Lithuanian Enterprise Bankruptcy law describes the projedures taken after a company, an association or another organization is deemed no longer able to pay off its debts.
REPUBLIC OF LITHUANIA ENTERPRISE BANKRUPTCY LAW
20 March 2001 – No IX-216
(As last amended on 21 June 2012 – No XI-2092)
Vilnius
ChAPTER ONE
GENERAL PROVISIONS
Article 1. Purpose of the Law
1. This Law shall regulate enterprise bankruptcy process.
2. The Law shall apply to all legal persons registered in the manner prescribed by the legal acts of the Republic of Lithuania (hereinafter referred to as “enterprises”), except for budgetary institutions, political parties, trade unions and religious communities and associations. The specific features of bankruptcy process may be established in special laws regulating the activities of legal persons.
3. The provisions of other laws regulating the activities of enterprises, the creditor’s right to satisfaction of claims, the creditor’s right to take measures to recover debts, set-off, except as provided for in the Law of the Republic of Lithuania on Financial Collateral Arrangements, taxes and other compulsory payments and the administration thereof in the course of bankruptcy process shall be applied in enterprises to the extent they do not contradict the provisions of this Law.
4. This Law shall apply to the extent it does not contradict the Law on Financial Collateral Arrangements and the Law on Settlement Finality in Payment and Securities Settlement Systems.
5. The purpose of this Law shall be to ensure the implementation of legal acts of the European Union specified in the Annex to this Law.
Article 2. Definitions
1. “Bankruptcy” means the state of an insolvent enterprise where bankruptcy proceedings have been initiated against the enterprise in court or the creditors are performing extrajudicial bankruptcy procedures in the enterprise.
2. “Bankruptcy process” means the totality of judicial or extrajudicial enterprise bankruptcy procedures.
3. “Bankruptcy proceedings” means a civil case heard in court over disputes arising from legal relations relating to bankruptcy.
4. “Enterprise in bankruptcy” means an enterprise against which bankruptcy proceedings have been initiated or in respect of which extrajudicial bankruptcy procedures are applied.
5. “Bankrupt enterprise” means an enterprise declared bankrupt by the court or, in case of extrajudicial bankruptcy procedures, by the meeting of creditors, and thus put into liquidation.
6. “Management of assets of an enterprise in bankruptcy or a bankrupt enterprise” means the following activities of the administrator: organisation of retention of the assets of an enterprise in bankruptcy or a bankrupt enterprise, recovery of assets from the debtors, sale of assets, satisfaction of the creditors’ claims, transfer of the remaining assets.
7. “Creditor’s claims secured by pledge and/or mortgage” means the right acquired by the creditor (holder of the pledge, mortgage creditor) under a pledge agreement or a registered mortgage bond or pledge note, in the event of the enterprise’s default to fulfil the obligation secured by pledge and/or mortgage, to request in the manner prescribed by this Law that the pledged assets be sold and his claims be satisfied from the proceeds and, in the event of failure to sell the pledged assets, that the assets be transferred into his ownership.
Version of paragraph 7 as of 1 July 2012:
7. “Creditor’s claims secured by pledge and/or mortgage” means the right acquired by the creditor (holder of the pledge, mortgage creditor) under a mortgage (pledge) transaction or on the basis of judicial mortgage (pledge), in the event of the enterprise’s default to fulfil the obligation secured by pledge and/or mortgage, to request in the manner prescribed by this Law that the pledged assets be sold and his claims be satisfied from the proceeds and, in the event of failure to sell the pledged assets, that the assets be transferred into his ownership.
8. “Insolvency of an enterprise” means the state of an enterprise when it fails to discharge its obligations (pay debts, carry out works paid for in advance, etc.) and the overdue liabilities of the enterprise (debts, unperformed works, etc.) are in excess of half of the value of the assets entered in the enterprise’s balance.
9. “Owner (owners)” means the participant (participants) of an enterprise: a shareholder or a group of shareholders whose shares carry at least 1/10 of all votes, the owner, stakeholder (stakeholders), member (members) of an individual enterprise and an institution exercising the rights and duties of the owner of a state or municipal enterprise.
