Liquidating an MB in Lithuania: who decides, who liquidates, who gets what

A small partnership (mažoji bendrija, MB) is liquidated by a decision of its members’ meeting taken by a qualified majority. Where there is only one member, that member’s written decision is enough. The same decision appoints the liquidator. The liquidator can be a member, the manager or another person, but if a liquidation committee is set up, only MB members can sit on it. The liquidator completes the MB’s obligations and pays the creditors. Only then is what is left split among the members in proportion to their contributions as they stood on the day of the liquidation decision. The MB ceases to exist when it is deregistered from the Register of Legal Entities (Juridinių asmenų registras).

Who decides to liquidate an MB

An MB can be liquidated on the grounds for liquidating legal entities set out in the Civil Code (Article 30(1) of the Law on Small Partnerships of the Republic of Lithuania, MBĮ). Article 2.106 of the Civil Code of the Republic of Lithuania (CK) lists those grounds exhaustively: a decision of the members, bankruptcy, a decision of a court or of the registrar, the end of the period for which the entity was set up, and the other cases named in that article.

When the members themselves decide to liquidate, this is the exclusive power of the members’ meeting (Article 13(13) MBĮ). The decision needs a qualified majority of not less than 2/3 of all votes held by the MB’s members (Article 18(1)(6) MBĮ). The MB’s articles (nuostatai) can set a higher majority (Article 18(2) MBĮ), so check your articles first. Where the MB has a single member, no meeting is called: that member’s written decision is equal to a decision of the members’ meeting (Article 15(3) MBĮ).

The members’ meeting cannot decide to liquidate an insolvent MB (Article 30(3) MBĮ). A bankrupt MB is liquidated under the Law on Insolvency of Legal Entities (Article 30(4) MBĮ). If the Centre of Registers (Registrų centras) decides to liquidate the MB, the Civil Code rules on liquidation on the registrar’s initiative apply (Article 30(2) MBĮ). What to do in that case is covered in Centre of Registers initiated liquidation: what to do.

Who can be the liquidator of an MB

The members’ meeting that decides to liquidate the MB must appoint a liquidator (Article 30(6) MBĮ). If several liquidators are appointed, a liquidation committee is formed. In that case only MB members can be appointed as liquidators, and one of them is appointed chair of the committee (Article 30(6) MBĮ).

Where a single liquidator is appointed, the MBĮ sets no such restriction. Article 2.108(3) CK requires the liquidator to have the necessary qualifications, and the MB’s articles can set other rules for appointing the liquidator (Article 2.108(2) CK). If the articles say nothing on this, the MB’s manager, a member or an outside person can be appointed as the sole liquidator. Whether that outside liquidator may also be a legal person, the MBĮ does not say directly. Each liquidator’s name, surname and personal code are filed with the register (Article 30(10)(1) MBĮ), which suggests a natural person. But this is only an inference from the data filed with the register: Article 2.108(3) CK uses the general word “person”, and while the ABĮ says expressly that a UAB’s liquidator may only be a natural person (Article 74(1) ABĮ), the MBĮ contains no such restriction. We found no case law on the point, so the question is not settled.

From the liquidator’s appointment, the MB’s management body loses its powers (Article 30(7) MBĮ). The liquidator is appointed and removed by the members’ meeting (Article 13(14) MBĮ). The decision is passed when more than 1/2 of all votes of the members entitled to vote are cast for it, unless the articles set a higher majority (Article 17 MBĮ). A liquidator who fails to perform their duties, or performs them improperly, must compensate in full the damage caused (Article 2.110(4) CK).

The register, the notice and the creditors

From the day of the liquidation decision, the MB has the status of an MB in liquidation (Article 30(5) MBĮ). The liquidator gives the registrar their details and, no later than on the day of the first public notice, files the documents confirming the liquidation decision (Article 30(10)(1) MBĮ). The register receives an application to register the legal status, the liquidation decision and a document on the liquidator (point 184 of the Regulations of the Register of Legal Entities, the JAR Regulations).

The liquidator must publish the liquidation decision in the source named in the MB’s articles three times at intervals of not less than 30 days, or publish it once and notify all creditors in writing (Article 30(9) MBĮ).

