Liquidation of the company in Lithuania

If you decide to suspend your business in Lithuania, You need to go through the procedure liquidation of the company. At first glance, the process may seem complicated, but if you have the appropriate legal support, everything will go smoothly. In this article we will talk in detail about all the nuances of this process, consider the relevant legislation governing company liquidation procedure, as well as the main stages.

Two ways liquidation of a company in Lithuania

Any private legal entity (firm, company, society) in Lithuania can cease to exist in two main ways:

At this stage it is accepted decision to close the company.

Voluntary decision close a company in Lithuania initiated by the owners (participants, shareholders) of the company. The basis for termination of work in this case is the desire of the owners to close the business. So, at a joint meeting of owners, the appropriate decision is made, then a liquidator is appointed, creditors are notified and information about the liquidation is published. Then the company's assets are sold and various obligations are repaid, a liquidation balance sheet and report is drawn up, and the required documentation is submitted to the Lithuanian Enterprise Register. The final stage is the exclusion of the company from the register.

Compulsory is initiated by the controlling government agency (for example, the Register of Enterprises of Lithuania).

The basis for company closure are violations of regulations governing the activities of the company (for example, failure to submit reports, conducting illegal activities). The procedure is as follows: sending the company a notice of possible forced termination of business activities, providing time to eliminate violations, making a decision on forced closure by the court, appointing a liquidator responsible for completing the process, selling the company’s assets and paying off liabilities, drawing up a liquidation balance sheet and report, filing documents to the Lithuanian Enterprise Register and exclusion of the company from the register.

Procedure for closing a company in Lithuania

Liquidation is a legal process that leads to the cessation of its existence. In Lithuania, this process is regulated by the Law on Enterprises of the Republic of Lithuania and other regulations. Stages of closing a company:

Company liquidation process may take several months. Failure to comply with legal requirements can result in fines and other sanctions.

Causes liquidation of the company

There are many reasons why the company may be liquidated. Some of the most common:

• Insolvency: The company can no longer meet its expenses and obligations.
• Declining Profit: The business does not generate the desired profit for a long time.
• Changing market conditions: The market in which the company operates undergoes significant changes, making the business unprofitable.
• Loss of Key Customers: The company loses a significant portion of its customers, leading to a decrease in revenue.

• Poor management: Management fails to manage the firm, resulting in waste and inefficiency.
• Management Change: The ownership or management of a company changes, resulting in new strategic directions that are inconsistent with the company's current operations.
• Conflicts between owners or shareholders: Disagreements between owners or shareholders make it impossible to continue running the business.

• Changes in legislation: the legislation governing the company's activities undergoes changes that make business impossible or unprofitable.
• Natural Disasters: The company becomes the victim of a natural disaster, making it impossible to continue doing business.
• Military operations: the company is located in a military zone, which makes it impossible to continue doing business.

• Merger or Acquisition: A company merges with or is acquired by another company, causing it to close down.
• Change of strategy: A firm decides to change its strategy and focus, making the continued existence of the current company unnecessary.
• Market Exit: A firm decides to cease operations in a particular market, which may result in its liquidation in that market.

In addition to the reasons listed above, there are many other factors that can lead to the cessation of a company's business activities. It is important to note that this decision is a serious step and should only be made after careful consideration of all possible options.

Legislation governing liquidation of companies in Lithuania

The process is regulated by the Law on Enterprises of the Republic of Lithuania, which contains detailed rulesRules for liquidation of companies, including the procedure for creating a commission, its powers and responsibilities, the procedure for conducting an inventory, assessing assets and liabilities, repaying debts, dismissing employees, distributing remaining assets, and deregistering a company. The specifics of the procedure for closing a company are described in detail in the Law on Enterprises, namely in the article “Voluntary liquidation by decision of shareholders.”

Key regulations that you should also pay attention to:

• The Civil Code of the Republic of Lithuania defines general provisions on legal entities, including the procedure for their creation, reorganization and liquidation.
• Bankruptcy law applies in cases where a company cannot meet its financial obligations and is in bankruptcy.
• Accounting Law: defines the rules for maintaining accounting records in the process of closing a company.
• The Tax Code, which establishes the taxation procedure in the event that a decision has been made to liquidate a company.

Documentation

You will need to provide the following package of documents:

1. Financial:
   • Balance at the start of the procedure.
   • Profit and loss statement for the last reporting period.
   • Accounting statements for all periods of the company's activities.
2. Documents directly related to the liquidator:
   • Decision to appoint a liquidator. Note that this decision is made by shareholders or participants.
   • The liquidator's consent to perform his duties.
   • Information about the liquidator, including full name, address, passport details.
3. Documents on personnel matters:
   • Employment contracts with all employees of the company.
   • Orders on hiring/dismissal: employees.
   • Personal files of employees (if any).
   • Documents on the calculation and payment of wages (taxes, contributions).
   • Journal of registration of employment contracts.
4. Additional documents:
   • Printed forms for publication of liquidation in accordance with legal requirements.
   • Consent of creditors (if any).
   • Other documents that may be required depending on the specifics of the company's activities.

The list of documentation may be supplemented depending on the specifics of a particular situation.

Notification of creditors

The liquidation process involves a number of important procedures, one of which is the notification of creditors, who have the right to know about the closure of the company and present their claims within the period established by law. Failure to comply with obligations can lead to serious consequences for the liquidator and the company itself.