10. Repealed as of 1 July 2008.
11. “Composition with the creditors” means an agreement between the creditors and the enterprise to continue the activities of the enterprise where the latter assumes certain obligations, whereas the creditors agree to defer, reduce or waive their claims.
12. “Fraudulent bankruptcy” means deliberate bringing of the enterprise to bankruptcy.
13. “Simplified bankruptcy procedures” means judicial enterprise bankruptcy procedures carried out where the enterprise has no assets or where its assets are insufficient to cover the legal and administrative expenses.
Article 3. Creditors of an Enterprise
Creditors of an enterprise (hereinafter – creditors) shall mean natural and legal persons entitled to request from the enterprise the discharge of its obligations and liabilities, including:
1) in the event of non-payment of taxes, state social insurance and compulsory health insurance contributions – state institutions which have an obligation to collect them;
2) in the event of non-payment of remuneration and compensation for damage arising from employment relations – employees of the enterprise (successors thereof);
3) in the event of transfer to the State of the obligation to compensate for damage due to accidents at work or contraction of an occupational disease in the cases specified in the Provisional Law on Damage Compensation in Accident at Work or Occupational Disease Cases – an institution authorised by the Government;
4) in the event of non-repayment of loans granted from the funds borrowed on behalf of the State and loans granted with the State guarantee – the Ministry of Finance;
5) natural and legal persons upon the sale of agricultural products;
6) in the event of non-repayment of assistance granted from the EU funds – state institutions administering the EU funds;
7) other creditors.
CHAPTER TWO
petition for initiation of bankruptcy proceedings
Article 4. Grounds for Filing with the Court of a Petition for Initiation of Enterprise Bankruptcy Proceedings
Persons specified in Article 5 of this Law may file with the court a petition for the initiation of bankruptcy proceedings if at least one of the following conditions is present:
1) the enterprise fails to pay the remuneration and other employment-related amounts in due time;
2) the enterprise fails, in due time, to pay for the goods received and works (services) carried out, defaults on the repayment of credits and fails to discharge other property obligations assumed under transactions;
3) the enterprise fails to pay, in due time, taxes and other compulsory contributions prescribed by law and/or the awarded amounts;
4) the enterprise has publicly announced or notified the creditor (creditors) in any other manner of its inability or lack of intent to discharge its obligations. Publication of such information in the manner prescribed by the Government or an institution authorised by it on the website of the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law shall also be considered as public announcement;
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.
Article 5. Petition Filed with the Court for Initiation of Enterprise Bankruptcy Proceedings
1. The following persons shall have the right to file a petition with the court for the initiation of enterprise bankruptcy proceedings:
1) the creditor (creditors);
2) the owner (owners);
3) the head of the enterprise administration.
2. In the presence of the condition laid down in paragraph 1 of Article 7 of this Law, a petition for the initiation of bankruptcy proceedings must be filed with the court by the liquidator of the enterprise in liquidation.
3. Petitions shall be filed in writing with the regional court of the locality in which the enterprise’s registered office is located in the manner specified in the Code of Civil Procedure.
4. Where several petitions for the initiation of enterprise bankruptcy proceedings against the same enterprise are filed with the court, they must be examined jointly. Where upon appointment of a specific judge for examination of petitions for the initiation of enterprise bankruptcy proceedings, the court receives petitions for the initiation of enterprise bankruptcy proceedings against the same enterprise from other persons, all of these petitions shall be examined by the judge appointed for examination of the petition which was filed with the court first.
5. Documents substantiating the validity of a petition shall be attached thereto.
Article 6. Petition for Initiation of Bankruptcy Proceedings Filed with the Court by the Creditor (Creditors)
1. In the presence of at least one of the conditions specified in subparagraphs 1, 2 and 3 of Article 4 of this Law, the creditor (creditors) may file with the court a petition for the initiation of bankruptcy proceedings upon the expiry of the time limit specified in paragraph 2 of this Article. The petition must be accompanied by evidence attesting to the fulfilment of the requirements set in paragraphs 2 and 4 of this Article in the manner prescribed by the Code of Civil Procedure and a copy of the notification referred to in paragraph 2 of this Article.
