Liquidation and bankruptcy are two different ways of closing a company, and which one applies depends not on what the shareholders want but on whether the company is solvent. Shareholders may decide to liquidate only a solvent company: the general meeting of shareholders may not adopt a decision to liquidate an insolvent company (Article 73(3) of the Law on Companies of the Republic of Lithuania (AB\u012e)), and an insolvent company is liquidated through bankruptcy under the Law on Insolvency of Legal Entities (AB\u012e Article 73(4)). If it turns out during liquidation that the assets are not enough to pay the creditors, the liquidator must stop all payments and start bankruptcy proceedings without delay (Article 7 of the Law on Insolvency of Legal Entities of the Republic of Lithuania (JAN\u012e)). The shareholders then receive only what is left after the creditors' claims are satisfied and the bankruptcy costs are paid (JAN\u012e Article 93(3)).<\/p>\r\n
Who else can start bankruptcy and how the court establishes insolvency is covered in our article Does bankruptcy need shareholder consent? How insolvency is established<\/a>. How liquidation runs when the company is solvent is described in What happens during a UAB liquidation<\/a>. This article covers how the two routes differ and what a liquidator should do when the assets run short.<\/p>\r\n Article 2.106 of the Civil Code of the Republic of Lithuania (CK) treats them as separate grounds for liquidation: a decision of the members to end the entity's activities, and a decision of a court or of the creditors' meeting to liquidate the entity due to bankruptcy (CK Article 2.106(1) and (2)). The differences are these.<\/p>\r\n The liquidator has a duty to start insolvency proceedings if it turns out during liquidation that the legal entity is insolvent (JAN\u012e Article 5(2)). No shareholder approval is needed. The steps are these.<\/p>\r\n A liquidator who fails to perform the duties set in CK Article 2.110 and the AB\u012e, or performs them improperly, must compensate the resulting damage in full (CK Article 2.110(4)). JAN\u012e Article 7 requires payments to be stopped and the process to be started without delay, so take these steps as soon as the insolvency becomes clear.<\/p>\r\n The court refuses to open a bankruptcy case if it finds that the assets are not enough to pay the costs of administering the bankruptcy (JAN\u012e Article 22(3)(4)). The case is still opened if the applicant pays the amount set by the court into the court's deposit account, or an insolvency administrator agrees to take on the cost risk (JAN\u012e Article 23(1)). The court offers the applicant a period of no more than 14 days to pay the amount, so where the applicant is the company itself, the offer is made to the company (JAN\u012e Article 23(2)). If the shareholders want the bankruptcy case to be opened, they can provide the company with funds to pay it.<\/p>\r\n If the amount is not paid, the court notifies insolvency administrators that they may administer the bankruptcy while taking on the cost risk (JAN\u012e Article 23(3)). If within 30 days of that notice no insolvency administrator files a consent-declaration with the court, the court refuses to open the bankruptcy case and instructs that liquidation be initiated by the operator of the Register of Legal Entities, the Centre of Registers (Registr\u0173 centras<\/em>). That ruling cannot be appealed (JAN\u012e Article 23(4)). Employees' claims are then paid under the Law on Guarantees to Employees upon the Insolvency of their Employer and on Long-Term Employment Benefits (JAN\u012e Article 23(6)).<\/p>\r\n CK Article 2.70 then applies. The registry operator initiates liquidation (CK Article 2.70(1)(7)). An applicant who did not pay the amount set by the court may not deny that the ground for liquidation exists (CK Article 2.70(4)). No liquidator is appointed in this case (CK Article 2.70(8)). From the day the entity acquires the status of \"entity for which liquidation is being initiated\", creditors have one year to bring a claim for performance of obligations or for the opening of insolvency proceedings (CK Article 2.70(6)). If they do not, the registry operator decides to liquidate the entity (CK Article 2.70(7)), and once the status \"in liquidation\" (likviduojamas<\/em>) is registered, it deregisters the company within five working days at the latest (point 200 of the Regulations of the Register of Legal Entities (JAR nuostatai)). How this route works is covered in The Centre of Registers initiated liquidation: what to do<\/a>.<\/p>\r\n The JAN\u012e provisions cited in this article do not change in the JAN\u012e versions entering into force on 1 January 2027 or on 1 May 2028.<\/p>\r\n Send us the latest balance sheet, a list of creditors with amounts and due dates, and the decision to liquidate the company. We will assess whether the company is solvent and prepare the liquidator's notice to creditors or the application to the court.<\/p>\r\n Phone +370 5 212 1506, email info@linden.lt<\/p>\r\nHow liquidation differs from bankruptcy<\/h2>\r\n
What a liquidator should do when the assets are not enough<\/h2>\r\n
When the assets do not even cover the bankruptcy costs<\/h2>\r\n
What this means for shareholders<\/h2>\r\n
More on liquidation<\/h2>\r\n
How to start<\/h2>\r\n