Month: March 2025

Legal representation: what do you need to know about powers of attorney?

Posted on by avocad_bxgv12hf

Imagine: you're on holiday in another country and you have an important contract to sign in Lithuania. Or your grandmother can't go to the bank or do the paperwork herself because of health problems. A friend asks you to help him sell his flat because he lives abroad. According to lawyers, there is only one solution to these situations - power of attorney. A power of attorney is a written document that gives someone the right to carry out legal acts on behalf of another person. Rokas Puodžiūnas, a lawyer at AVOCAD, points out that although it is a convenient and frequently used tool, it is important to know the basic rules of the power of attorney in order for it to work smoothly and avoid mistakes.

First of all, the will of one person (the principal) is sufficient to constitute a power of attorney. "The consent of the representative is not required for the power of attorney to be issued and take effect. The chosen representative is not obliged to fulfil the obligations entrusted to him or her, and the law gives the representative the right to refuse the power of attorney issued to him or her," the lawyer points out.

The principal who issues the power of attorney is called the attorney-in-fact and the agent who receives the power of attorney is called the agent. The power of attorney specifies the specific acts to be performed by the principal on behalf of the agent with respect to a third party.

The rights conferred on a representative can only be confirmed by a power of attorney issued by the representative, so the representative must produce the power of attorney to third parties when performing any act on behalf of the principal.

The lawyer also points out that powers of attorney must specify the precise rights conferred on the authorised person. "The law does not allow the abstract content of rights to be specified. For example, it is not possible to state that the power of attorney covers all possible legal acts. The power of attorney must contain an exhaustive and detailed list of the rights to be granted," says Puodžiūnas. Similarly, a power of attorney cannot be granted for rights that can only be exercised personally (e.g. marriage, making a will, establishing usufruct over an object).

Powers of attorney vary from one-off to more powerful. For ease of understanding, they are classified according to the extent of the rights they confer:

  • A single (ordinary) mandate is one that is intended for one specific act. For example, if you need to sign a contract for the sale of a car and you can't do it, you issue a power of attorney to someone else to do it for you.
  • General Power of Attorney - when you want someone to help you take care of your property, protect it or manage its day-to-day affairs. This is a slightly broader power of attorney, but still limited.
  • Special mandate - for action in a specific field. For example, if you want someone to represent you in court or handle your affairs at the bank.

Powers of attorney can also be issued to one person or several. If you appoint one specific person, this is called a separate power of attorney. If you authorise several people and they have to act together, this is a general (quantitative) authorisation.

Another important point, according to an AVOCAD lawyer, is the duration of the mandate. It can be either fixed-term (where it clearly states how long it is valid for) or open-ended. "However, if there is no time limit, the law still limits its validity - such a power of attorney is automatically valid only for one year from the date of issue," says R. Puodžiūnas.

To be valid, a power of attorney must be in a separate written document and signed by the attorney-in-fact - the one who authorises another to act on his/her behalf. In some cases, the law also requires notarisation. This is necessary when authorising transactions requiring a notarial form, when acting on behalf of a natural person in dealing with legal persons or when dealing with actions relating to the management, use or disposal of immovable property.

Mandates are not perpetual. They expire in various ways - when they expire, when the attorney-in-fact decides to revoke it, or when the attorney-in-fact refuses to execute it. A power of attorney also ceases to have effect when one of the parties disappears - for example, if a legal person is wound up or is declared bankrupt, or if one of the natural parties dies, or is declared incapacitated in a particular field, or is simply declared missing.

The lawyer reminds you that when the power of attorney ends, both the principal and the attorney-in-fact have their duties. The principal must reimburse the necessary expenses incurred by the agent in the performance of his or her mandate - unless it was agreed in advance that this would be done without remuneration. If both parties are natural persons, the agreement is presumed to be gratuitous unless otherwise stated.

The principal also has a duty to inform of the end of the mandate, in particular if he or she revokes it, or if the mandate ends because of death or a change in legal status. In such a case, the heirs should be notified. In the meantime, the attorney-in-fact must return the original document - if he or she is unable to do so, his or her successors must do so. In addition, the attorney-in-fact must be accountable to the principal: he or she must give full details of how he or she carried out the assignment, the acts he or she performed, the documents he or she signed and the benefits he or she received on behalf of the principal. Anything received during the execution of the assignment must be returned to the principal.

 

Dividends: when are they illegal?  

