Converting an IĮ into a UAB or MB: liability, assets, contracts, staff

Yes, an individual enterprise (individuali įmonė, IĮ) can be converted into a private limited liability company (UAB) or a small partnership (mažoji bendrija, MB). The new entity takes over all of the IĮ’s rights and obligations: its assets, contracts and debts. The employees’ terms of employment do not change. The owner’s unlimited liability does not disappear at once: for the IĮ’s obligations that arose before the new entity is registered, the owner remains subsidiarily liable for three years. The conversion is complete once the new entity’s founding documents are registered.

How to convert a small partnership into a UAB we have already answered in the FAQ on the service page (in Lithuanian). How to increase or reduce share capital is on the share capital service page (in Lithuanian). This article covers the conversion of an individual enterprise.

What an IĮ can be converted into, and what cannot be converted

Article 11(1) of the Law on Individual Enterprises of the Republic of Lithuania (IĮĮ) lists four forms: a public limited liability company (AB), a private limited liability company (UAB), a small partnership and a public institution (viešoji įstaiga). The decision to convert is taken by the owner alone (IĮĮ Article 6(5)(6)).

A conversion (pertvarkymas) is a change of the legal form of a legal entity (Article 2.104(1) of the Civil Code of the Republic of Lithuania (CK)). So only a legal entity can be converted. If you work under an individual activity certificate (individualios veiklos pažyma), you are not a legal entity. In that case the MB or UAB is set up from scratch, and contracts with clients are then concluded in the new company’s name.

Another common situation: the client wants the UAB to have two owners. An IĮ always has one owner, and only a natural person (IĮĮ Article 6(1) and (2)). So after the conversion the UAB starts with a single shareholder. A second shareholder can come in later: part of the shares is transferred to them, or new shares are issued. We explain how in our article on issuing new UAB shares. If you choose an MB, note that its members can only be natural persons, and there can be no more than 10 of them (Article 2(1) and (2) of the Law on Small Partnerships of the Republic of Lithuania (MBĮ)).

What happens to the owner’s liability

An individual enterprise is a legal entity with unlimited civil liability (IĮĮ Article 2(1)). If the IĮ’s assets are not enough to meet its obligations, the owner is liable for them, unless the law provides otherwise (CK Article 2.50(4)).

A UAB is a legal entity with limited civil liability (Article 2(2) of the Law on Companies of the Republic of Lithuania (ABĮ)). So is an MB (MBĮ Article 2(1)). This applies to new obligations.

Old obligations are covered by a special rule. Where a legal entity whose members are liable for its obligations is converted, those members are subsidiarily liable for three years for the obligations that arose before the entity in its new form was registered. This applies whatever the new form is (CK Article 2.104(2)). The owner is not released from this liability even if they later transfer the UAB shares or leave the MB (CK Article 2.104(2)). Subsidiary liability means that the creditor must first bring the claim against the company itself. The creditor can bring it against the owner if the company refused to compensate the loss or did not respond within a reasonable time (CK Article 6.245(5)). So a conversion does not “wipe” old debts. It limits liability going forward.

Assets, contracts and employees

Assets and contracts. The legal entity in its new form takes over all of the rights and obligations of the converted entity (CK Article 2.104(1)). There is no need to transfer each contract separately. The founding documents of the new form are registered in the Register of Legal Entities (Juridinių asmenų registras), and the company’s existing data in the register are changed (IĮĮ Article 11(6)). In our practice the company code stays the same, and the name can be changed as part of the conversion. Even so, it is worth telling your bank and key partners in advance that the legal form, and perhaps the name, will change.

Creditors. A creditor-protection rule applies to conversions (CK Article 2.104(4)). A creditor has the right to demand termination or early performance of an obligation and compensation for losses, if this is provided for in the transaction or there are grounds to believe that performance will become more difficult because of the conversion, and, at the creditor’s request, no additional security for performance was provided (CK Article 2.101(2)). So review your loan and leasing agreements before converting.

Employees. A conversion of the employer does not change the employees’ terms of employment and cannot be a lawful reason to end the employment relationship (Article 51(1) of the Labour Code of the Republic of Lithuania (DK)). No new employment contracts need to be signed.

