Shares in other companies during liquidation: act before deregistration

If a company in liquidation holds shares in another company, for example a subsidiary, those shares are its assets, and the liquidator must deal with them while the company is still on the register. There are two routes: sell the shares and use the proceeds for the creditors, or, once the creditors have been paid, hand the shares to the shareholders as remaining assets (Article 73(13) of the Law on Companies of the Republic of Lithuania (ABĮ)). If the company is deregistered while the register still shows it as the shareholder, the shares do not simply pass to its shareholders: for assets of a company liquidated on the initiative of the Centre of Registers, the Supreme Court has held that ownership is established in court by way of a claim, and the shareholders of a company wound up by a liquidator should expect the same route. If the deregistered company was the subsidiary’s sole shareholder, the subsidiary meanwhile cannot take the decisions that only the general meeting of shareholders can take.

What to do when money is left in the account after deregistration is explained in The company has been deregistered but money is left in its account: what can be done. This article deals with shares, and with the company whose shares are left without a living owner.

Shares are assets of the company in liquidation

The liquidator has the rights and duties of the company’s board and of its manager (ABĮ Article 74(1)). In relations with other persons the manager acts on the company’s behalf alone (ABĮ Article 19(6)), so during liquidation the liquidator exercises the shareholder’s rights in the subsidiary.

From the liquidator’s appointment, the participants’ competence to enter into transactions passes to the liquidator (Article 2.110(1) of the Civil Code of the Republic of Lithuania (CK)). So the agreement selling or transferring the shares is signed on behalf of the company in liquidation by the liquidator. To avoid any doubt about these steps, it is worth naming them in the liquidation decision itself.

One of the liquidator’s functions is, after settling with the creditors, to distribute the remaining assets to the shareholders and to prepare the transfer deeds (ABĮ Article 74(2), point 2). A liquidator who fails to perform their duties, or performs them improperly, must compensate in full the damage caused (CK Article 2.110(4)). If the shares are neither sold nor transferred, this function has not been performed.

Route one: sell the shares

The proceeds from selling the shares become funds of the company in liquidation. The creditors are paid from them first, in the order of priority set by the Civil Code (ABĮ Article 73(13)).

If the subsidiary is a private limited company (UAB), the rules of ABĮ Article 47 apply:

• a shareholder who intends to sell shares must notify the UAB itself in writing (ABĮ Article 47(1));
• the other shareholders of that UAB have a pre-emption right to buy all the shares offered for sale (ABĮ Article 47(2));
• the UAB’s articles of association may provide that the pre-emption right does not apply, or set a different sale procedure (ABĮ Article 47(9));
• the share sale and purchase agreement is made in simple written form, unless the Civil Code requires notarial form (ABĮ Article 47(10)).

So read the subsidiary’s articles of association before you look for a buyer.

Route two: hand the shares to the shareholders

Once the creditors have been paid, the remaining assets of the company in liquidation are divided among the shareholders in proportion to the nominal value of their shares (ABĮ Article 73(13)). Shares in another company can be part of those remaining assets. Two time limits matter:

• assets may be distributed to the shareholders no earlier than 2 months after all the publication and creditor-notification steps set in ABĮ Article 73(10) have been completed (ABĮ Article 73(14));
• if there are court disputes over the company’s debts, assets may not be distributed to the shareholders until the court has resolved them and the creditors have been paid (ABĮ Article 73(15)).

Record the transfer in a transfer deed (ABĮ Article 74(2), point 2). A transfer of intangible shares is recorded by entries in the personal securities accounts of the transferor and the transferee (ABĮ Article 46(2)). When a UAB’s shareholders change, the data are filed with the Information System of Legal Entities’ Participants (JADIS) no later than 5 days after receipt of the documents on which the entries are based (ABĮ Article 41¹(2)). The subsidiary’s manager is responsible for this (ABĮ Article 41¹(3)), so hand the documents to the manager straight away.

