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Country Commercial Guides FY 2000: Lithuania Report prepared by U.S. Embassy Vilnius, released July 1999 Note*

CHAPTER IV. Marketing U.S. Products and Services

Lithuania has a growing network of grocery and produce stores of Western standard. The first supermarkets were opened a couple of years ago. The assortment of goods in grocery stores is improving; some specific product groups, such as fat-free or imported ethnic products are becoming more popular. Import of foreign goods into Lithuania is increasing. Several of the new private businesses concentrate on importing. The trading companies' intermediary role in the foreign trade is gradually vanishing as most of the wholesalers and retailers are today undertaking international transactions themselves and working directly with the foreign suppliers or producers.

The marketing of consumer products in Lithuania is somewhat inhibited due to the lack of large distributors or wholesalers. Food and grocery import, and wholesale and retail operations are handled by private food wholesale companies. Only a handful of these companies are considered reliable enough to be engaged in international commercial activity. In addition to consumer product wholesalers, even meat processing enterprises import meat or livestock directly.

The market for consumer products in Lithuania is fragmented. Consumer preferences differ among various income, age and social groups. According to recent statistics, 60% of those interviewed claimed that owing to their limited income, price is the most conclusive factor in shopping situations. For people who are satisfied with their income level, product quality and brand names are more important. They consider high price as an indicator for good quality.

Advertising may be conducted freely in any printed or electronic media. The leading newspapers in Lithuania are "Lietuvos Rytas", "Respublika", "Lietuvos Aidas" published in Lithuanian and Russian. The leading business newspapers are "Verslo Zinios" and "Baltic Business News".

At present, there are no laws that regulate the relationship between a foreign company and its distributors or agents in Lithuania. A distributor relationship can be determined according to the provisions of each specific distributor agreement.

A joint venture with the local partner is the best way for a U.S. company to start business in Lithuania. It is advisable to find out as much as possible about the potential partner. The basic data on a Lithuanian company, including credit ratings, is available from local information service companies, although this system is not yet fully developed. Foreign investors can choose between two means of establishment: representative office or incorporated business organization. Establishment of a representative office in Lithuania gives the foreign company a legal presence in the country, but does not permit it to carry on any economic activity, and is thus useful only for assessing business opportunities. In order to pursue economic activity in Lithuania, the foreign investor must incorporate his business organization. Foreign investors may choose the following types of enterprise:

1. Sole trader
2. General or limited partnership
3. Public or closed joint-stock company
4. State (local government) enterprise
5. Agricultural company
6. Cooperative; and
7. Investment agency

The most typical type of enterprise adopted is a joint-stock company. A closed (private) or public joint-stock company can be either wholly or partially foreign owned. The investor may buy into an existing company or establish a new one. If a foreign investor requires a wholly foreign owned company, the only appropriate type of enterprise is a joint-stock company. The principal differences between closed and public joint-stock companies are the amount of authorized share capital, the number of shareholders and the circulation of shares. Presently, a public joint-stock company must have a minimum paid up share capital of 100,000 Litas (approx. $25,000), at least 50 shareholders, and its shares must be circulated and traded publicly. A closed joint-stock company must have a minimum paid up share capital of 10,000 Litas (approx. $ 2,500), a minimum of one and a maximum of 50 shareholders, and its shares may not be publicly circulated or traded.

Pre-incorporation steps:

1. The investor must secure the premises used as the official address of the new company in the registration process.

2. The proposed name of the new company must be registered at the patent bureau.

3. The memorandum/agreement on incorporation and the by-laws of the new company must be prepared and notarized.

4. A hard currency accumulation account or account in Litas needs to be opened in the name of the new company in a local bank. Current regulations require that funds that meet the minimum capital requirements either be transferred from abroad to the accumulation account or lodged locally subject to compliance with certain procedures. Opening the account is a routine procedure, but before any funds can be withdrawn, the investor must provide evidence of incorporation of the company. A certificate, which is required in the incorporation process, will be issued by the bank as conclusive evidence that the requisite funds meeting the minimum capital requirement are held in the account.

Once the pre-incorporation steps have been completed, the investor needs to obtain a consent from the local municipality to establish the new company and, if the new company is in manufacturing, also a permit from the Environmental Department.

In certain cases, depending on the business to be undertaken, further licenses may be required from other appropriate government departments before business can be commenced.

Present regulations prohibit foreign investors from engaging in business activities affecting areas such as national security and defense, the manufacture and sale of drugs and organization of lotteries and gambling.

Incorporation process

Once the name has been registered at the patent bureau, the pre-incorporation steps taken and all necessary additional permits obtained, the company can apply for registration with the Register of Enterprises at the Ministry of Economics.

If the investor is a company incorporated outside of Lithuania, the following must be submitted:

1. A certified copy (legalized at the Embassy of the Republic of Lithuania) of the registration certificate or other documentation proving that the investor is legally incorporated in its country of incorporation;

2. A copy of the latest available audited balance sheet of the investor or other acceptable document confirming the investor's ability to meet the minimum capital requirement;

3. A board document indicating the decision to incorporate a company in Lithuania and invest the required amount of capital;

4. A certified copy of the by-laws or memorandum and articles of association of the investor;

If the investor is a natural person, he must produce evidence (for example, in the form of letter from his bank) confirming that he has the financial resources to meet the capital required for investment in the new company.

If translations into Lithuanian are necessary, these must be done through an official translation bureau in Lithuania.

In addition to the documents detailed above, the following further documents must be filed with the registration application:

- agreement/memorandum of incorporation certified by a notary public in Lithuania;
- by-laws certified by a notary public in Lithuania;
- certificate from the patent bureau showing registration of the company name;
- documentary evidence confirming the new company's official address;
- minutes of the shareholders meeting appointing the directors of the new company;
- certificate issued by the bank certifying that it has received the necessary capital for the company from abroad.

Once the application is ready and submitted, the Registrar of Enterprises is legally obliged to issue the registration certificate within 30 days after filing the application and all requisite documents with the Ministry of Economics.