Assets in exchange for shares, when converting into a UAB. An IĮ is converted into a UAB under the ABĮ provisions on converting a legal entity of another legal form into a company (IĮĮ Article 11(5)). This means three things. First, the assets for which shares are issued must be valued by an independent property valuer (ABĮ Article 72(12)), except in the cases listed in the law (ABĮ Article 72(13)). Second, the valuation report (or, in the cases set by law, a certificate) is submitted to the register no later than 10 days before the day of the decision to convert (ABĮ Article 72(14)). Third, the UAB’s share capital must not be lower than the statutory minimum (ABĮ Article 72(15); the minimum is set in ABĮ Article 2(4)). If the IĮ’s assets are not enough to form the minimum share capital, or its liabilities exceed the value of its assets, the owner has the right to make additional contributions (ABĮ Article 72(15)). IĮĮ Article 11(5) applies these ABĮ rules only to a conversion into a public or private limited liability company, not into an MB.

Steps and documents

1. Valuation of assets (UAB only). The valuation report or certificate is submitted to the register no later than 10 days before the decision (ABĮ Article 72(14); point 165 of the Regulations of the Register of Legal Entities (Juridinių asmenų registro nuostatai, JAR Regulations)).
2. Decision and new founding documents. When the owner decides to convert the enterprise, the founding documents of the legal entity in its new form are adopted at the same time. They must meet the requirements of the law governing that form (IĮĮ Article 11(2)). For a UAB these are the articles of association (įstatai); for an MB, its regulations (nuostatai).
3. “Under conversion” status. From the day of the decision the IĮ has the status of an enterprise under conversion. The document confirming the decision is submitted to the register no later than on the first day of the public announcement (IĮĮ Article 11(3)). An application to register the legal status is filed at the same time (point 166 of the JAR Regulations). The register records the status “under conversion” (pertvarkomas) within three working days at the latest (point 167 of the JAR Regulations).
4. Announcement and creditors. The decision is announced in the daily newspaper named in the IĮ’s regulations three times, at intervals of no less than 30 days. The alternative is to announce it once and notify all creditors in writing. The notice must contain the information about the IĮ referred to in CK Article 2.44, the new legal form, and where and from when the new founding documents can be inspected (IĮĮ Article 11(4); CK Article 2.44(1)). In our practice this stage takes the most time, which is why we usually choose a single announcement plus written notices to creditors.
5. Balance sheet and management bodies. Before registration, the new entity’s management bodies are elected and the balance sheet of the IĮ under conversion is drawn up (IĮĮ Article 11(6)).
6. Notary. When a legal entity is registered after a conversion, the documents are submitted to a notary (point 48 of the JAR Regulations).
7. Registration. An application to register the changes and the full text of the amended founding document are submitted to the register (point 168 of the JAR Regulations). The conversion is deemed complete from the registration of the founding documents of the legal entity in its new form (IĮĮ Article 11(7)).
8. Beneficial owners. A legal entity must submit information on its beneficial owners to the manager of the Information System of Legal Entity Participants (Juridinių asmenų dalyvių informacinė sistema, JADIS) no later than 10 days after the data change (Article 25(1) of the Law on the Prevention of Money Laundering and Terrorist Financing of the Republic of Lithuania (PPTFPĮ)). After the conversion, check whether the data have changed. After conversion into a UAB whose sole shareholder is the former IĮ owner, the company’s manager also submits the shareholder’s data to the JADIS manager (ABĮ Article 12(5)). From 1 November 2026 the same rule moves to ABĮ Article 12(4) (ABĮ Article 12(4), as in force from 1 November 2026).

Convert, or set up a new UAB and close the IĮ?

Both routes are possible. The difference is what happens to the running business.

A conversion is one procedure. The assets, contracts and debts stay in the same entity (CK Article 2.104(1)), and the employees’ terms do not change (DK Article 51(1)). The other side of it is the three-year subsidiary liability for old obligations (CK Article 2.104(2)).

A new UAB starts from zero. The IĮ remains a separate enterprise with its own contracts and debts. To transfer a debt to the new company, the creditor’s consent is needed (CK Article 6.116(1)). If a business or part of it is transferred to the new company, the employment relationships of that business’s employees pass to it automatically (DK Article 51(2)). The IĮ still has to be liquidated afterwards in a separate procedure, and while it exists the owner is liable for its obligations (CK Article 2.50(4)).

In our practice a new company is chosen when the IĮ has almost no activity and no employees or long-term contracts. When the IĮ has employees and lease, leasing or supply contracts, converting is usually simpler. An IĮ is liquidated on the grounds and under the procedure for liquidating legal entities set out in the Civil Code (IĮĮ Article 13(1)). We describe the general course of a liquidation in our article on starting a UAB liquidation.

How to start

Send us the IĮ’s regulations, tell us which form you want to convert into, whether you will change the name, and how many employees and creditors the IĮ has. We will prepare the decision, the new entity’s articles of association or regulations and the notices to creditors, and represent you before the notary and the register.

Phone +370 5 212 1506, email info@linden.lt

More about this service: changing the legal form of a legal entity (conversion).