In recent years, the Lithuanian Register of Legal Entities (hereinafter – the Register Center) intensified its monitoring of companies that are not conducting business or are not submitting financial documents on time. When legal grounds exist, the Register Center initiates their liquidation. Until September 1, 2024, such liquidation procedures could only be canceled through a court decision. However, this process has been simplified with the new amendments.
When can liquidation be initiated?
According to Article 2.70 of the Civil Code (hereinafter – CC), the Register Center has the right to initiate the liquidation of a legal entity if at least one of the following circumstances exists:
- The legal entity has not submitted the annual financial statements within 12 months after the deadline.
- There are no governing bodies in place, and no decisions have been made for more than 6 months.
- The registered office of the legal entity has not been specified in the register for more than 6 months.
- The legal entity has not updated its data in the register for 5 years, and there is reason to believe that it is not operating.
- The company’s share capital is less than the required minimum amount.
- The court refuses to open bankruptcy proceedings for an insolvent legal entity and mandates the Register Center to initiate liquidation.
New legal regulation of the liquidation procedure
On September 1, 2024, important changes to the CC came into effect, bringing about significant modifications to the liquidation procedures of legal entities. According to Article 2.70(5) of the CC, legal entities for which the Register Center has initiated liquidation can now cancel this procedure without a court decision. Instead of applying to the court, it is possible now to apply directly to the Register Center. This new provision not only simplifies the resumption of legal entities’ operations but also shortens the process, ensuring a faster and more efficient renewal of activities.
The legal status of a legal entity as “initiated liquidation” can be canceled by submitting documents that negate the circumstances that led to the initiation of the liquidation procedure. This could include the submission of financial statements or updating the company’s data.
It is important to note that companies seeking to cancel the initiated liquidation shall apply directly to the Register Center within 12 months from the date of registration of the “initiated liquidation” status.
Creditors’ rights and protection
Article 2.70(5) of the CC also provides creditors with additional options to apply to the court within one year from the registration of the “initiated liquidation” status. Creditors may seek to cancel the liquidation procedure and initiate proceedings for the enforcement of the legal entity’s obligations or insolvency. Additionally, creditors with enforceable documents may demand that these be fully executed.
How to avoid initiating liquidation?
To avoid the initiation of liquidation, it is significantly important for companies to submit financial statements on time and update their data. Before initiating liquidation, the Register Center typically sends a notice regarding the planned initiation of liquidation. Upon receiving this notice, the company is given a 3-month period to meet the requirements and submit financial statements. If this is not done in time, the liquidation process may begin.
Additionally, it is important to emphasize that failure to submit financial statements not only increases the risk of liquidation but may also result in administrative liability. According to the Administrative Violations Code, failure to submit financial statements on time may result in a fine for the manager of the legal entity ranging from EUR 600 to EUR 1,450. The liability in such cases rests with the person officially registered as the legal entity’s manager.
Help is needed? Contact us
If the liquidation process has already been initiated for your company, Leinonen’s legal team can provide individual legal consultations, prepare the necessary documents, and represent the company at the Register Center in order to cancel the liquidation procedure. Contact us at lithuania.legal@leinonen.eu.