2. The creditor (creditors) must notify the enterprise in writing of his (their) intention to file with the court a petition for the initiation of bankruptcy proceedings. In the event of failure to deliver the notification in one of the specified ways, the creditor (creditors) must send the notification to the address of the registered office of the enterprise. The notification shall be considered delivered five days after the dispatch thereof. The notification shall identify the undischarged liabilities of the enterprise and shall contain a warning that in case of failure to discharge the aforementioned liabilities within the time limit specified in the notification, the creditor (creditors) will file with the court a petition for the initiation of the enterprise bankruptcy proceedings. The creditor (creditors) shall set a period of at least 30 days from the date of delivery of the notification for the discharge of liabilities.
3. In the presence of the condition specified in subparagraph 5 of Article 4 of this Law and the creditor (creditors) has (have) filed with the court a petition for the initiation of bankruptcy proceedings not later than within one month from the date of return of the writs of execution, the conditions specified in paragraph 2 of this Article shall not be applicable when filing the petition with the court.
4. The creditor (creditor) must present to the enterprise copies of the petition filed with the court and of the annexes accompanying the petition.
5. A petition filed with the court may be withdrawn before the court passes a ruling to initiate bankruptcy proceedings.
Article 7. Petition for Initiation of Bankruptcy Proceedings Filed with the Court by the Liquidator of the Enterprise
1. Should it transpire during the liquidation of the enterprise pursuant to the procedure prescribed by other laws regulating the activities of enterprises that the enterprise will be unable to discharge all of its liabilities, the liquidator of the enterprise must forthwith suspend all payments and not later than within 15 days from the day of establishment of the aforementioned condition file with the court a petition for the initiation of the enterprise bankruptcy proceedings. The petition to the court shall be accompanied by the lists of creditors and debtors of the enterprise, including their addresses, amounts of liabilities and debts and the time limits for the settlement thereof, as well as the financial statements (a balance sheet and profit (loss) account) for the period from the day of adoption of the decision to put the enterprise into liquidation to the day of filing of the petition as well as evidence attesting to the fulfilment of the requirements set in paragraph 3 of this Article in the manner prescribed by the Code of Civil Procedure.
2. Expenses relating to the administration of enterprise bankruptcy shall be covered in the manner prescribed by this Law.
3. The liquidator must provide the owner (owners) of the enterprise with copies of the petition filed with the court and of the annexes accompanying the petition.
Article 8. Petition for Initiation of Bankruptcy Proceedings Filed with the Court by the Head or Owner (Owners) of the Enterprise
1. If the enterprise is unable to and/or will be unable to settle with the creditor (creditors) and the latter has (have) not filed a petition with the court for the initiation of bankruptcy proceedings or if the condition referred to in subparagraph 4 of Article 4 of this Law is present, the head or the owner (owners) of the enterprise must file a petition with the court for the initiation of bankruptcy proceedings.
2. The reasons for filing by the enterprise of a petition for the initiation of bankruptcy proceedings shall be indicated in the petition. The petition to the court shall be accompanied by the lists of creditors and debtors of the enterprise, indicating their addresses, amounts of liabilities and debts and the time limits for the settlement thereof, a set of financial statements for the previous financial year and the period of the reporting financial year prior to the date of filing of the petition and information relating to the proceedings initiated in courts and recoveries without suit, the pledged assets and other obligations, as well as evidence attesting to the fulfilment of the requirements set in paragraph 3 of this Article in the manner prescribed by the Code of Civil Procedure, where the petition has been filed on the basis specified in subparagraph 4 of Article 4 of this Law – evidence that the condition specified in this subparagraph has been fulfilled. Other documents of relevance to the bankruptcy proceedings may also be presented to the court.
