LITHUANIA Law and Practice Contributed by: Evaldas Klimas and Mantas Lideika, WALLESS
• a notary fee of up to EUR338, with the exact amount depending on the value of the mort - gaged real estate; and • a bailiff fee consisting of: (a) up to EUR220 as administration expens - es (the exact amount depends on the amount subject to recovery); (b) a success fee calculated as a percentage of the amount subject to recovery (from 4% to 19%); plus (c) additional expenses. All fees are net of VAT (21%, if applicable). 3.5 Legal Requirements Before an Entity Can Give Valid Security The creation of security by a Lithuanian entity may raise two concerns: • potential non-compliance with Lithuanian financial assistance restrictions; and • potential non-compliance with corporate ben - efit requirements. Article 45 (2) of the Law on Companies of the Republic of Lithuania indicates that a company may not directly or indirectly advance funds, make a loan nor grant security to individuals or corporate entities if doing so facilitates the acquisition of shares by the latter persons. This means that the Lithuanian entity is not permitted to secure debt obligations if the only purpose and utilisation of such funds is to finance the acquisition of the Lithuanian entity. Furthermore, the principles of Lithuanian civil law and corporate law require that an entity entering into any transaction should have sufficient com - mercial benefit from that transaction.
Both of these issues may lead to the invalidity or unenforceability of obligations of the Lithuanian guarantor and/or mortgagor (pledgor). 3.6 Formalities When a Borrower Is in Default If a borrower fails to fulfil secured obligations, enforcement of the mortgage over the real estate would be carried out through an out-of- court enforcement procedure. A creditor would have to apply to a notary public, requesting the issuing of an enforceable instrument. After the enforceable instrument has been issued by the notary public, the creditor would have to apply to a bailiff, requesting the initiation of a recov - ery procedure over the real estate mortgaged in favour of the creditor. Under Lithuanian law, the priority of a mortgage over real estate is decided by considering the timing of the mortgage registration in the Regis - ter of Agreements and Constraints of the Repub - lic of Lithuania – ie, registration will reflect the registered mortgage priority over any other not- yet-registered mortgages and any subsequently registered mortgages, as well as all unsecured claims. The duration of the enforcement and realisation on real property security can vary greatly. If there are no unfounded complaints, the enforcement takes about six months from the application to the bailiff. If the debtor has exhib - ited malice in making unfounded complaints, the litigation may last for several years. No specific rules regarding restrictions on a lender’s ability to foreclose or realise on collateral in real estate lending have been implemented by governmen - tal entities in response to the pandemic. 3.7 Subordinating Existing Debt to Newly Created Debt A debt may become subordinated upon the con - sent of a previous creditor and the conclusion of
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