ABĮ Article 47 governs the sale of shares; whether the other shareholders of the subsidiary have a pre-emption right when the shares are handed to the shareholders of the company in liquidation in kind is not stated directly in the law, and we found no case law on this point, so it is worth agreeing such a transfer with the other shareholders in advance. How the remaining assets are distributed, and which taxes then apply, is explained in Assets to shareholders on liquidation in Lithuania: when, how much, tax.

What happens if the company is deregistered still holding the shares

A legal entity ceases to exist from the moment it is deregistered from the Register of Legal Entities (CK Article 2.95(3)). If the shares were neither sold nor transferred, the shareholder on record is a person that no longer exists. Nobody can vote or transfer the shares in its name.

ABĮ Article 73(13) provides that company assets discovered later are distributed in the same way. But the law does not say how to do this once the company no longer exists. The Supreme Court of Lithuania, ruling on the assets of a company liquidated on the initiative of the Centre of Registers, held that the law does not provide for ownership of such assets to pass to the entity’s participants automatically, so ownership is established in contentious proceedings on a claim, not as a fact of legal significance (ruling of the Supreme Court of Lithuania of 16 October 2024 in civil case No e3K-3-185-1120/2024, paragraphs 25 and 26). The Supreme Court has not ruled separately on whether it would treat shares left behind by a company liquidated by a liquidator in the same way, so when preparing to go to court, proceed by way of a claim.

The shareholders of the deregistered company should therefore prepare to go to court for recognition of their ownership of the shares: until there is such a judgment, they have nothing to prove their right to vote at the subsidiary’s meeting.

What this means for the subsidiary

A company must have a general meeting of shareholders and a manager (ABĮ Article 19(1)). Where the company has neither a board nor a supervisory board, the manager is elected and removed by the general meeting of shareholders (ABĮ Article 37(3)). Only the general meeting approves the annual financial statements (ABĮ Article 20(1), point 11). When the sole shareholder has been deregistered, nobody can vote at the meeting, so these decisions cannot be taken.

Over time this may create a ground for liquidating the subsidiary itself, for example if the annual financial statements are not filed with the register, or if the manager leaves and nobody can elect a new one. The manager of the Register of Legal Entities has the right to initiate liquidation where, among other things:

• the legal entity has not filed the documents listed in CK Article 2.66(4), including the annual financial statements, within twelve months after the filing deadlines (CK Article 2.70(1), point 1);
• the legal entity’s management bodies have not been formed and as a result cannot take decisions for longer than six months (CK Article 2.70(1), point 2).

How that liquidation works, and what can still be done, is explained in Liquidation notice from the Centre of Registers: what to do and when. So do not delay the claim for ownership of the shares.

How to avoid this

1. Check where your company is a shareholder. JADIS holds data on UAB shareholders and the shares they own (ABĮ Article 41¹(1)).
2. Put the fate of the shares into the liquidation decision. State whether the shares will be sold or handed to the shareholders.
3. Complete the transfer before you file the documents for deregistration. Make sure the subsidiary’s manager has filed the new shareholder’s data with JADIS (ABĮ Article 41¹(2)).

More on liquidation

• Liquidation of companies: service page
• The company has been deregistered but money is left in its account: what can be done
• Assets to shareholders on liquidation in Lithuania: when, how much, tax
• Who can be a company liquidator in Lithuania, and what are they liable for?
• During a UAB liquidation: employees, creditors, audit and the bank account
• Liquidation notice from the Centre of Registers: what to do and when
• 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
• After bankruptcy opens: CEO duties and what shareholders can still do

How to start

Send us the Centre of Registers extracts for the company in liquidation and for the subsidiary, the articles of association of both companies and the liquidation decision, and, if the company has already been deregistered, its last shareholder data. We will tell you which route to take for the shares and prepare the documents or the claim.

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

More about this service: Liquidation of companies.