A merger, division by formation of new companies or division by acquisition of the employer, or its merger into another company, does not change employees' working conditions and cannot be a lawful reason to end employment. Employment relationships pass automatically, no employee consent and no new employment contracts are needed, and the employment contracts are amended within ten working days of the transfer. Each employee is told about the transfer in writing in advance and may object in writing to the continuation of employment. The employment contract is then terminated at the employer's initiative without fault on the employee's part. If the company has a works council, it is informed and consulted before the decision is taken. The employment contract of the CEO of the company being merged ends on removal, by agreement, or because the CEO's function becomes redundant. The Supreme Court of Lithuania has held that the end of an entity through reorganisation is not in itself a ground to terminate employment.<\/p>\r\n
The basics of why employee consent is not needed are covered in our article do you need the consent of creditors and employees to reorganise a company<\/a>. Here we deal with what lies between the lines: the employee who objects, the works council, the CEO and duplicate positions.<\/p>\r\n Article 51(1) of the Labour Code of the Republic of Lithuania (DK) provides that a conversion, merger, division by formation of new companies or division by acquisition of the employer, or its merger into another company, does not change employees' working conditions and cannot be a lawful reason to end employment. Where a business or part of it passes to another entity, the employment relationships of that business pass to it automatically, and the transferee acquires the employer's rights and obligations existing at the time of transfer (Article 51(2) DK). Rights and obligations set out in collective agreements apply for two years after the transfer, unless the collective agreement ends or a new collective agreement applicable to the transferee sets these terms afresh (Article 51(2) DK).<\/p>\r\n The employment relationships that pass continue on the same terms. Changing working conditions or terminating an employment contract because of the transfer of a business is prohibited, and the transferee may end employment only on general grounds not linked to the transfer (Article 51(3) DK).<\/p>\r\n The Supreme Court of Lithuania (Lietuvos Auk\u0161\u010diausiasis Teismas<\/em>, LAT) has held that, where a legal entity (in that case a municipal budgetary school) ceases to exist because it is merged into another, employment should as a rule continue, because the new entity steps into the place of the former employer. The end of a legal entity through reorganisation does not in itself create a ground to terminate employment because the employer has ceased to exist (LAT ruling of 9 March 2022 in civil case No. e3K-3-55-781\/2022, para. 34).<\/p>\r\n What employees are told, and when.<\/strong> The transferor must notify the employee in writing of the forthcoming transfer of the business or part of it no later than ten working days before the transfer. The notice states the date of the transfer, its legal basis, its economic and social consequences for the employee and the measures taken (Article 51(5) DK). By its heading, Article 51 DK also covers the reorganisation of the employer, and in a merger by acquisition all the rights and obligations of the company being merged pass to the continuing company (Article 2.97(3) of the Civil Code of the Republic of Lithuania, CK). They pass from the registration of the amended articles, unless the terms of reorganisation provide otherwise (Article 68(1) of the Law on Companies of the Republic of Lithuania, AB\u012e; from 1 November 2026: from their entry in the information system of the Register of Legal Entities). It therefore makes sense to treat that day as the transfer date, deliver the notice no later than ten working days before it, and include all the details listed in Article 51(5) DK.<\/p>\r\n If the employee objects.<\/strong> If, within five working days of receiving the notice, the employee objects in writing to the continuation of employment, the transferor terminates the employment contract at the employer's initiative without fault on the employee's part (Article 51(5) DK). This is a separate ground in Article 57 DK: the employee does not agree to the continuation of employment on a transfer of a business or part of it (Article 57(1)(4) DK). The notice periods in Article 57(7) DK and the severance pay in Article 57(8) DK apply. Notice periods and payments are described in detail in our article dismissal without employee fault: notice and severance<\/a>.<\/p>\r\n The time limit for objecting runs from receipt of the notice. So deliver the notice in a way that lets you prove the date of receipt.<\/p>\r\n After the transfer.<\/strong> The transferor hands over the employees' personal data and documents it holds to the transferee and notifies the State Social Insurance Fund administering institution (Sodra<\/em>) of the change of employer. The employment contracts must be amended no later than ten working days after the day the employment relationships pass (Article 51(6) DK).<\/p>\r\n If the transferor continues to exist.<\/strong> In a separation, the company from which a part is separated continues to operate (Article 71(1) AB\u012e). If the transferee does not perform its obligations to employees, the transferor is jointly and severally liable for the employee's rights that arose before the transfer, and this liability applies for one year after the transfer (Article 51(4) DK).<\/p>\r\n Before taking a decision on the reorganisation of the company, the employer must inform the works councils and consult them on the reasons for the decision, its legal, economic and social consequences for employees, and the measures to mitigate adverse consequences (Article 208(1) DK). The information is provided in writing no later than five working days before consultations begin (Article 208(2) DK). Consultations must last no less than five working days from the first day of consultation, unless the works council agrees to a different period (Article 208(5) DK).<\/p>\r\n Where there is no works council or employee trustee, the information goes to the trade union operating at employer level, and to the employees directly or at a general meeting of employees (Article 208(3) DK).<\/p>\r\n If these duties are breached, the works council or trade union may, within two months of learning of the breach, bring a labour dispute on rights, and the body hearing the dispute may annul the employer's decisions (Article 209(1) DK). So schedule the consultations before the first decision on the reorganisation, including the general meeting's approval to prepare the terms of reorganisation (Article 63(1) AB\u012e).<\/p>\r\n The CEO is the company's single-person management body (Article 37(1) AB\u012e). The CEO is elected and removed by the board or, if there is no board, by the supervisory board or the general meeting of shareholders (Article 37(3) AB\u012e). Once the body that elected the CEO decides to remove them, the employment contract is terminated (Article 37(4) AB\u012e).<\/p>\r\n The Labour Code has no separate rule on the CEO in a reorganisation. Employment can be ended by agreement (Article 54(1) DK). Beyond that, there are two routes:<\/p>\r\n That case concerned the head of a budgetary institution, so for a UAB look first at the removal route under Article 37 AB\u012e. The CEO of a small partnership (MB) need not have an employment contract (Article 101(1) DK), so in that case the consequences depend on what contract was concluded with them.<\/p>\r\n The law does not deal with this situation separately. The general rules lead to the following:<\/p>\r\n We compared the current edition of the Labour Code with the future editions taking effect on 1 November 2026 and 1 January 2027. The text of Articles 51, 54, 57, 101, 104, 208 and 209 DK cited in this article does not change in them.<\/p>\r\n Send us the draft terms of reorganisation and the list of both companies' employees with their positions, and tell us whether there is a works council or trade union. We will prepare the notices to employees, a plan for consulting the works council and draft decisions on the CEO.<\/p>\r\n Phone +370 5 212 1506, email info@linden.lt<\/p>\r\nWhat passes and what stays the same<\/h2>\r\n
Notice to employees and their objection<\/h2>\r\n
Works council, employee trustee or trade union<\/h2>\r\n
What happens to the CEO of the company being merged<\/h2>\r\n
Two chief accountants after the merger<\/h2>\r\n
Is the Labour Code changing<\/h2>\r\n
More on reorganisation<\/h2>\r\n
How to start<\/h2>\r\n