Investment Funds in Lithuania

A contractual fund lacks legal standing and, consequently, does notpossess any formalized management bodies. Instead, the operationaland administrative functions of a contractual fund are entirelyoverseen by a licenced management company responsible for itsoperation.

The investors of the fund engage with and hold a stake in the fund byvirtue of contractual arrangements, typically structured as investmentagreements or agreements related to the acquisition of investmentunits. Under these contractual provisions, investors effectivelybecome owners units of the fund and have legal claims in its assets,participating in its activities in accordance with the terms establishedwithin these agreements and fund establishment documents.

The management of the investment company, as well as allresponsibilities associated with its management bodies, includingthe Chief Executive Officer (CEO) and the Management Board, oralternatively, the duties of the general partner, are formallydelegated to a licensed management company through theexecution of a comprehensive management transfer agreement.

In practical terms, the management bodies of the investmentcompany are typically put in place during its initial establishmentphase. However, as soon as the Bank of Lithuania grants approvalfor the foundational documents of the investment entity, theypromptly cede their authority to the licensed managementcompany. This transfer of authority marks a crucial transition in thegovernance structure, ensuring that the investment company’soperations are conducted by and under the oversight and guidanceof the licenced management company.

In nearly all instances, self-managed partnerships primarily assumethe legal form of limited partnerships (in LT: Komanditinė ūkinėbendrija). Within the context of a self-managed limited partnership,the key responsibility for its management lies with its general partner.

Limited companies, including both public limited liability companies(in LT: Akcinė bendrovė) and private limited liability companies (in LT: Uždaroji akcinė bendrovė), operate under the stewardship oftheir internal management bodies. This typically encompasses theChief Executive Officer (CEO) and/or the Management Board, whoassume the responsibility for the company’s day-to-day operationsand strategic decision-making.

Typically, fund structures tend to be more intricate than simple A-Cmodels, often incorporating distinct management holding entities tohandle various components such as management fees, carriedinterest (carry), advisory fees, and team’s commitment.

These multi-layered fund structures offer the flexibility to implementdiverse dividend, fee, or carry distribution models and allocations tothe management team. This approach ensures that the carriedinterest, which represents a share of the fund’s profits, is collectedinto separate vehicles, facilitating more nuanced and customizedcompensation arrangements for the management team.