Company Bankruptcy

  • 2011-02-16
  • By Indre Triponaite, Associate Lawyer

ECOVIS Miškinis, Kvainauskas ir partneriai advokatu kontora

(continued from TBT Issue 738)

According to Article 4 of the Law on Enterprise Bankruptcy, the petition for initiation of enterprise bankruptcy proceedings shall be filed with the court if at least one of the following conditions is present:

1)    the enterprise fails to pay wages and other employment-related amounts when due;
2)    the enterprise fails to pay, when due, for the goods received, work performed/services provided, defaults in the repayment of  credits and doesn’t fulfill other obligations assumed under contracts;
3)    the enterprise fails to pay, when due, taxes, other compulsory contributions prescribed by law and/or the awarded sums;
4)    the enterprise has made a public announcement or notified the creditor/creditors in any other manner of its inability or lack of intent to discharge its obligations;
5)    the enterprise has no assets or income from which debts could be recovered and, therefore, the bailiff has returned the writs of execution to the creditor.

Bankruptcy proceedings will be instituted if the court has sufficient grounds to find the enterprise insolvent or, alternatively, if it is found that the enterprise has publicly declared or notified the creditor or creditors of the enterprise’s inability or lack of intent to discharge its obligations. The Law on Enterprise Bankruptcy establishes that insolvency of the enterprise refers to the state of the enterprise when it fails to settle with the creditor or creditors after the lapse of three months from the deadline prescribed by laws, other legal acts, as well as by the agreements between a creditor and the enterprise for the discharge of the obligations of the enterprise, or upon expiry of the said time period after the creditor or creditors demands or demand the discharge of the obligations where the deadline has not been set in the agreement, and the overdue obligations/debts are in excess of over half of the value of the assets on the enterprise’s balance sheet.

It should be noted that the creditor or creditors may file the petition for the initiation of the enterprise bankruptcy proceedings only after the conveyance of the enterprise manager, in writing, of his or their intention to file the petition for the initiation of the enterprise bankruptcy proceedings. The creditor or creditors must notify and warn that if the enterprise will not discharge its obligations in a 30 day period, the creditor or creditors will file the petition for the enterprise bankruptcy.