No. Bankruptcy proceedings are started by the company's manager (for a company in liquidation, the liquidator) or by a creditor, not by the shareholders. The Law on Insolvency of Legal Entities of the Republic of Lithuania (JAN\u012e) gives the manager the right to start the process as soon as insolvency is merely likely, and a duty to do so once the company is insolvent. A creditor needs the time for performance of the obligation owed to it to have passed (JAN\u012e Article 4(1)(2)), and the obligation stated in its notice must be undisputed (JAN\u012e Article 9(2)). The shareholders are informed, but their approval is not needed for bankruptcy. Where the case goes to court, the court establishes insolvency by checking two criteria: whether the company performs its property obligations on time, and whether its liabilities exceed the value of its assets (JAN\u012e Article 2(7)).<\/p>\r\n
When the manager must file, what the manager risks by not filing, which documents go with the petition and what happens when the assets do not even cover the expenses of the bankruptcy, we have answered briefly in the company law FAQ<\/a> (in Lithuanian). We have also written a separate article on the manager's duty<\/a> (in Lithuanian). This article covers who has the right to start, what shareholders can do and how insolvency is proved.<\/p>\r\n Article 4(1) of the Law on Insolvency of Legal Entities (JAN\u012e Article 4(1)) gives two persons the right to initiate insolvency proceedings.<\/p>\r\n The duty to initiate proceedings lies with the manager if the company is insolvent, and with the liquidator if it turns out during liquidation that the company is insolvent (JAN\u012e Article 5). What the liquidator should do we discussed in the article on the UAB liquidation process<\/a>.<\/p>\r\n This question arises for companies whose articles of association say that important decisions are taken by the meeting of members. The articles may even say that the meeting of members decides on bankruptcy, while convening it with the required quorum may be practically impossible.<\/p>\r\n JAN\u012e Article 5 places the duty to initiate proceedings on the manager and does not make it conditional on the members' approval. So the manager does not need to wait for a meeting that may never take place. The duty and the liability are personal to the manager. The manager must compensate damage caused by failing to perform, or improperly performing, the duties set out in JAN\u012e (JAN\u012e Article 13(1)). The court may, for 1 to 5 years, restrict the manager's right to act as a manager or to sit on a collective management body if the manager did not initiate insolvency proceedings when obliged to (JAN\u012e Article 13(2)(1)). From 1 January 2027 this ground is widened: the right may also be restricted where the manager did not file a petition with the court for insolvency proceedings when obliged to do so (JAN\u012e Article 13(2)(1), version from 2027-01-01).<\/p>\r\n Shareholders still have a part to play, in these places.<\/p>\r\n Liquidation is not a way out for an insolvent company. The general meeting of shareholders may not decide to liquidate an insolvent company (AB\u012e Article 73(3)). How liquidation is started for a solvent company we described in the article on starting a UAB liquidation<\/a>.<\/p>\r\n As a rule, nobody goes to court straight away. A notice is sent first.<\/p>\r\n When the company starts it.<\/strong> The manager or liquidator sends a notice to the creditors by registered letter, through bailiffs or through courier service providers. Electronic means of communication may also be used, if the security of the information is ensured, the person's identity can be established and a confirmation of receipt is obtained. If the notice is not sent by electronic means of communication, it is deemed served 7 days after it was sent (JAN\u012e Article 8(1)). The notice states the unperformed obligation and warns that, without an agreement on assistance or a decision to carry out the bankruptcy out of court, the company will apply to court (JAN\u012e Article 8(2)). The deadline set is no shorter than 15 days and no longer than 30 days from service of the notice on the creditor (JAN\u012e Article 8(3)). The offer and the deadline may be dispensed with if an earlier agreement on assistance is not being performed or is being performed improperly, if the liquidator initiates the bankruptcy, or if a bailiff (court enforcement officer, antstolis<\/em>) has returned the enforcement documents to the creditor because the company has no assets or income (JAN\u012e Article 8(4)).<\/p>\r\n The manager must initiate insolvency proceedings immediately (JAN\u012e Article 6(2)(2)). From 1 January 2027 the law says this in so many words: if, within the deadline in JAN\u012e Article 8(3), no agreement on assistance is concluded and no decision to carry out the bankruptcy out of court is taken, the manager must immediately file a petition with the court (JAN\u012e Article 6(2)(2), version from 2027-01-01). If a concluded agreement on assistance is not being performed or is being performed improperly, the manager initiates the process no later than 5 working days from the day this became, or should have become, known (JAN\u012e Article 6(2)(3)).<\/p>\r\n When a creditor starts it.<\/strong> The creditor sends a notice to the company at its registered office in the same way (JAN\u012e Article 9(1)). The notice states the unperformed, undisputed obligation and warns that the creditor will apply to court for restructuring or bankruptcy proceedings (JAN\u012e Article 9(2)). The deadline is the same: no shorter than 15 days and no longer than 30 days from service (JAN\u012e Article 9(3)). The requirements on the content of the notice and the deadline may be dispensed with if an earlier agreement on assistance is not being performed or is being performed improperly, or if a bailiff has returned the enforcement documents to the creditor because the company has no assets or income (JAN\u012e Article 9(4)(1) and (2)). The right to apply to court then arises from service of the notice (JAN\u012e Article 16(1)(2) and (4)).