Liquidation is a way to annul the corporate entity, where the company is removed from the Register of Corporate Entities and its rights and obligations are not transferred to anyone. Shareholders appoint a liquidator who performs liquidation and management procedures. Liquidation can be:

• Volunteer;
• Forced.

From the day of adoption of the decision to liquidate the company, the company acquires the status of a company in liquidation and all executive decision and managerial body powers devolve to the liquidator appointed by the owner, shareholders or by court decision.

The corporate liquidator is a person appointed in accordance with the civil code of Lithuania, by court decision or by decision of other institutions, and performs liquidation procedures; or is the person executing liquidation procedures during bankruptcy.

Bases for corporate liquidation:

1. a decision is adopted by members of the corporate entity to terminate the activities of the corporation;
2. a court or a creditors’ meeting adopts a decision to liquidate the bankrupt corporation (liquidation is performed in accordance with procedures established in the Law on Company Bancruptcy);
3. a court makes a judgement to liquidate, subject to provisions of Article 2.131 of the Civil Code;
4. a court makes a judgement to liquidate the corporation in instances prescribed in Article 2.70 of the Civil Code;
5. the term for which the legal person was established expires;
6. the number of members of a corporate entity shrinks to less than the minimum allowed by law, provided members of the corporate entity fail to adopt a decision within six months to reorganise or restructure the corporate entity;
7.  the incorporation is found to be invalid.

Bankruptcy is when the company is in a state of insolvency and a bankruptcy case is brought to court in regard to the company, or creditors perform bankruptcy procedures out of court.

The insolvency of the company means the company fails to fulfill its obligations (non-payment of debts, non-performance of work previously paid for, etc.) and overdue liabilities (debts, unaccomplished work, etc.) exceed half the asset value shown on the company’s balance-sheet.

Legal proceedings for bankruptcy can be brought by:

1. the creditors;
2. the owners;
3. the CEO;
4. the liquidator (during liquidation procedures).

Grounds for initiating bankruptcy proceedings in court

A petition to initiate legal action for bankruptcy can be brought before the court if at least one of the following conditions are met:

1. the company fails to pay wages and other employmee-related sums when due;
2. the company fails to pay when due for the goods received, or work performed or services provided, defaults in repayment of credit and fails to fulfill other obligations undertaken;
3. the company fails to pay when due taxes, other compulsory contributions prescribed by law and/or sums awarded by courts;
4. the company publicly announces or notifies creditors in any other manner its inability or lack of intent to discharge its obligations;
5. the company has no assets or income for recovery of debts and thus a bailiff has returned writs of execution to the creditor.

Bankruptcy petitions should be submitted to the the district court where the company office is located location in writing in the manner described in the civil procedural code.