• Publication: the liquidator undertakes to publish a notice of liquidation in an official publication approved by the Lithuanian Enterprise Register.
• Direct Notice: The liquidator must give individual notices to all known creditors. This notice must contain information about liquidation, the deadline for submitting claims and the procedure for satisfying them.
• Time limits: Creditors have the right to present their claims within 4 months from the date of publication of the closure notice. If the liquidator does not have information about a specific creditor, the time limit for filing claims may be extended.

• 1st priority: state (payment of taxes) and employees (payment of wages)
• 2nd priority: owners of preferred shares.
• 3rd priority: creditors.

Insolvency of a company in Lithuania: definition and signs

This is a condition that is characterized by the inability of an enterprise to fully fulfill its financial obligations to creditors, employees and the state. Signs of insolvency of a company in Lithuania:

• Failure to satisfy the claims of creditors for monetary obligations: the enterprise cannot, within 3 months from the date of payment, repay the debt to creditors for monetary obligations, the amount of which exceeds 1/10 of the total amount of obligations. At the same time, obligations secured by a pledge, surety or bank guarantee are not taken into account.
• Non-payment of severance pay and (or) wages: the enterprise cannot, within 2 months from the date of payment, pay severance pay and (or) wages to persons working or who worked under an employment contract.
• Failure to fulfill the obligation to pay mandatory payments: the enterprise cannot, within 3 months from the date of payment, fulfill the obligation to pay mandatory payments, such as taxes, fees, customs duties.

• Head of the enterprise.
• Creditor of the enterprise.
• The bankruptcy manager.
• Prosecutor.
• The body exercising state control (supervision) over the activities of legal entities.

• Documents confirming the insolvency of the enterprise.
• List of creditors and their requirements.
• Financial statements of the enterprise for the last reporting period.
• Other documents required by law.

• Before the date of cessation of operations of the company, it is necessary to prepare financial statements that must comply with all statutory requirements. The liquidator is solely responsible for the preparation and presentation of financial statements.

• If the procedure for closing a company lasts more than one year, the liquidator undertakes to prepare the necessary financial statements of the company for the year, as well as a closure report, within three months. This documentation must be approved at a meeting of the company's shareholders.

• Failure to comply with statutory requirements when winding up a company may result in fines and other penalties. In some cases, more serious measures may be taken, such as forced restoration of the company.

When appointing a liquidator, it is recommended that the candidate be carefully selected and that the liquidator be provided with all the necessary resources to carry out his duties. If necessary, we advise you to seek help from a lawyer specializing in corporate law.

Ending the process

After completing all the necessary procedures, the liquidator undertakes to provide the following information to the Register of Legal Entities: the decision and report of the liquidator, as well as financial statements. In addition, other documentation may be required. After this decision is approved by the Register, information about the termination of the company’s activities is officially published.

It should be noted that this process is quite complicated, fraught with various difficulties. We can advise you on all stages of this procedure or act as the Liquidator of your company, representing its interests. This will help you avoid undesirable consequences, such as various fines, unexpected tax audits, or refusal to terminate the company’s business activities by government officials.

Consequences and penalties for incorrect company liquidation process in Lithuania

Failure to comply with legal requirements during liquidation can lead to serious negative consequences, including:

1. Penalties:
   • The State Tax Service (STS) of Lithuania may impose a fine for late submission of documents, for incomplete or inaccurate completion of documents, for non-payment of taxes and fees.
   • The Lithuanian Enterprise Register may impose a fine for late registration of a decision on liquidation of the company, for incomplete or inaccurate completion of documents, for failure to fulfill other duties.
   • The court is able to impose a fine for violation of court decisions related to liquidation of the company.
2. Forced restoration of the company: the court may decide to forcefully restore the company if the liquidation process was carried out in violation of the law. In this case, all costs associated with the restoration of the company will be borne by the persons who committed the violations.
3. Responsibility to creditors: if during the liquidation of the company the rights of creditors were violated, then they can go to court with a claim for damages. The court may order those who committed violations to pay creditors compensation for the damage caused.
4. Criminal liability: in some cases for serious violations of liquidation of the company There may be criminal liability.

The consequences and penalties listed above are not exhaustive. The exact consequences and penalties for improperly dissolving a firm will depend on the specific circumstances of the case.

Conclusion

Liquidation of the company - a complex and multi-stage process that requires careful compliance with all legal requirements.

• Multi-step: many formal procedures must be completed.
• Failure to comply with legal requirements may result in fines and other penalties.
• It is necessary to pay off all the company's debts and distribute the remaining assets.
• All tax liabilities should be closed.

Our services: we will help close a company in Lithuania

Closing a company is not just a formality, but a legally complex process involving many nuances. Going through all stages of liquidation on your own can result not only in a loss of time and effort, but also in serious mistakes leading to fines, tax audits, and in the worst case, refusal to close the company. That is why the employees of YB CASE offer you comprehensive assistance in liquidating your company in Lithuania.

• Acting as your Liquidator: we will take full responsibility for the correct and timely implementation of all necessary procedures, saving you from the need to delve into legal intricacies.
• Professional advice: our experienced lawyers will advise you in detail on all stages of liquidation, explain your rights and obligations, help you collect the necessary package of documents and minimize possible risks.

With our help, you can avoid fines and tax audits, close your company as soon as possible and make this process as transparent as possible.

Closing a company is an important step that requires a professional approach. Entrust this matter to experienced specialists, and you can be sure of a successful result! Turning to YB CASE will allow you to save time and effort, avoid difficulties with the law, and close your company quickly and without problems.