Law on Crowdfunding
On 3rd November, 2016 the Lithuanian Parliament adopted the Law on Crowdfunding (hereinafter – the Law), which aims to make crowdfunding, which becomes more and more popular in the world, as well as related platforms more transparent and more reliable for both customers and investors. This Law implements a priority measure of the Government’s program, which aims to improve mechanisms for investment of residents’ savings into the economy while increasing a diversity of funding sources. The Law on Crowdfunding came into force on 1st December, 2016.
The Law defines crowdfunding as a financing method where a project, publicly announced in a special platform, is being financed by unrelated investors at their own expense or when investors acquire creditor's rights through a crowdfunding platform. There is a requirement that a crowdfunding project must be designed for satisfaction of business, professional, science, exploratory and other needs, not for consumption. This requirement does not apply to crowdfunding based on a non-financial reward, as well as charity and aid.
According to this Law only legal entities will be allowed to act as operators of crowdfunding platforms. Before starting their activities, operators shall be included in the Public List of Crowdfunding Platforms’ Operators managed by the Bank of Lithuania. According to the Law on Markets in Financial Instruments (hereinafter – the Law on MiFI) operators included in the list shall be considered to be financial advisory firms. Which means, that an operator who intends to provide investment services shall have to obtain a license under the Law on MiFI. Investors will be able to freely invest in crowdfunding projects without limitations, however, they will have to undergo an appropriateness test first. If the results of the test come out negative, the operator shall provide a warning and only after that the investor would be able to start investing. Initiator of the project (the owner) can be any person who, according to the laws, has registered its activities for which he seeks to get a crowdfunding and who, for this purpose, initiates and provides a project for investors through a crowdfunding platform.
Crowdfunding platform operator shall have for the whole period of its activity an appropriate amount of capital (i.e. not less than 40 000 EUR or the calculated need of own capital, which must be at least 0.2% of the amount of outstanding funds financed through the crowdfunding platform and not repaid to investors – depending which one is higher) or other means of collaterals (civil liability insurance, financial institution warranty or a guarantee).
Crowdfunding platform operator, before giving the opportunity to the investor to make a specific type of financing transaction for the first time through its crowdfunding platform, shall evaluate whether the specific type of financing transaction is appropriate for the investor. In addition, it is a responsibility of a crowdfunding platform operator to make sure that investors do not invest more than 1000 EUR per 12 month period through a single crowdfunding platform.
Initiator of the project, who seeks to attract from EUR 100.000 to EUR 5 million per year, regardless of the type of financing transaction, must prepare an information document in accordance with requirements of Law on Companies. If a planned financial value of a transaction is above EUR 5 million per year, initiator of the project shall be able to receive such amount only by issuance of securities in accordance with the Law of Securities; for that reason a prospectus is required.
In order to secure the investors, the Law establishes requirements for the crowdfunding operator activities, also determines the order on inclusion of an operator to the list maintained by the supervisory authority and establishes information disclosure and other requirements.
Crowdfunding platform operators’ activities will be supervised by the Bank of Lithuania.
It is believed that by removing legal obstacles, the new regulation will encourage development of the whole FinTech ecosystem, alternative sources of funding and will provide new opportunities, especially for the small and medium-sized businesses, to attract funding, will bring business closer to society and will help the society to directly participate in the funding of a business.
Amendments of the Civil Code of the Republic of Lithuania
On 8 November, 2016 the Parliament adopted the amendments to the Civil Code of the Republic of Lithuania (hereinafter – the Law). The Law will come into force on 1 July 2017.
The law specifies competence of regional courts by stating that regional courts, as the first instance courts, shall hear the civil cases, where the claim amount exceeds 40 000 EUR (it was previously established that regional courts hear the cases, where the claim amount exceeds 43 500 EUR), except for the family and labour cases and cases for compensation of non-pecuniary damage. This requirement applies to claims (initial or counterclaims), applications, requests and independent claims provided by the third parties, submitted after 1 July, 2017.
The Law also supplements the provisions of the Code on Civil Procedure related to the representation, by establishing that only a qualified representation shall be possible in the instance of appeal. It states, that „appeal shall be drafted by the attorney-at-law“, which means that in the process of appeal only attorneys-at-law shall be able to act as professional representatives (currently, the participants of the case can draft an appeal).
Certain amendments of the Law are related to the amounts of stamp duty. It is decided to impose a stamp duty on requests for application of interim measures (EUR 50 stamp duty), except for requests on interim measures applicable in the family cases as indicated in the Civil Code. Also, it should be noted, that in cases where the decisions related to a public tender procedures are appealed, the stamp duty shall depend on the type of public procurement, i.e. for a low value procurements – EUR 300, for a simplified procurements – EUR 1000, and for the international procurements the stamp duty shall be EUR 3000. It should be noted that EUR 500 stamp duty has been established for claims on opening of the company’s bankruptcy case, unless the claim is brought by the owner (owners), manager, liquidator, former or current employee, state institution or authority, as well as in cases when the claim is based on the fact that the company has no assets or income, which could be used to cover the debts, and for that reason, the bailiff has returned writs of execution to the creditor.
Also, this Law newly establishes the order for delivery of procedural documents. The procedure establishes the order of how to deliver the procedural document to a person who was not been found in the place of his residence or other provided address or work place. It is provided that in such a case a person, who delivers the procedural documents, shall deliver documents to a place of residence declared by a natural person. If the procedural documents cannot be submitted following this order, the person, who delivers the procedural document, shall leave a notification on the delivery of procedural documents in the place of residence and indicate this fact in the note returned to the court. In this case, a procedural document shall be deemed to be delivered after thirty days counting from the date when the notification on the procedural documents was left in the place of residence declared by the addressee. The order on delivery of the procedural documents and order for leaving a notification of the procedural documents, as well as a form of a note on delivered procedural documents shall be established by the Government.
Delay of entry into force of the new Labour Code of the Republic of Lithuania
On 20 December, 2015 the Parliament has adopted the amendments of the Labour Code and the accompanying statutes (project No XIIIP-69 (2)), by which it was decided to postpone the entry into force of the part of the laws on social model, including the new Labour Code, for the period of half of the year. According to the adopted amendments, social model laws will come into effect as of 1 July, 2017. The aim of this delay is to provide relevant amendments which would balance the interests of employers and employees and meet the expectations of Lithuanian residents.
Amendments to the Law on State Social Insurance of the Republic of Lithuania
On 20 December, 2016 the Parliament has decided to withdraw the “ceilings” of the social insurance fees as well as the commitment to reduce employers’ fees paid to the social insurance fund by 1 percent from the next year and later to decide on this each consecutive year. Additionally, according to the adopted provisions, as of 1 July, 2017 the social insurance fee rate, calculated for the financing of the main part of pension, shall be reduced by 1 percent. The reduced income of the social insurance fund shall be compensated by providing the state budget assignations.