How to Close Your Company in Lithuania
When a company doesn’t deliver desired results in spite of having tried to put it back on its feet or when all the strategic goals have been reached, and you’re keen to move on, it might be the time to think about official closure. Knowing how to go about it is imperative as liquidating a business is an intricate process that may put its stakeholders – investors, employees, suppliers, clients – at risk.
This is precisely why it requires qualified support who would assist you in avoiding unfortunate mistakes and would help you to adhere to the mandatory procedures plus save you a lot of precious time that could be used for initiating new exciting ventures.
Not sure what a company liquidation exactly means? It’s a procedure during which the activities of a legal entity are stopped and completely terminated, it’s deregistered from the State Enterprise Centre of Registers, and its existing responsibilities are not transferred to anyone else.
Now, if you’ve made the decision to terminate a business and want to find out which way of termination suits you best, read on, as in this article we’ll review the most common ways of liquidating a company in Lithuania.
Members’ Voluntary Liquidation
This solution is available to those who intend to close a solvent company, which means that it owns sufficient assets to meet its liabilities – pay debts, interest, etc. Only then can the company’s shareholders or owners voluntarily decide to terminate their business. The decision on the liquidation of the company must be taken in the form of a vote at the general meeting and must be voted on by at least ⅔ of all members, i.e. a majority.
Also, a liquidator(s) – who must be a natural person – has to be appointed by the decision of the members. They can choose from the company’s directors, shareholders, employees or other internal stakeholders.
Once the decision to liquidate the company is approved by the board or owners, it must stop trading and the liquidator takes control from the director(s). Throughout the process, which may take anywhere from a few months to several years, the responsibilities and requirements of the head of the company will apply to this person. When the division of shareholders or owners elects such a person or group of persons, the former director loses decision-making authority, as all responsibilities are transferred to the liquidator.
Within two months, the planned liquidation must be announced via public communication channels. One way is to announce it 3 times every 30 days through the channel specified in the company’s articles of association. Another way is to announce it once in the specified channel and in writing to each creditor individually.
On the same day, the liquidator must contact the State Enterprise Centre of Registers with the document proving the decision to liquidate the company and request to change the status of the company to “in liquidation”.
The company’s liquidator will also have to supply additional documentation to the State Enterprise Centre of Registers, draw up the balance sheet of the company in liquidation, submit an accounting statement to the county archives and settle in full with the company’s creditors.
When the status of the company is changed to “in liquidation” and the company has paid all its debts, the State Tax Inspectorate will inform the State Enterprise Centre of Registers that the company has no debts. The latter institution will erase the company from its registry by the liquidator’s request. Lastly, the liquidator must delete the company’s website address, if the company has one.
Creditors’ Voluntary Liquidation
If a company is insolvent, meaning that it doesn’t own sufficient assets to meet its liabilities and pay its debts to one or more creditors, we recommend initiating a voluntary liquidation along with the involvement of your creditors. Just like during the process of members’ voluntary liquidation, the company’s directors still have the freedom of electing a liquidator, which enables them to retain some control over the process.
Again, the liquidator must make a public announcement about the initiated liquidation, contact the State Enterprise Centre of Registers, deal with the State Tax Inspectorate and carry out other responsibilities handed over by the company’s directors.
An important step of creditors’ voluntary liquidation is an official agreement on the terms of debt settlement. Usually it’s followed by a requirement to sell any remaining corporate assets and distribute the money to the company’s creditors and other stakeholders.
The first priority is satisfying requirements of the creditors whose claims are secured by the pledge of the company’s assets. Only then requirements by the employees, tax institutions and the remaining creditors have to be met.
Another way to liquidate an insolvent company is compulsory liquidation. It’s a court-ordered termination of a business when the entire process is commanded by the court and the company’s representatives have no say in the decision-making, such as timeline and appointment of a liquidator. It’s typically initiated by a discontent creditor or even by the State Enterprise Centre of Registers.
Compulsory liquidation typically signals that the company’s directors are either unaware of the financial difficulties or disregard them, which is why it casts a shadow on their reputation. It’s highly advised not to leave a company’s finances for freewheeling and take an initiative by opting for a voluntary liquidation.
What Step to Take Next?
Company liquidation is a complex, sometimes overwhelming process, and you shouldn’t be left alone in it. It’s crucial to receive support from someone who’s apt at Lithuanian legislation and can help you to make informed decisions.
We strive to manage the termination of a company’s operations in an orderly and timely manner so that our greatly valued clients can focus on building a new future without having to worry about wrapping up the past.
In order to minimise the stress of your company liquidation, you should seek guidance from the team of experienced Company in Lithuania UAB professionals, who will be glad to take this burden off your shoulders by guiding you through the process and dealing with the stakeholders on your behalf. We offer fully remote business termination services in accordance with local legislation and practice. Please contact Company in Lithuania UAB for further guidance.