Partnership Agreement
A joint activity agreement (partnership agreement) – under this agreement, two or more persons (partners), combining their property, work, or knowledge, undertake to act jointly for a specific lawful purpose or to engage in certain activities. Joint activity agreements are also used to establish partnerships in the Republic of Lithuania. If the purpose of the joint activity is not profit-making, the joint activity agreement is referred to as an association agreement. The agreement must be in writing, and in cases provided for by law (in Lithuania), in notarial form. Failure to comply with the form requirements renders the agreement invalid.
A partner’s contribution is considered to be everything they bring into the joint activity – money, other assets, professional and other knowledge, skills, business reputation, and business contacts. It is presumed that partners’ contributions are equal unless the joint activity agreement stipulates otherwise. Contributions are valued in monetary terms by agreement of all partners.
When managing joint affairs, each partner has the right to act on behalf of all partners unless the joint activity agreement provides that joint affairs are managed by one of the partners or by all partners together. If the affairs can only be managed jointly, the consent of all partners is required to conclude any transaction. In relations with third parties, a partner’s authority to conclude transactions on behalf of all partners is confirmed either by a power of attorney issued by the other partners or by the joint activity agreement itself.
If the partnership agreement is not related to the partners’ business or commercial activities, each partner is liable for joint contractual obligations with all their assets in proportion to their share. For joint non-contractual obligations, the partners are jointly and severally liable. If the joint activity agreement is related to the partners’ business or commercial activities (in the Republic of Lithuania), all partners are jointly and severally liable for joint obligations regardless of the grounds on which they arose.
The profit obtained from the joint activity is distributed among the partners in proportion to the value of their contributions to the joint activity unless otherwise stipulated in the joint activity agreement. Any agreement to exclude a partner from profit distribution is invalid.
A joint activity agreement terminates:
- Upon one of the partners being declared legally incapable, of limited legal capacity, or missing, unless the joint activity agreement or a subsequent agreement of the remaining partners provides for the continuation of the agreement among the remaining partners, except in cases where the joint activity agreement remains valid without that partner;
- Upon the initiation of bankruptcy proceedings against one of the partners, except for the cases specified in point 1 of this section;
- Upon the death, liquidation, or reorganisation of one of the partners, unless the joint activity agreement or a subsequent agreement of the remaining partners provides for the continuation of the agreement among the remaining partners or the replacement of the deceased (liquidated or reorganised) partner with their legal successors;
- Upon one of the partners’ withdrawal from participating in a joint activity agreement of indefinite duration, except for the cases specified in point 1 of this section;
- At the request of one of the partners – upon termination of a fixed-term joint activity agreement, except for the cases specified in point 1 of this section;
- Upon the expiry of the term of the joint activity agreement;
- Upon the partitioning of one partner’s share from the joint property at the request of their creditors, except for the cases specified in point 1 of this section.
From the moment of termination of the joint activity agreement, its participants are jointly and severally liable to third parties for unfulfilled joint obligations. A partner who contributed an individually specified item to the joint activity has the right, upon termination of the agreement, to demand the return of that item, provided that this does not infringe upon the interests of the other partners or creditors.