A reorganisation has not one but four important dates. It starts on the day the reorganisation terms are publicly announced: from that day the companies take on the status of a company being reorganised and a company taking part in the reorganisation. It ends when the amended articles of the continuing company, or a new company, are registered. The absorbed company ends later still \u2013 when it is deregistered. Shareholders receive new shares under the reorganisation terms, but they become shareholders of the continuing company when the reorganisation ends, and the data in the Information System of Legal Entities' Participants (JADIS) are updated after that, within 5 days. For private limited companies (UAB) a notary is mandatory at the last stage.<\/p>\r\n
Whether you need the consent of creditors, the bank or employees, which legal forms can be merged and the order of steps are covered in our article on creditor and employee consent<\/a>. Separations are covered separately<\/a>. This article is about dates, shareholders and the notary.<\/p>\r\n 1. The day of public announcement \u2013 the start.<\/strong> The reorganisation terms are filed with the register no later than the first day of the public announcement that they have been drawn up (Article 63(8) of the Law on Companies of the Republic of Lithuania (AB\u012e)). An application to register the companies' legal status is filed at the same time (point 149 of the Regulations of the Register of Legal Entities (JARN)). From the day of public announcement, the company being absorbed takes on the status of a company being reorganised and the continuing company the status of a company taking part in the reorganisation (Article 63(13) AB\u012e). The register records the status within three working days at the latest (point 150 JARN). In our practice we give the date of public announcement as the start date of the reorganisation when the accountants ask for it.<\/p>\r\n 2. The day of the decision.<\/strong> The decision on reorganisation may be taken no earlier than 30 days after the day the registrar announces receipt of the terms, or of the link to the company website where they are published (Article 62(2) AB\u012e). Creditors may file their claims from the first day of announcement until that meeting (Article 66(2) AB\u012e). The document confirming the decision is filed with the register within 5 days at the latest (Article 62(4) AB\u012e). The register regulations repeat the same period (point 152 JARN).<\/p>\r\n 3. The day the amended articles are registered \u2013 the end.<\/strong> The reorganisation is complete when all new companies, or the amended articles of all continuing companies, are registered (Article 69(1) AB\u012e). From that day all assets, rights and obligations pass to the continuing company, unless the reorganisation terms provide otherwise (Article 68(1) AB\u012e). So it is worth checking the terms themselves. They state the moment from which rights and obligations pass (Article 63(1)(8) AB\u012e) and the moment from which transactions are entered in the continuing company's accounts (Article 63(1)(9) AB\u012e). A creditor can push the end date back: documents may not be filed for registration until performance is additionally secured for a creditor who has demanded it (Article 66(4) AB\u012e).<\/p>\r\n 4. The day of deregistration.<\/strong> A reorganised company ends when it is deregistered from the register (Article 69(5) AB\u012e). Article 2.95(3) of the Civil Code of the Republic of Lithuania (CK) says the same. So between the third and fourth dates the absorbed company is still on the register, although its rights and obligations have already passed. A separate application is filed to deregister it. A reorganisation completion financial statement is filed with it, if the company is subject to the financial statement provisions of the Law on Financial Reporting by Undertakings and Groups of Undertakings. The register deregisters the company within five working days at the latest (point 212 JARN). In our practice the register did not deregister a company without this statement, so it is worth asking the accountant for it straight after completion. The last financial year of the company being reorganised runs from the start of the financial year to the reorganisation end day (Article 14(4) of the Law on Financial Reporting by Undertakings and Groups of Undertakings (IIGA\u012e)). The statement is prepared on the data of the company's last day of activity before the reorganisation end day (Article 15(2) IIGA\u012e). The end day is the day the continuing company's amended articles, or the new company, are registered (Article 69(1) AB\u012e). Companies that keep their accounts under International Financial Reporting Standards (IFRS) file IFRS financial statements instead (point 212 JARN).