Posted on by avocad_bxgv12hf

The end of the financial year is a good time to learn more about dividends. This is an important aspect of a company's financial planning, but according to lawyers, businesses often forget a fundamental rule: dividends should only be paid when the company is stable and the interests of creditors are not affected. If a company has outstanding debts that should have been paid, the payment of dividends may be considered unlawful.

According to Domantas Velykis, Associate at AVOCAD, the Law on Joint Stock Companies provides that dividends are a share of profit allocated to a shareholder in proportion to the value of the shares owned by the shareholder. Simply put, dividends are a share of profit distributed to shareholders according to the number of shares they hold. Normally, companies allocate only a portion of their profits to dividends and invest the rest in business development, innovation or other needs.

The distribution of profits takes place after the end of the financial year, when the company's annual accounts are approved. The General Meeting of Shareholders decides on the payment of dividends and their amount. Although dividends are usually paid once a year, the law allows companies to distribute dividends more frequently - for example, every six months.

Only those persons who are shareholders of the company at the close of business on the day of the General Meeting of Shareholders or who are otherwise legally entitled to dividends are entitled to receive dividends. In the event of a subsequent acquisition of shares, the new shareholder is not entitled to past dividends but may be entitled to future payments.

Dividends must be decided in accordance with the legal framework. "If dividends are distributed in violation of the law, the shareholder may be obliged to repay the amount received to the company," notes Domantas Velykis. The Companies Act provides that if a shareholder knew or should have known that dividends were unlawfully distributed, the company is entitled to recover the amounts paid.

According to AVOCAD's lawyer, there are three cases where a company cannot decide to pay dividends:

  1. If the company has outstanding liabilities that have already fallen due.
  2. If the company's distributable profit is negative, a loss has been incurred.
  3. If the company's equity is too low or would fall to a critical threshold after the payment of dividends.

The Supreme Court of Lithuania has stated that dividends should only be paid when the company is stable and such payments do not harm the interests of creditors. One of the indicators of the stability of an undertaking is its ability to pay its creditors. Therefore, if a company has outstanding debts which should have been paid, the payment of dividends may be considered unlawful.

However, case law recognises that if a company, after having declared a dividend, pays the outstanding debt before actually paying the dividend to the shareholders, the infringement is deemed to be eliminated. In such a case, the dividends paid to the shareholders would not be considered unlawful.

Another relevant situation, according to the lawyer, is if the company agrees with the creditor to postpone the payment of the debt by adopting new payment terms. Case law shows that in such cases the obligation is not considered to be in arrears and therefore the granting of dividends can be considered legitimate if the company complies with the new payment terms. In this way, the company can safeguard the interests of its shareholders without infringing the rights of its creditors.

Thus, the distribution of dividends is a delicate process that requires careful legal assessment. It is important for companies not only to comply with the law, but also to take a responsible view of their financial position and liabilities in order to avoid potential legal consequences.

Ocean rescue operation. How much will it cost?

Posted on by avocad_bxgv12hf

The rescue of Lithuanian Aurimas Mockus off the coast of Australia, which has attracted public attention, has revealed an important aspect - how such rescues are legally regulated and who has to pay for them.

According to Mantas Baigis, an attorney at AVOCAD, such rescue operations are very clearly regulated by international law. According to the lawyer, rescue at sea is regulated by the International Convention on Maritime Search and Rescue, to which Australia is a party. Under the Convention, States are obliged to provide assistance to anyone in danger at sea, regardless of their nationality or the circumstances of the disaster, i.e. rescue operations at sea do not normally involve the reimbursement of rescue costs.

"However, if it is established that a person intentionally or through extreme negligence (e.g. disregarding warnings) caused a situation that required a rescue operation, proceedings may be initiated to recover the costs of such an operation," notes Baigys.

As regards the salvage operation of Aurimas Mockus' rowing boat and the property it contained, the International Convention on Salvage of Property in Waters applies, which entitles salvage operations to remuneration. The Convention details the conditions for indemnity. In other words, salvors are entitled to remuneration. This remuneration is usually paid out of the pocket of the property owner or insurer.

The lawyer also points out that rescue operations are two different categories. "In any case, whether Aurimas Mockus will be required to pay any costs (if a boat rescue is carried out) will depend on how the situation will be qualified by the Australian organisations responsible for the rescue operations," notes the AVOCAD lawyer.

What are the regulations for rescuing people and property in the Baltic Sea?

