal, shall be applied the procedure established for natural persons.

6. The founders of a public institution shall adopt the bylaws of the institution upon having formed the contract of founding.

7. If a state or municipal institution shall assign property to a public institution on a use basis, a contract shall be concluded specifying the terms and conditions and duration of such property use and the non-property and property rights of the property owner. The head of the institution shall sign the contract on behalf of the state or municipal institution. The contract of use of state or municipal property formed prior to the registration of the institution, shall be signed by the authorised representative of the founders.

8. Prior to the constituent meeting, the persons indicated in the contract of founding shall have the right to conclude transactions on behalf of the public institution being founded. These transactions shall create obligations for the institution upon being approved by the constituent meeting. If these transactions are not approved by the meeting, the founders shall be jointly liable for the obligations based upon these transactions.

9. The constituent meeting shall be applied the provisions, established by this Law, for the general meeting of a public institution. The founders shall have the right of a deciding vote in it.

ARTICLE 6. The Partners (Owner) of the Public Institution

1. The partner (owner) of the public institution shall be a natural or legal person, who according to the procedure established by this Law and bylaws of the public institution, shall hold a part of the capital of the public institution’s partners. The founder of a public institution shall from the day of making a contribution become a partner (owner, if all of the contributions are made by one person) in the public institution.

2. The partner (owner) of the public institution shall have the following non-property rights:

1) to take part in the general meeting with a deciding vote;

2) to obtain information on the activities of the public institution;

3) to appeal in court the general meeting resolutions, the collective managing body (if such exists) and decisions of the administration if they are not in compliance with the laws and other legal acts; and

4) other non-property rights provided for in the public institution’s bylaws.

3. The partner (owner) of a public institution shall have the following property rights:

1) to obtain according to the procedure established by Article 16 of this Law, a part of the property of the public institution under liquidation;

2) to bequeath as inheritance, sell or otherwise transfer, a part of his own property to other individuals in accordance with the procedure established in the bylaws.

ARTICLE 7. Public Institution Bylaws

1. The bylaws constitute a legal document which the public institution must base its activities upon.

2. The following must be stated in the bylaws of the public institution:

1) the name of the institution;

2) the registered office;

3) the spheres and objectives of the institution’s activities;

4) the rights and obligations of the partner (owner), the procedure for granting and deprivation of the partner’s (owner’s) rights and the procedure for transferring a part of the capital belonging to the partner (owner), to other persons’ property;         

5) the rights of the institution which has transferred property on a use basis;

6) powers of the general meeting of the public institution and the procedure for convening it and adopting resolutions;

7) the procedure of forming and revoking the collective bodies of management, their competence, functions and liability;

8) appointment procedure and powers of the head of the administration;

9) procedure for disposal of the institution’s property;

10) sources of funds and procedure of fund utilisation;

11) control of financial activities;

12) procedure of amending and supplementing the bylaws;

13) procedure of establishing and liquidating branches;

14) procedure of reorganisation and liquidation of the institution; and

15) duration of the institution’s activities.

3. The bylaws may also contain other provisions related to the specific character (specifics) of the public institution which are in compliance with the laws.

4. The bylaws of a public institution must be signed by all of its founders, and the signatures must be verified: those of natural persons must be certified by a notary, those of legal persons, by the head or an authorised representative, by signature and seal of a legal person.

5. The right of initiative to amend and supplement the bylaws shall be vested in the administration of the public institution, the collective body of the public institution and the general meeting of the public institution. The amended or supplemented bylaws shall be approved by the general meeting of the public institution.

6. The amendments and supplements of the bylaws shall become effective upon their registration in accordance with the procedure established by laws.

ARTICLE 8. Registration of Public Institutions

1. Public institutions shall be registered, only in accordance with the procedure established by laws and only after the contributions stipulated in the contract of founding have been made.

2. Public institutions shall be reregistered and stricken from the register in accordance with the procedure established by laws.

3. If the public institution receives from the state or municipality some property on a use basis, a contract of use shall be submitted in the course of registration of the public institution.

4. If, according to the procedure established by laws, a licence (permit) is required for the activities provided for in the bylaws of the public institution, the licence (permit) must be obtained prior to the registration of the public institution.

ARTICLE 9. The Branches of Public Institutions

1. A branch is a division of a public institution having an individual registered office and administration. The branch is not a legal person and shall operate in the name of the public institution as a legal person, in accordance with the bylaws of the public institution and powers granted by the head of its administration, which must be specified in the institution bylaws and regulations of the branch. The number of branches of public institutions shall not be limited.

2. A branch shall be permitted to have its own sub-account. The property of the branch shall be recorded in the financial accounts of the public institution and in separate financial accounts of the branch.

3. A branch shall be registered and stricken from the register in accordance with the procedure established by laws.

ARTICLE 10. The Associations of Public Institutions

1. Public institutions may join associations of non-profit organisations.

2. The procedure for the establishment of associations and activities thereof shall be established by the Law on Associations.