3. The head of the enterprise must provide the owner with copies of the petition filed with the court and of the annexes accompanying the petition. Where the petition is filed with the court by the owner (owners), he (they) must provide the enterprise with the documents specified in this paragraph.
4. The head of the enterprise or any other person (persons) having the right to adopt a respective decision in the enterprise must compensate for damage incurred by the creditors due to the enterprise missing the deadline for filing with the court of a petition for the initiation of bankruptcy proceedings.
CHAPTER THREE
hearing of BANKRUPTCY proceedings in court
Article 9. Preparation for Hearing of Bankruptcy Proceedings in Court
1. After the documents specified in paragraph 4 of Article 6 and paragraph 3 of Article 8 of this Law have been delivered to the enterprise, the head of the enterprise shall, not later than within five days from the receipt thereof, furnish to the court the lists of creditors and debtors of the enterprise, indicating their addresses, amounts of liabilities and debts, the time limits for the settlement thereof, a set of financial statements for the previous financial year and the period of the reporting financial year prior to the date of filing with the court of the petition by the creditors, information relating to the proceedings initiated in courts and recoveries without suit, the pledged assets and other obligations. Where the head of the enterprise fails, within the specified time limit, to furnish to the court the aforementioned documents without a valid excuse, the court or the judge may impose on the head of the enterprise a fine in the amount of up to LTL 10 000.
2. Upon receiving a petition for the initiation of bankruptcy proceedings, the court may:
1) obligate the persons who were and are entitled to act on behalf of the enterprise, the owner (owners), chief accountant (accountant), the head of a structural division in charge of keeping of the accounts of the enterprise to furnish to the court the documents required for the hearing of the bankruptcy proceedings and to appraise the assets of the enterprise in the manner prescribed by legal acts;
2) summon before the court the persons who were and are entitled to act on behalf of the enterprise, the owner (owners), the head of the company which provided accounting services to the enterprise prior to the initiation of bankruptcy proceedings, the head of a structural division in charge of keeping of the accounts of the enterprise, the chief accountant (accountant) and other executive officers, irrespective of the grounds on which the employment or civil contracts with them were terminated, provided that they had been dismissed from work or the civil contracts with them had been terminated within 12 months prior to the date of filing with the court of a petition for the initiation of bankruptcy proceedings, and request that they provide written explanations relating to the initiation of bankruptcy proceedings. Appearance before the court of the aforementioned persons shall be obligatory and the guarantees established under the Code of Civil Procedure in respect of witnesses shall apply to them;
3) summon before the court the creditors of the enterprise;
4) request that the head or the owner (owners) of the enterprise furnish to the court the data on the economic and financial position of the enterprise;
5) on its own initiative or the initiative of the person concerned, apply interim protective measures according to the procedure laid down in the Code of Civil Procedure effective until the entry into force of the ruling to initiate bankruptcy proceedings or to refuse to initiate bankruptcy proceedings;
6) specify other circumstances which are of relevance to the hearing of the case.
3. Upon admission by the court of a petition for the initiation of bankruptcy proceedings, where decisions have been made by courts and other institutions with regard to the enterprise and writs of execution have been issued based thereon, the assets (funds) of the enterprise under the writs of execution may be seized, however the handling and/or recovery of such assets shall be suspended, except for the cases specified in paragraph 4 of Article 33 of this Law. If the court refuses to initiate the enterprise bankruptcy proceedings, the recovery and handling of assets shall be resumed, and the interim protective measures applied shall be cancelled. The court must publish information about the admission of a petition for the initiation of bankruptcy proceedings as well as information about the refusal to initiate the enterprise bankruptcy proceedings not later than on the next working day following the judge’s resolution on the admission of the petition for the initiation of bankruptcy proceedings and the entry into force of the court ruling on the refusal to initiate the enterprise bankruptcy proceedings. Such information shall be publicly announced on a special website.
4. Losses incurred due to an unfair and unfounded petition for the initiation of bankruptcy proceedings shall be compensated in accordance with the procedure laid down in the Civil Code.