Lithuania is also a signatory to the International Convention on Maritime Search and Rescue and is not required to reimburse a person for the cost of his or her rescue (unless the person is found to have acted with extreme carelessness and intent). In addition, Lithuania has adopted the Law on Safe Navigation, which strictly stipulates that ships in the territorial sea and ports of the Republic of Lithuania are obliged to provide assistance to people in distress at sea using the technical means at their disposal. Our country has also acceded to the International Convention for the Salvage of Property in Waters, the provisions of which are applicable to salvage operations, which are normally the responsibility of the owner of the property or its insurer.

 

Can you win without playing cards: economic pressure, negotiating inequality and treaty challenge 

Posted on by avocad_bxgv12hf

The most talked-about event at the moment is the US-Ukraine mineral agreement. The terms of the agreement are being examined in public and even certain episodes of the negotiations are being made public. The situation culminated in a meeting between the Presidents of Ukraine and the US, during which it is possible to see the two parties in different positions, namely the dominant US, which is demanding that Ukraine conclude the treaty, with a real threat of existential and economic consequences for Ukraine if the treaty is not signed. On the other side, we have Ukraine, which is being forced to sign a deal that is clearly to its detriment, and which it would never have considered signing if its existence had not been threatened.

We can look at the situation from a moral point of view, where the stronger party to the contract cannot take advantage of the weaker party's particularly bad situation, but we can also look at the situation from a legal perspective, a situation that is much closer to our everyday lives.

Imagine you are the owner of a company. The company is facing financial difficulties and the possibility of bankruptcy. You are approached by your business partners who ask you to sign a personal guarantee agreement for the company's liabilities, otherwise they will no longer work with your company, which means bankruptcy for you. As the President of the United States would say, you do not have a card to play, either you guarantee or the company ends. Eventually, the surety is signed, the company goes bankrupt and the creditor is already claiming the debt from you. Is it possible to invalidate such a surety agreement?

Even closer: you lose your job, you have young children, you have no means of livelihood, you are offered to sell your home at a price you consider inadequate, but you have no choice but to sell it quickly, otherwise you will suffer very serious consequences. Can such a contract of sale be challenged?

These agreements are not much different from the US-UKRAINE deal in everyday life, but the world is taking a dim view of the current situation, and no one is coming to the rescue of the country that is pressed against the wall. However, if you were the shareholder of the company I mentioned, or a natural person, you could, even after signing such an agreement, go to court and ask for it to be declared invalid.

The Civil Code gives you the right to rescind a contract if it was concluded under economic pressure or a real threat of such pressure. A contract may also be declared void if it was concluded by a person due to circumstances which made it necessary to conclude it on very unfavourable terms.

The case law consistently holds that in order for a transaction to be recognised as having been concluded as a result of economic pressure or a real threat, the following conditions must be met: (1) the other person demanded that the contract be concluded; (2) the threat was made on economic grounds, the occurrence of which depended on the dishonest actions of the other person; (3) the transaction was concluded on terms manifestly disadvantageous to the person concluding the transaction; and (4) the contract would not have been concluded in the absence of economic pressure.

The application of the hardship ground in business-to-business relationships requires consideration of business risk.A transaction may be declared void on this ground only if the following conditions are met: (1) circumstances beyond the control of the other party to the transaction have arisen which have forced the person to enter into the transaction on terms that are manifestly unfavourable to him; (2) the other party to the transaction has knowledge of those circumstances and has taken advantage of them by imposing his own will on the other party to the transaction.

In such cases, it is particularly important to assess the element of inequality between the parties in the agreement, where one party receives much more than the other. The criterion for identifying inequality is defined as a shocking disproportion between the benefits obtained by the parties from the contract or its terms.It is also important that, in addition to the shocking disproportion in the benefits received by the parties, the circumstances giving rise to unfairness are identified, i.e. that the stronger party has taken unfair advantage of the weaker party because of its economic weakness or disadvantage, its imprudence, inexperience, lack of bargaining experience.

International principles of contract law state that in certain cases only an objective element is sufficient to establish a fundamental inequality, i.e. the nature and purpose of the contract may be such that it is sufficient to establish a shocking disproportion in the benefits obtained by the parties from the contract.Such an interpretation of fundamental inequality is in line with the Civil Code.While it is possible in certain cases to establish a fundamental inequality merely on the basis of a disproportion between the parties' mutual obligations and the benefits they receive, where the difference is particularly shocking, the subjective circumstances which make the stronger party's dishonesty unfair should normally also be assessed.

In one way or another, the law provides that a contract may be declared void if it is the result of difficult circumstances or economic pressure, but in each case the circumstances would be examined and assessed by a court, as contracts can in principle only be declared void if there is a clearly established ground.

 

Lawyer Egidijus Kieras