Reorganisation does not require the creditors' consent. Creditors have rights, but they are not the ones who take the decision. In practice the bank's consent is often needed \u2013 not because of the law, but because of the agreement with the bank. Employees' consent is not needed either, and no new employment contracts need to be concluded: the employment relationships continue. These are usually the very two questions over which a reorganisation is put off for no reason. Below \u2013 which of this is law, which is a contract term and which is simply practice.<\/p>\r\n
Creditors' rights during a reorganisation are set out in Article 2.101(1) and (2) of the Civil Code (CK) and in Article 66(1) of the Law on Companies (AB\u012e).<\/p>\r\n
The difference between a right and a consent is fundamental. A creditor cannot stop a reorganisation merely because it does not like it. But it has rights it can use, and it uses them when it learns of the reorganisation too late or in the wrong way.<\/p>\r\n
In practice a simple rule follows from this: the creditors are dealt with through a proper notification procedure, not by negotiating for permission.<\/p>\r\n
The bank is a creditor, but its question is dealt with differently. From our letters to clients: in practice the bank's consent is needed where obligations are transferred to the new company, or where the agreement with the bank itself directly requires it.<\/p>\r\n
This means that reviewing the agreement with the bank is the first task, not the last. Credit and leasing agreements often contain a clause that makes a reorganisation, a transfer of assets or a change of control subject to the bank's consent. That clause applies regardless of what the rules governing reorganisation say: it is an agreement between the parties.<\/p>\r\n
If this review is done at the end, the worst outcome follows \u2013 the documents are prepared, the time limits are running, and nobody has yet asked for consent.<\/p>\r\n
The transfer of a business or part of a business is governed by Article 51 of the Labour Code (DK) \u2013 Article 51(1), Article 51(2), Article 51(5) and Article 51(6) DK. The essence is one: the employment relationships continue. However, where a business or part of it is transferred, the employee is notified of this in writing no later than ten working days in advance, and may, within five working days, object in writing to the continuation of the employment relationship (Article 51(5) DK); the employment contracts are amended within ten working days of the transfer of the employment relationships (Article 51(6) DK).<\/p>\r\n
The practical conclusion is twofold. There is no need to ask for the employee's consent. And there is no need to sign new employment contracts \u2013 the existing ones remain in force. This does not mean employees are told nothing; it means that informing them is informing, not asking for permission.<\/p>\r\n
The mistake we see most often is the reverse: out of caution, the company prepares new employment contracts for everyone. Then questions arise about length of service, about continuity of terms and about why someone is signing a document they did not need to sign.<\/p>\r\n
Two things from our practice. The employment contracts being transferred are listed in the asset transfer and acceptance certificate. And it is worth stating in the preamble to the documents that the steps are being taken because of the reorganisation.<\/p>\r\n
Both of these are a practical recommendation, not a statutory requirement. We say this openly, because the difference matters: if you do not do them, the documents will not be unlawful. They will simply be harder to explain two years later, when someone \u2013 an auditor, a buyer or an inspector \u2013 asks on what basis an employee ended up in another company.<\/p>\r\n
A question that comes up in almost every international structure: does a notice to a foreign creditor have to be translated?<\/p>\r\n
From our practice \u2013 the notice can be sent in Lithuanian, because it is a formality. For the notary's office, the dispatch receipts and confirmation that there were no objections are sufficient.<\/p>\r\n
This saves both time and translation costs. At the same time, it means that the fact of dispatch matters more than the language of the text. So it is decided in advance who sends the notices and when, and where the receipts are kept. The receipts must be kept from day one, not collected at the end.<\/p>\r\n
Before planning, it is worth checking whether the chosen combination is possible at all. Which legal forms of legal entities may be merged and converted is determined by Article 2.98(1) CK, Article 61(3) AB\u012e and Article 2.104(1) CK.<\/p>\r\n
The time limit to build into the timeline is the same as for other forms of reorganisation: under Article 2.96(3) CK, thirty days must pass between the public announcement and the decision.<\/p>\r\n
A separate but very common case is the conversion of a small partnership (MB) into a private limited liability company (UAB). It is governed by Article 29(2) of the Law on Small Partnerships (MB\u012e), Article 2.104(4) CK and Article 72(15) AB\u012e.<\/p>\r\n
In practice this takes about two months. And it costs more than clients plan for: the publication and the notary come on top of the legal work. These two costs are worth putting in the budget straight away, because they are unavoidable, not optional.<\/p>\r\n
The order here is not a formality. The bank consent question, raised at step four, stops all four.<\/p>\r\n
Write to us with the structure you want to end up with, and by when. Our answer on whether this needs the bank's consent, what employees and creditors will have to be told and how long it will take costs nothing.<\/p>\r\n
Tel. +370 5 212 1506, email info@linden.lt<\/p>\r\n