Virginijus Bitė, Law Professor at Mykolas Romeris University Law School

Ivan Romashchenko, Senior Researcher at the Legal Technology Centre, Mykolas Romeris University Law School

Photo credit: Elian, via Wikimedia Commons

For years, company registration heavily relied on paper documentation. The 2019 Digitalisation Directive pushed EU members to offer digital company formation for private businesses. While Lithuania already had online legal entity formation pre-2019, this directive still prompted necessary legal updates, mostly enacted by July 1, 2022. These included recognizing identification tools like electronic signatures from other EU countries. Additionally, Lithuania’s State Enterprise Centre of Registers revamped its registration portal, adding an English guide and simplifying the process for foreigners, removing the need for a Lithuanian bank account before incorporation.

Our research delved into the Digitalisation Directive’s impact on Lithuanian company registration, aiming to identify potential improvements. We compared several EU jurisdictions (Estonia, Latvia, Lithuania, Poland) and Ukraine. We also surveyed Lithuanian law firms of various sizes and interviewed a representative from the State Enterprise Centre of Registers about their experience and future plans for online company registration. Additionally, we sought statistical data on online limited liability company registration from corresponding authorities in Estonia, Latvia, and Poland.

Lithuania fulfilled the Directive’s key requirement of online private company formation between 2009 and 2010. For comparison, this became available in Estonia in 2007, Latvia in 2010, Poland in 2012, and Ukraine in 2019. Statistics reveal an increase in online company formations across all these jurisdictions.

All jurisdictions implemented standardized articles of association templates for online company formation. However, while Estonian, Latvian, and Lithuanian templates offer limited options, Poland and Ukraine provide more customizable templates. This grants founders flexibility but could necessitate legal advice, increasing costs. Conversely, overly flexible templates with many fillable fields could also complicate the process. Therefore, adding more default provisions to the templates requires further examination.

Another crucial aspect is the signing process for founding documents and accessibility for foreigners. Having the longest history of online company registration (since 2007), Estonia allows foreigners residing in the EU to easily form companies online. Other EU countries gradually recognize qualified electronic signatures from foreign providers. While Poland offers the ePUAP trusted profile for signing, it is limited to individuals with a PESEL number, making qualified electronic signatures the primary tool for online company formation.

Many Lithuanian respondents advocate for broader e-signature use during online company formation, particularly introducing e-banking. This argument stems from the fact that e-banking users undergo consistent identification and security checks with document verification. Latvia and Ukraine successfully utilize Bank ID as a user-friendly identification tool, supporting this argument.

Despite significant implementation of the Digitalisation Directive, Lithuania still faces challenges in online company formation. Some, like recognizing EU-issued identification and publishing documents in a widely understood language, are being addressed through the Directive. However, respondents suggest additional technical and legal measures beyond its scope. This includes streamlining the e-signature process from multiple documents to a single file and recognizing e-banking as an identification tool. Providing more flexibility in signing the standardized template for limited liability companies would also increase accessibility. These improvements, exceeding the Directive’s requirements, aim to optimize the existing company formation regulations.

For further details: Bitė, V., Romashchenko, I. Online Formation of Companies in Lithuania in a Comparative Context: Implementation of the Digitalisation Directive and Beyond. Eur Bus Org Law Rev (2023). https://doi.org/10.1007/s40804-023-00282-6.