<\/p>\r\n Can a creditor start bankruptcy without a court judgment? JAN\u012e Article 9 does not require a judgment. It requires the obligation to be undisputed. So, where the debtor disputes the debt on the merits, the creditor first has to obtain a judgment for the debt and only then take the bankruptcy route. Where the debt is not disputed, the notice is real pressure: within the deadline it sets, it is worth either paying or proposing an agreement.<\/p>\r\n Ordinarily, the right to apply to court arises when the deadline set in the notice expires (JAN\u012e Article 16(1)(1)). This right does not last forever. Once 3 months have passed since it arose, the process has to be initiated again by notice under JAN\u012e Articles 8 and 9 (JAN\u012e Article 16(2)).<\/p>\r\n Insolvency is a state in which a legal entity cannot perform its property obligations on time or its liabilities exceed the value of its assets (JAN\u012e Article 2(7)). The criteria are separate: one is enough. A company with a positive balance sheet that has not paid its suppliers for months may be insolvent. So may a company that pays on time but whose debts already exceed its assets.<\/p>\r\n Bankruptcy proceedings are opened if the legal entity is insolvent and no restructuring proceedings are being opened for it (JAN\u012e Article 21(2)). The court has tools to establish the facts. It may order creditors, members, members of management bodies, the person keeping the financial accounts and other responsible employees to submit additional documents, and it may summon them and require written explanations (JAN\u012e Article 20(1)). Where a creditor files the petition, the manager must, within 5 working days of receiving notice that it was accepted, submit to the court the company's lists of creditors and debtors and the other information listed in JAN\u012e Article 17(2), points 3\u20138 (JAN\u012e Article 20(2), JAN\u012e Article 17(2)). From 1 January 2027 this information also includes information on the company's waste, contaminated soil, ground or mining plot, if the company holds unmanaged waste (JAN\u012e Article 17(2)(8), version from 2027-01-01).<\/p>\r\n The court refuses to open bankruptcy proceedings if, before the ruling, the company satisfies the claims of the creditor that filed the petition, or if the company is not insolvent (JAN\u012e Article 22(3)(1) and (2)). It also refuses where the assets are insufficient to cover the bankruptcy administration expenses, unless the applicant pays in the amount set by the court or an insolvency administrator agrees to take on the risk of those expenses (JAN\u012e Article 22(3)(4), JAN\u012e Article 23(1)). If, within 30 days of the court's notice of this possibility, no insolvency administrator submits a consent-declaration to the court, the court refuses to open bankruptcy proceedings and orders the liquidation of the company to be initiated on the initiative of the data controller of the Register of Legal Entities (JAN\u012e Article 23(4)).<\/p>\r\n Insolvency is proved in a company's petition in a simple way: the situation and the debts are described, and the documents supporting the debts and the balance sheet are submitted. The balance sheet shows whether liabilities exceed assets. A list of overdue invoices, taxes and wages shows whether the company is performing its obligations on time.<\/p>\r\n Creditors may want to know not only whether the company is insolvent, but why. That question is answered not by the petition but by the bankruptcy process.<\/p>\r\n The court declares a bankruptcy intentional if it finds that the insolvency was caused by deliberately bad management and\/or by transactions concluded when it was known, or should have been known, that they infringe the creditors' rights and\/or legitimate interests (JAN\u012e Article 70(1)). What this means for creditors we explained in the article on intentional bankruptcy<\/a> (in Lithuanian).<\/p>\r\n When an administrator asks for help answering creditors' questions about the causes of insolvency, it is worth knowing where the line is. These are questions of fact about the company's business. A lawyer can help to put them precisely and link them to the law, but the facts themselves must come from those who ran the company.<\/p>\r\n Bankruptcy may also be carried out without the court if, on the day of the decision, there are no court cases and no pre-trial out-of-court dispute resolution in which property claims have been brought against the company, including employment-related claims, no enforcement has been directed against its assets, and no tax investigation or tax audit is under way (JAN\u012e Article 11(1)). If these conditions are not met, the out-of-court route is possible only with the consent of the tax administrator, the claimant and\/or the enforcement creditor (JAN\u012e Article 11(2)). From 1 January 2027 a fourth condition is added: the company has no unmanaged waste, contaminated soil, ground and\/or mining plot (JAN\u012e Article 11(1)(4), version from 2027-01-01). This condition cannot be overcome by consent, because from that date the exception applies only to the first three (JAN\u012e Article 11(2), version from 2027-01-01).<\/p>\r\n The decision is deemed adopted if it is approved by creditors whose claims make up at least 3\/4 of the total liabilities of the company, including those not yet due (JAN\u012e Article 11(3)). In that case, the matters that would otherwise be for the court are decided by the creditors' meeting, which also appoints the insolvency administrator (JAN\u012e Article 12(1) and (2)). Shareholder consent is not needed here either: the creditors decide.<\/p>\r\n Send us the latest balance sheet, a list of overdue debts and the company's articles of association. We will assess whether the company is insolvent, who has to act and by when, and prepare the notice to creditors or the petition to the court.<\/p>\r\n Phone +370 5 212 1506, email info@linden.lt<\/p>\r\nWho can start bankruptcy proceedings<\/h2>\r\n
Is shareholder approval needed?<\/h2>\r\n
How the process starts: a notice before court<\/h2>\r\n
How the court establishes insolvency<\/h2>\r\n
Who establishes the causes of insolvency<\/h2>\r\n
Out-of-court bankruptcy<\/h2>\r\n
How to start<\/h2>\r\n