<\/p>\r\n Shares in the companies being reorganised are exchanged for shares in the companies operating after the reorganisation (Article 67(1) AB\u012e). How this will happen is set out in the reorganisation terms. They state:<\/p>\r\n The Civil Code also requires the terms to state the procedure, conditions and time limits by which a participant of the entity being reorganised becomes a participant of the continuing entity (Article 2.99(1)(3) CK).<\/p>\r\n New shares may be allocated to shareholders proportionally or not (Article 67(2) AB\u012e). A difference in share values may be paid in cash, but no more than 10 per cent of the nominal value of the new shares received (Article 67(6) AB\u012e). Own shares acquired by the ending company, and its shares acquired by the continuing company, are not exchanged for new shares (Article 67(5) AB\u012e).<\/p>\r\n Two cases work differently. When the continuing company owns all the shares of the company being absorbed, the shares are not exchanged: the duty to exchange shares does not apply to that kind of absorption (Article 70(1) AB\u012e). This is common when one company first acquires all the shares of another and then absorbs it. And when a company is divided and the shares are allocated disproportionately, shareholders holding less than 1\/10 of the capital may, within 45 days of the decision, demand that the company being divided buy back their shares before the reorganisation ends (Article 67(4) AB\u012e).<\/p>\r\n If a company has several classes of shares, the holders of each class, including non-voting shares, must approve the reorganisation decision separately (Article 62(1) AB\u012e).<\/p>\r\n When the new shareholders appear in the register.<\/strong> In our practice, until the amended articles are registered, the continuing company's shareholders do not change in the register: the extract still shows the former sole shareholder, and this is not a mistake. If a general meeting of the continuing company is called before the documents are filed, the shareholders of the ending companies who have been allocated its shares under the terms may already vote at it (Article 69(2) AB\u012e). Once the articles are registered, data on the new shareholders are filed with the Information System of Legal Entities' Participants (JADIS, Juridini\u0173 asmen\u0173 dalyvi\u0173 informacin\u0117 sistema<\/em>) no later than 5 days after receiving the documents on which the entries are based (Article 41\u00b9(2) AB\u012e). The manager is responsible for this (Article 41\u00b9(3) AB\u012e). In our practice this is a separate step after the articles are registered, not part of the same filing.<\/p>\r\n Yes. Documents are submitted to a notary when new legal entities are registered after a reorganisation, or when the amended founding documents of continuing legal entities are registered (point 48 JARN). The notary receives the full text of the amended articles and the documents confirming the amendments (point 50 JARN). The notary confirms that the data are true, that the articles comply with the law and that the obligations set by law have been fulfilled (point 54 JARN). Only then are the documents filed with the register (point 57 JARN).<\/p>\r\n The exceptions apply only to the legal entities listed in the regulations, for example state and municipal enterprises, or public institutions (vie\u0161osios \u012fstaigos<\/em>) owned by the state or a municipality (point 48 JARN). Other public institutions are not on that list.<\/p>\r\n The earlier documents \u2013 the application to register the status and the reorganisation terms \u2013 are filed with the register by the company's filers (point 149 JARN). In our practice the notary reviews them at the start, because at the end the notary will confirm that every procedure has been completed. That way a mistake can be caught earlier.<\/p>\r\n The notary is not the only one who checks. The reorganisation terms must be assessed by an auditor (Article 63(2) AB\u012e). Where the continuing company owns all the shares of the company being absorbed, no assessment is needed (Article 70(1) AB\u012e). The assessment is not carried out if all shareholders of each company agree (Article 63(5) AB\u012e). In our practice we also suggest bringing in tax advisers early: they review the terms from a tax angle and advise on accounting for the period from start to end.<\/p>\r\n Tell us which companies are involved, who their shareholders are and what shareholder structure you want at the end. We will set out a timeline of the dates and the share exchange rules for the reorganisation terms.<\/p>\r\n Phone +370 5 212 1506, email info@linden.lt<\/p>\r\nFour dates worth writing down<\/h2>\r\n
What happens to shareholders and shares<\/h2>\r\n
Is a notary needed<\/h2>\r\n
How to start<\/h2>\r\n