An MB in liquidation can enter only into transactions linked to winding up its activities or provided for in the liquidation decision (Article 2.111 CK). The liquidator completes the MB’s obligations, pays the creditors and makes claims against the MB’s debtors (Article 30(10)(3) and (4) MBĮ). Creditors’ claims are met in the order set by law (Article 30(11) MBĮ), which is the order in Article 2.113(1) CK. How that order works, and what to do about employees, is covered in During a UAB liquidation: employees, creditors, audit and the bank account. The same order of creditors applies to an MB.

How the MB’s assets are split among the members

Assets go to the members only after the creditors have been paid. What is left is split among the members in proportion to their contributions as they stood on the day of the liquidation decision (Article 30(11) MBĮ). A member who had not yet met their contribution commitment on that day can receive assets in proportion to the contribution actually transferred before the decision (Article 30(11) MBĮ).

A contribution transferred by a member became the MB’s property (Article 8(3) MBĮ). So a member does not take back “their” item. They receive a share of what is left, in the proportion of the contributions. The liquidator records the transfer to the members in acceptance and transfer certificates (Article 30(10)(5) MBĮ).

Timing matters for one more reason: the liquidation decision can no longer be revoked once at least one member has received part of the assets of the entity in liquidation (Article 2.107(2) CK).

Tax. The Law on Personal Income Tax treats a liquidation as if the member sold their interest. Where assets are transferred to a member, the income is the fair market price of those assets on the day ownership passes (Article 11(1) and (2) of the Law on Personal Income Tax, GPMĮ). Assess the tax consequences before you sign the transfer certificates.

Are MB members liable for the MB’s debts

An MB is a legal entity with limited civil liability (Article 2(1) MBĮ). A member is not liable for the legal entity’s obligations, except in the cases set by law or by the founding documents (Article 2.50(2) CK). However, if the MB cannot meet an obligation because of a member’s bad-faith actions, the member is liable with their own assets on a subsidiary basis (Article 2.50(3) CK).

One more rule matters on liquidation: advance profit payments. If a member’s advance exceeds their share of the year’s profit, they must return the difference to the MB. If the MB made a loss in the financial year, the full amount received as advance profit must be returned (Article 26(6) MBĮ). The liquidator must make claims against the MB’s debtors (Article 30(10)(4) MBĮ), and a member who has to return such an amount is a debtor of the MB.

If it turns out during the liquidation that the MB is insolvent, the liquidator must stop all payments and initiate bankruptcy proceedings without delay (Article 7 of the Law on Insolvency of Legal Entities, JANĮ). Payments to members stop as well.

How the MB is deregistered

After the settlements, the liquidator hands over the MB’s documents for safekeeping, draws up the liquidation certificate and files it with the registrar together with the other deregistration documents (Article 30(10)(6)–(8) MBĮ). Point 198 of the JAR Regulations lists what must be filed: an application for deregistration, the liquidation certificate, a certificate that the documents were handed over for safekeeping, and other documents.

The liquidator must complete the liquidation and deregister the MB no later than one year after the status of an entity in liquidation is registered. Before that period ends, the registrar can be asked to extend it by one year (Article 2.110(3) CK). What drives the timing is covered in How long company liquidation takes.

A liquidated MB ceases to exist from its deregistration from the Register of Legal Entities (Article 30(13) MBĮ; Article 2.95(3) CK).

More on liquidation

• Liquidation of companies: service page
• Liquidation initiated by the Centre of Registers
• Closing an individual enterprise (IĮ) in Lithuania: steps and liability
• Liquidating a public institution (VšĮ): who decides, liquidator, assets
• Liquidating an association or charity fund: who gets the assets
• Closing a foreign company’s branch in Lithuania: steps and what can stop it
• Are shareholders and the CEO liable for debts after deregistration?
• Liquidating a UAB with a shareholder abroad: what can be done remotely
• Liquidation in Lithuania: archive certificate and state land lease tax
• Liquidation in Lithuania: annual financial statements and the AGM
• Shares in other companies during liquidation: act before deregistration
• After bankruptcy opens: CEO duties and what shareholders can still do

How to start

Send us the MB’s articles and a recent Centre of Registers extract, and tell us how many members the MB has, what their contributions are, and what debts and assets the MB has. We will tell you which decision is needed, who can be the liquidator and how the assets will be split.

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

More about this service: Liquidation of companies.