5. As of the date of admission of a petition for the initiation of bankruptcy proceedings, creditors of an enterprise shall be considered to have legal interest and shall have the right to apply to court to be included in the proceedings as third parties who do not lodge separate claims. The application to the court must be accompanied by evidence of the creditor’s right of claim in respect of the enterprise.
6. The court or the judge shall, not later than within one month from the day of receipt of a petition, adopt a ruling on the initiation of or refusal to initiate bankruptcy proceedings. For valid reasons the court shall be entitled to extend the time limit for the preparation for hearing of the bankruptcy proceedings in court, but for not longer than one month. Where, in preparation for the hearing of the case, the court decides to convene a preliminary sitting, such a sitting may only be held once. When instructing to convene a preliminary sitting, the court must comply with the time limits for adoption of the ruling to initiate bankruptcy proceedings or to refuse to initiate the proceedings specified in this paragraph. Where a petition for the initiation of restructuring proceedings is received during the examination of the petition for the initiation of bankruptcy proceedings and the court ruling to initiate bankruptcy proceedings has not yet been adopted, the examination of the petition for the initiation of bankruptcy proceedings shall be postponed pending the court ruling to initiate restructuring proceedings or to refuse to initiate restructuring proceedings.
7. Bankruptcy proceedings shall be initiated if the court has established the presence of at least one of the following conditions:
1) the enterprise is insolvent or the enterprise is late with payment of remuneration and amounts relating to employment relations to the employee (employees);
2) the enterprise has publicly announced to or notified the creditor (creditors) in any other manner of its inability or lack of intent to discharge its obligations.
Article 10. Initiating Bankruptcy Proceedings in Court
1. Bankruptcy proceedings shall be initiated and heard in contentious proceedings as prescribed by the Code of Civil Procedure except for the cases specified by this Law.
2. Bankruptcy proceedings shall be initiated and heard by the regional court of the locality wherein the registered office of the enterprise is situated.
3. The court shall refuse to initiate bankruptcy proceedings where:
1) prior to adoption by the court of the ruling to initiate bankruptcy proceedings, the enterprise satisfies the claims of the creditor (creditors) who filed with the court a petition for the initiation of bankruptcy proceedings;
2) restructuring proceedings have been initiated against the enterprise;
3) during the examination of the petition for the initiation of bankruptcy proceedings the court makes a sufficiently justified assumption that the enterprise has no assets or that its assets are insufficient to cover the legal and administrative expenses, except for the cases provided for in paragraphs 10 and 12 of this Article.
4. Upon adopting a ruling to initiate bankruptcy proceedings, the court or the judge must:
1) appoint the administrator of the enterprise;
2) seize the immovable property and other tangible fixed assets of the enterprise effective until the entry into force of the ruling to initiate bankruptcy proceedings;
3) not later than on the next working day issue a written notification of the initiated bankruptcy proceedings to the Register of Legal Entities, to the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law, the enterprise (where the ruling has been adopted in written proceedings – also to the creditors and administrator), to the Bank of Lithuania if bankruptcy proceedings have been initiated against an enterprise which is included in the list of system participants published by the Bank of Lithuania in accordance with the Law on Settlement Finality in Payment and Securities Settlement Systems, also if bankruptcy proceedings have been initiated against an insurance and reinsurance company, a financial brokerage firm, a management company, an investment company or a public limited liability company considered to be an issuer of securities under the Law on Securities not later than on the next working day following the entry into force of the court ruling to initiate bankruptcy proceedings to the Register of Legal Entities and within ten days from the entry into force of the ruling to initiate bankruptcy proceedings to: the creditors, all persons who have leased, borrowed or are keeping the assets of the enterprise in custody or using or managing them on any other grounds, also the Ministry of Finance if the enterprise is the recipient of a loan borrowed on behalf of the State or guaranteed by the State, the tax administrators, the state social insurance and compulsory health insurance administrators, credit institutions, financial brokerage firms and insurance companies providing services to the enterprise and the institution exercising the rights and duties of the owner of the state or municipal enterprise in bankruptcy;
