Bankruptcy in Lithuania
Insolvency of an enterprise means the state of an enterprise when it fails to settle with the creditor/creditors and the overdue liabilities/debts are in excess of over a half of the value of the assets on the enterprise's balance.
Bankruptcy means the state of an insolvent enterprise where bankruptcy proceedings have been instituted in court or the creditors are performing extrajudicial bankruptcy procedures in the enterprise.
Cases for filing the petition for bankruptcy
The creditor/creditors, the shareholder/shareholders, the head of the enterprise administration may file a petition for bankruptcy with the court if at least one of the following conditions is present:
- the enterprise fails to pay wages and other employment-related amounts when due;
- the enterprise fails to pay, when due, for the goods received, work performed/ services provided, defaults in the repayment of credits and does not fulfill other liabilities assumed under contracts;
- the enterprise fails to pay, when due, taxes, other compulsory contributions prescribed by law and/or the awarded sums;
- the enterprise has made a public announcement or notified the creditor /creditors in any other manner of its inability or lack of intent to discharge its liabilities;
- the enterprise has no assets or income from which debts could be recovered and therefore the bailiff has returned the writs of execution to the creditor.
Within one month from the day of receipt of the petition the court or the judge shall make a decision to institute bankruptcy proceedings or to refuse to grant the petition. In case a petition for restructuring is received during the investigation of the petition for bankruptcy and the court decision to institute bankruptcy proceedings has not yet been issued, the investigation of the petition for bankruptcy shall be postponed pending the court order to initiate restructuring proceedings or to refuse to grant the petition for restructuring.
Bankruptcy proceedings shall be instituted if the court establishes the presence of at least one of the following conditions:
- the enterprise is insolvent or the enterprise is late in paying the employees’ wages;
- the enterprise has made a public announcement or in any other manner notified the creditor/creditors of its inability to effect settlement with the creditor/creditors and/or of its lack of intent to discharge its liabilities.
Upon making a decision to institute bankruptcy proceedings, the court or the judge, in accordance with the law, must give forthwith a written notification to the register of legal persons, the enterprise, the Bank of Lithuania, the creditors, all persons who are keeping in custody or using or managing the enterprise assets on any other grounds, also the Ministry of Finance, the tax administrators, compulsory social insurance and compulsory health insurance administrators, credit institutions and insurance companies servicing the enterprise, the founder of the state-owned, municipal enterprise in bankruptcy or the institution representing the enterprise, also the Securities Commission, the courts, the pre-trial investigation institutions, the public prosecutor's department.
The court refuses to grant the petition for bankruptcy if one of the following conditions is present:
- The company has satisfied the claims of creditor(s) which have filed the petition for bankruptcy of the company;
- Restructuring proceedings for the company were commenced;
- The court comes to a conclusion that the company does not have enough money of estate to cover the expenditures of bankruptcy administration, with the exception of circumstances indicated in the Art. 10.
Andrius Apanavicius, Attorney at Law of the Gencs Valters Law Firm in Vilnius
Practising in fields of Bankruptcy Law in Latvia, Lithuania and Estonia
T: +370 52 61 10 00
F: +370 52 61 11 00