ARTICLE 11. Management of Public Institutions

1. The managing bodies of a public institution shall be the general meeting and the administration. A collective managing body (council, board, etc.) may be established by the decision of the general meeting of the public institution.

2. The general meeting of the public institution shall be the supreme managing body of the public institution. At a general meeting, the partners (owner) of the public institution and the state or municipal institution, which has transferred to the public institution property on a use basis, shall have the decisive vote, if this has been stipulated in the contract of use. If the founder of a public institution is an individual person, his written decisions shall rank equally with the decisions of the general meeting.

3. The meeting shall have the following powers:

1) to amend and supplement the bylaws;

2) to establish mandatory tasks to be implemented through its activities;

3) to determine fees and charges for services, work and production, as well as rules of their calculation, if they are not fixed by the Government;

4) to appoint and dismiss from office the head of administration of a public institution and to establish his remuneration;

5) to establish remuneration of the members of the collective body of management and the inspector (auditor);

6) to certify the annual financial accounting;

7) to establish branches of a public institution, to reorganise and liquidate a public institution.

4. The administration must convoke a scheduled general meeting annually, within 3 months from the close of the business year.

5. The general meeting of a public institution may be convoked per court decision, if it had not been convoked in accordance with the procedure established by this Law and the bylaws of the public institution and for this reason, a partner, head of administration, inspector, auditor or some other interested person, has made an appeal in court.

6. The administration shall organise and implement the operations of the public institution. The administration shall base its work on the laws, bylaws of the public institution, its own labour regulations, department and office statutes and the resolutions adopted by other managing bodies of the public institution and the decisions of the head of the administration.

7. A public institution must have a head of administration and chief finance officer (accountant). This post may not be held by one and the same person or persons who are related by kinship or marriage (parents, adopted parents, spouses, brothers, sisters, children, as well as the brothers, sisters, parents and children of a spouse). The functions of a chief finance officer may be performed under contract by a legal person.

8. The head of administration shall establish the list of staff and shall employ and dismiss the employees from office. The powers and functions of the head of administration shall be established in the bylaws.

9. Collective managing bodies of a public institution (council, board) shall be formed by resolution of the general meeting. The number of members of a collective managing body, their duties, rights and liabilities, the procedure for its formation and removal, as well as payment of remuneration shall be established in the bylaws of a public institution. The work of only one member of the collective managing body may be remunerated.

ARTICLE 12. Control of the Financial Activities

1. The procedure of internal control of the financial activity of a public institution shall be established in the bylaws.

2. The State and municipal control institutions shall have the right to investigate the activities of a public institution in accordance with the procedure established by laws.

3. The Administration of a public institution must furnish the state (municipal) control institutions and entities of financial activity control, provided for in the bylaws of an institution, with the documents of the public institution, requested by them.

ARTICLE 13. The Funds of a Public Institution

1. The sources of the funds of a public institution may be:

1) funds contributed by the partners (owner);

2) fees received for services and contract work;

3) special purpose allocations from state and municipal budgets;

4) allocation from the Lithuania Fund and foreign funds;

5) funds received from charity, sponsorship, gifts, and inheritance.

6) other legally acquired funds.

2. An estimate of expenditure must be made in order to use the funds obtained from the state and municipal budgets and funds. An estimate of expenditure shall be prepared for the funds obtained from other sources, if the entities providing the funds shall require this.

3. The public institution shall use the funds which are received as charity or from sponsors, as well as through inheritance, as directed by a charity donor (sponsor) or a testator for the activities provided for in the bylaws. Funds received as charity, or from sponsors and through inheritance shall be kept in the individual account of additional funds of a public institution.

4. The public institution shall keep the funds received from the state and municipal budgets in an individual account of a public institution.

ARTICLE 14. The Property of a Public Institution

1. The property of a public institution shall be comprised of the property transferred to it by the founders (partners, owner), also the property acquired through inheritance, financial resources and other legally acquired property. Property may be given to a public institution on a use basis.

2. The state or municipal property transferred to the public institution on a use basis shall be used and administered in accordance with the procedure established by laws.

3. A public institution may sell, transfer, lease, exchange its long-term property and also warrant or guarantee the implementation by it of the obligations of other entities only by the resolution of the general meeting of the public institution. A detailed procedure, indicating voting regulations and voting rights of founders, must be established in the bylaws.

4. The contributions made by partners shall make up the partners’ capital of the institution. They shall be included in the documents of accounting of the public institution, while the partner (owner) shall be issued a document attesting to his share of the capital.

5. The capital of partners may be increased only through additional contributions and through reappraisal of the property of the public institution. The capital of partners shall be increased (decreased) due to reappraisal in proportion to his own part of public institution property, while the increase (decrease) of the partner capital is divided in proportion with the parts of the partners’ capital.

6. A public institution, having sold material assets that are not required for its activities, shall apply the proceeds according to the procedure established in its bylaws.

