Financial Licences in Lithuania

Lithuanian legislation enables entrepreneurs from all over the world to offer various financial and investment services to their clients on the basis of licences issued by the Bank of Lithuania.

Under Lithuanian law, companies have the right to carry out any financial activity not prohibited by law.

Licences granting the right to provide financial services are issued by the Bank of Lithuania to legal entities participating in the financial market established in the Republic of Lithuania.

By licensing companies, the Bank of Lithuania aims to ensure that all participants entering the financial market are reliable and financially viable, and their management is competent and has an impeccable reputation.

Currently, the Bank of Lithuania oversees more than 650 participants in the financial market, including banks, credit unions, insurance organizations, payment institutions, management companies,  Consumer credit providers etc. In the supervision of the financial market, the Bank of Lithuania uses risk-oriented supervision, which means that representatives of the Bank of Lithuania allocate resources primarily to the most important financial market participants or financial services and products that pose the greatest risk to consumers.

The development of a regulatory and supervisory system favourable to FinTech, as well as the promotion of innovation in the financial sector, is one of the main strategic directions of the Bank of Lithuania today. Together with other government departments, the Bank of Lithuania aims to create a favourable environment for FinTech, which will attract new companies from all over the world to Lithuania and contribute to the development of FinTech solutions in the country.

Following this direction, the Bank of Lithuania proposes the following solutions:

Meetings and consultations with potential financial market participants

Available information on possibilities of licensing financial services in Lithuania

Request meetings, e-mail consultations on the launch of new FinTech products

Verifying the compliance of the draft with legislative and licensing requirements

Company in Lithuania UAB can assist in obtaining the following financial licences:

Financial licenses in Lithuania

Advantages

  • Lithuania has the highest number of EMI licences obtained in Europe.
  • Opportunity to arrange an appointment with the Lithuanian bank to discuss the project
  • Accessible information on financial services licensing opportunities
  • Low cost of licensing compared to other EU countries

Stock options in Lithuania in 2023

Stock options, or options as they are called, have proven to be a stimulus tool for a long time, and more recently after 2020. The changes to the Income Tax Act (VAT), which came into force in February, are gaining popularity even faster.

The popularity of options was also affected by the pandemic, which brought the business world to a standstill, which forced employers to look for more and more unique ways to attract new talent – from finding Bites Lietuva employees in the Tinder app to financial proposals to attract employees. With exceptional experience or qualities. Therefore, employee stock options are gradually becoming a new part of the workplace culture that benefits both companies in developing long-term employee loyalty, as well as providing its employees with financial security for their future in the company.

Employee stock options

The option principle for employees is the same as for other stock options – a financial instrument giving the holder of the option the right (but not the obligation)  to purchase shares of the company at an agreed price, which is usually the preferred price, within a specified period of time. One of the goals of an optional contract can be the formation of long-term and loyal relations with the employee and the introduction of flexible pay policy in the organization. Such a motivational package shapes the attractive culture and image of the company in the public space, helps to ensure the motivation of employees related to obtaining material benefits and greater confidence in the future. A stock option may be granted to an employee by both the employer and other organizations in the group of companies. Stock options can be given not only to company employees, but also to individuals with whom the company has not concluded employment contracts (for example, for external consultants,

hired financiers, etc. whose relationship with the company corresponds to labour relations). It is important to note that in such a case, the exemption from the GPM can be applied only to persons considered as employees (Article 2 of the General Agreement on the 32nd).

The terms and conditions for offering stock options can be selected and adapted to the company’s objectives, for example, an option transaction may be tied to the fulfilment of certain conditions: efficiency of the company as a whole, time and achievements of the employee in the company, t. as well as changes in the share price of a company and other indicators that can be determined by the company providing the stock option.

The process of providing stock options

A stock option sale is not in itself a basis for transferring the company’s shares to an employee. It only entitles the employee to acquire shares in the company in the future. After an option transaction, shares are transferred under an additional transaction, which the employee can always refuse. In the event that an employee decides to exercise the right to an optional transaction, a transfer of shares by gift, sale or other form of transfer of shares is made with the employee, after which the shares are finally transferred to the ownership of the employee. The shares themselves are usually granted to employees by issuing new shares or by transferring shares owned by the company or shareholders. In normal practice, the beneficiary of an option is allowed to make a payment option, i.e. after a certain period during the period of the option, for example.

When the intended option is exercised, shares are not transferred to the employee, but instead are paid in cash the value of the shares, which is taken into account when the option is exercised.

Risk management

As with any financial instrument, there are risks associated with an employee stock option transaction. One of the main goals of the stock option is to motivate employees, keep employees in the company or attract new employees, to create a positive image of the employer. This implies the need to establish guarantees in the transaction for cases where, when the employee does not meet the necessary criteria and/or leaves the company, and the option ceases to perform its function for the company.

In an option transaction, it is advisable to provide that if an employee leaves the company improperly (for example, an employee is dismissed for gross violation of labour law), the employee loses the right to exercise the option. Undoubtedly, the rules may establish ways in which the employee’s care is appropriate (for example, after a certain goal has been achieved). Various guarantees are also available to maintain control over shares and voting rights (for example, in the case of a general purchase of shares, where all shares of a company are repurchased by the investor, monetary compensation is paid to the employee instead of shares).

A properly prepared legal and risk management stock option for employees can be an excellent tool for improving the company’s image as an employer and attracting or retaining employees, providing a direct financial benefit. When workers are increasingly pragmatic about the benefits from the employer, or do not see the direct value added that they create (for example, an employer’s luxury office gives little to an employee working from home), stock options may indeed be advantageous. The best way to increase motivation and strengthen long-term relationships.

Company in Lithuania UAB in turn can help with preparation of the documentation necessary for the request: in preparation of the business plan of your project, provision of accounting requirements, management of the company and persons occupying key positions, Aspects to consider in ensuring compliance with and compliance with the Prevention of Money Laundering (KYC/AML). These recommendations will significantly shorten the application period and help companies interested in obtaining a license for electronic money, a payment institution, a bank or a cryptocurrency license to realize their project in Lithuania in the shortest time.

Since 2018, the Bank of Lithuania has received more than 300 applications for financial licenses, most of which have been approved. The largest number of licenses (more than 50) in the last three years was issued to companies in the sphere of Electronic Money Institution.

Company in Lithuania UAB will help you to register your company in Lithuania. We are also glad to offer our clients accounting services and assistance in obtaining financial licences.

Milana Scherbakova

LEGAL ADVISOR

+370 661 75988
[email protected]

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