Until 2015, share sale agreements of private limited liability companies (in Lithuanian: uždarosios akcinės bendrovės) were concluded in simple written form. However, a new requirement in the Civil Code has come into force as of 1 January 2015 and has brought some changes to the deals market. The main change is that share sale agreements of private limited liability companies should be approved by a notary if (i) a shareholder sells 25% or more shares in the company or (ii) the price of shares under sale exceeds EUR 14,500. An exemption for a notarial deed is provided in cases when administration of securities accounts of the shareholders are transferred to securities account administrators. In that case, an accounting of company shares is performed by a financial market professional (eg a financial broker or a bank), though not by the manager of the company as was normally their function until the changes.

The main purpose of the new requirements is to ensure more transparency in the sale of shares of private limited liability companies, eg to make reliable records about the moment of transfer of title and to restrict possibilities to make backdated amendments to agreements. Practice has already shown that both ways of dealing with share sale transactions, either through a notarial deed or through the transfer of accounting of shares to a financial market professional, have their own specifics. These are briefly described below:

  1. Notarial deed:
    1. Normally,   notaries  charge   approx  0.4-0.5%   of   the  transaction   value   with  a  cap  on   the   notary’s   fee  up  to EUR 5,792.40. For this reason, it is important to assess in each case whether it is more beneficial to proceed with a notarial deed instead of transferring the accounting of securities to a financial market professional.
    2. Uncertainties arise as to implementing the right to an option (ie the right to acquire shares in the company from another shareholder under specified conditions), which is quite a common mechanism in a shareholders’ agreement. Practice on the right to an option has not yet been shaped, so it is still unclear whether agreements on the right to an option should be approved at the moment of conclusion (ie alongside the shareholders’ agreement) or at the moment of implementation (ie when the condition to exercise the right to the option arises). Another uncertainty is how to calculate the notary’s fee when the right to an option is approved by the notary at the moment of conclusion. Indeed, setting the price of shares to be purchased under an option arrangement is deferred to the future and is often linked to the financial results of the company or an independent valuation.
    3. Additional formalities may extend the sale process if, for example, a foreign seller or purchaser is not able to appear before a notary in person. They would need to issue their representatives a notarized power of attorney, have it apostilled (depending on the country of residence or establishment) and translated into Lithuanian.
       
  2. Transferring accounting of shares to a securities account administrator:
    1. Since the beginning of the year, more than 80* Lithuanian companies have transferred the administration of securities accounts to financial brokers or banks. Data on all these companies can easily be found on the website of the Lithuanian Central Securities Depository (LCSD). Information appears on the LCSD website when a financial broker or bank registers private limited liability companies with the LCSD as issuers, opens issuing registration accounts, assigns ISIN codes, and performs other formalities. Normally, transactions of large companies are confidential until the closing of a transaction, whilst the company data on the LCSD website appears until closing or even until the signing stage as the outcome of transferring shares to the securities account administrator. The foregoing data may trigger assumptions among third parties about intentions to sell the company, which may of course not always be the case. 
    2. Another point is that before making a record in the securities account, the financial broker or the bank requests some additional documents, eg instructions by the seller and the buyer to make records about the transfer of shares, extracts from the register about each party, the share sale agreement itself, and the like. These formalities may sometimes slow down the transaction process unless well organised by all participating parties.