ARTICLE 15. The Reorganisation of Public Institutions

1. Reorganisation means the transformation of a public institution as a legal person, without the liquidation procedure. The successors to all the rights and liabilities of the reorganised public institutions shall be the public institutions that become newly-established in the process of reorganisation and continuing activities after the reorganisation.

2. Public institutions may be reorganised in the following ways:

1) by merger of public institutions;

2) by division of public institutions.

3. Reorganisation by merger of public institutions may be carried out by:

1) joining to a public institution which shall continue its activities, other public institutions (one or several) which shall terminate their activities as legal persons;

2) founding a new public institution from public institutions which shall terminate their activities as legal entities.

4. Reorganisation of public institutions by way of division may be carried out by:

1) parcelling out the public institution which shall terminate its activities, to other public institutions which shall continue their activities;

2) establishing new public institutions from a public institution which shall terminate its activities;

3) separating sections from a public institution which shall continue its activities and merging these sections with other public institutions from the separated sections.

5. A plan shall be drafted for the reorganisation of a public institution by merger or division. It shall indicate the name of each public institution being reorganised, its address, the initiator of the reorganisation, reorganisation method, justification of reorganisation, stock-taking procedure, valuation of assets, successors to obligations and documents and time limits for their acceptance, the rights conferred to the administration of public institutions and experts during the reorganisation period, and time limits of reorganisation. Concurrently with the reorganisation plan, draft bylaws must be prepared, of public institutions which will function after the reorganisation.

6. The reorganisation plan shall be approved by the general meeting of the public institution and general (founders’) meeting of the public institutions that will function after the reorganisation. Experts for the examination of the reorganisation plan may be appointed by the resolution of the meeting that approves the reorganisation plan. The experts shall have the right to obtain from public institutions being reorganised, any of the information relative thereto.

ARTICLE 16. The Liquidation of Public Institutions

1. A public institution may be liquidated on the following grounds:

1) the duration of the public institution’s activities as specified in its bylaws, has expired;

2) the resolution of the general meeting, passed in accordance with the procedure established in the bylaws;

3) court decision to liquidate a public institution for established law violations;

4) a decision by the court or creditors’ meeting to liquidate a bancrupt public institution. In this instance the public institution shall be liquidated in accordance with the procedure established by the Law on Bankruptcy.

2. The institution which decides to liquidate a public institution shall appoint a liquidator, determining the time limits of liquidation, stock-taking procedure and procedure of property take-over. The general meeting, collective managing body and the administration of a public institution shall be divested of their powers, as of the day of the liquidator’s appointment and their functions shall be performed by the liquidator.

3. Following the settlement of its debts by the public institution in liquidation, the partners (owner) may have only their, the partner’s part of the capital refunded to them, from the balance of its property and funds. In the event some property or funds remain not parcelled, these shall be given over to another or other non-profit organisations, registered in the Republic of Lithuania.

4. The documents of the liquidated public institution shall be kept in accordance with the procedure established by the Law on Archives.

5. When liquidating a public institution, its employees shall be dismissed from work in accordance with the procedure established by the Law on the Employment Contract.

6. The liquidation of a public institution shall be made public on two occasions, with an interval of at least one month in between, or by giving written notice to each creditor.

ARTICLE 17. The Powers of the Liquidator

1. The liquidator shall have the rights and obligations of the head of administration of a public institution. He shall represent the public institution being liquidated in the state power and government institutions, court, and in instances involving relations with other legal and natural persons.

2. The liquidator of a public institution shall:

1) draw up financial accounts as of the beginning of the liquidation period (the liquidation balance sheet);

2) settle the accounts with the state, municipalities and social insurance agency;

3) complete the discharge of liabilities resulting from damages caused and those under contracts concluded previously by the public institution and enter into new contracts within his powers;

4) transfer the remaining assets of the public institution to the partners (owner) and that of the institution, which had decided to liquidate the public institution, to the stipulated non-profit organisation or organisations;

5) draw up the liquidation act of the public institution;

6) have the liquidated public institution removed from the Register in accordance with the procedure established by laws.

3. The liquidator shall be liable to the public institution and third parties for the losses incurred through his fault.

ARTICLE 18. Final Provisions

1. The operating non-profit organisations (enterprises) shall be reorganised into public institutions in the following manner:

1) the highest authority of a non-profit organisation (enterprise) shall pass a resolution to reorganise a non-profit organisation (enterprise) into a public institution;

2) the bylaws shall be prepared pursuant to this law and a public institution shall be registered in accordance with the procedure established by laws.

2. If at least one of the founders of a non-profit organisation (enterprise) happens to be a state or municipal institution, it shall conclude a contract to convey to a public institution for use, the property transferred to a non-profit organisation (enterprise) during its founding. In this instance, when in the course of founding of a non-profit organisation, the state or municipal institution has transferred its funds for the formation of authorised capital of the non-profit organisation, in reorganising the non-profit organisation into a public institution, these funds shall be included within the capital belonging to the public institution.