Initiation of company bankruptcy

  • 2011-03-30
  • By Marius Matiukas, Associate lawyer

ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora

Enterprise bankruptcy is a judicial and extrajudicial procedure which is usually applied to insolvent enterprises. Insolvency of a company, as defined in Enterprise bankruptcy law, refers to the state of an enterprise when it fails to settle with its creditor/creditors and the overdue liabilities/debts are in excess of over half of the value of the assets on the enterprise’s balance sheet. Bankruptcy means the state of an insolvent enterprise, where bankruptcy proceedings have been instituted in court, or the creditors are performing extrajudicial bankruptcy procedures on the enterprise. Bankruptcy proceedings mean a civil case is opened in court over disputes arising from legal relations connected with bankruptcy.

In order to start bankruptcy proceedings a Petition for Bankruptcy must be filed and presented to the court. Only specified persons may file a petition for bankruptcy with the court. The following persons have the right to file a petition: 1) the creditor/creditors; 2) the owner/owners; 3) the head of the company’s administration.

Specified persons may file a petition for bankruptcy 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 does not fulfill other liabilities 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 liabilities; 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 shall be instituted by the county court of the locality where the registered office of the enterprise is situated. The court shall refuse instituting bankruptcy proceedings if: 1) before the court makes a decision to institute bankruptcy proceedings, the enterprise satisfies the claims of the creditor/creditors who filed a petition for bankruptcy; 2) restructuring proceedings have been instituted against the enterprise; 3) during the hearing of the petition for the institution of bankruptcy proceedings, the court makes a sufficiently justified assumption that the enterprise possesses no assets or that its assets are not sufficient to cover legal and administration costs.

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