4) notify other courts hearing the cases in which property claims have been entered against the enterprise, including claims relating to employment relations, about the initiation of bankruptcy proceedings and take over hearing of these cases in the cases set forth by the procedural law. Notify pre-trial investigation institutions, the prosecutor’s office or courts if civil claims have been brought in criminal proceedings by the creditors of the enterprise in bankruptcy and take over for examination, in the cases set forth by the procedural law, all the documents relating to these civil claims. Notify pre-trial investigation institutions, the prosecutor’s office or courts if the assets of the enterprise in bankruptcy have been seized in criminal proceedings and, in the cases set forth by the procedural law, take over the documents relating to the seizure of the assets. Notify bailiffs’ offices which have been presented the writs of execution regarding the recovery from this enterprise or in relation to the seizure of its assets;
5) set a time limit not exceeding 45 days from the entry into force of the court ruling to initiate bankruptcy proceedings within which the creditors have the right to file their claims which arose prior to the date of initiation of bankruptcy proceedings;
6) set a time limit not exceeding 15 days from the entry into force of the court ruling to initiate bankruptcy proceedings within which the management bodies of the enterprise must transfer to the administrator the assets of the enterprise according to the balance sheet drawn up on the basis of the data available on the day of entry into force of the ruling to initiate bankruptcy proceedings and all the documents;
7) approve the amount of funds on the basis of an estimate submitted by the administrator which the administrator is entitled to use to cover the administrative expenses of the enterprise in bankruptcy pending the approval of the estimate of administrative expenses by the meeting of creditors. The administrator must submit the estimate specified in this subparagraph not later than within 20 working days from the entry into force of the ruling to initiate bankruptcy proceedings.
5. In the cases where the creditor’s civil claims are referred, in accordance with the procedure established by the Code of Criminal Procedure, to the court hearing the bankruptcy case, the time limits for the referral of claims set in subparagraph 5 of paragraph 4 of this Article shall be deemed to have been observed. The aforementioned actions by the creditors may be referred by the court ruling to the court hearing the bankruptcy case in the course of the entire bankruptcy process until the court adopts a ruling to terminate the bankruptcy case or a decision on the termination of the enterprise.
6. The court or the judge may assign the administrator of the enterprise to perform the actions specified in subparagraph 3 of paragraph 4 of this Article.
7. After the court ruling to initiate bankruptcy proceedings becomes effective:
1) the management bodies of the enterprise must transfer to the administrator the assets of the enterprise according to the balance sheet drawn up on the basis of the data available on the day of entry into force of the ruling to initiate bankruptcy proceedings and all the documents within the time limits set by the court. In the cases where the enterprise is an entity of unlimited civil liability, its owner (owners) must, within the same time limits, submit to the administrator the list of all the assets held by him (them), including the assets which are the object of joint ownership. Where a person committed by the court to transfer to the administrator all the documents within the time limits set by it fails to transfer the said documents or transfers not all of the documents, the court or the judge may impose on him a fine in the amount of up to LTL 10 000;
2) the management bodies of the enterprise shall lose their powers, while the administrator of the enterprise shall, upon a 15-day written advance notice, terminate employment or civil contracts with the board members and the head of the enterprise. These persons shall not be paid a severance pay and compensations, with the exception of a pecuniary compensation for unused leave. The above persons and the chief accountant (accountant), the head of a structural division in charge of keeping of the accounts of the enterprise, the head of the company which provided accounting services to the enterprise prior to the initiation of bankruptcy proceedings must, at the request of the court, in the course of the entire bankruptcy process furnish all the information necessary for the bankruptcy process;
3) the discharge of all financial obligations not discharged prior to the initiation of bankruptcy proceedings, including the payment of interest, default interest, taxes and other compulsory contributions and the recovery of debts from the enterprise through court or without suit, except for set-off, where such set-off is permitted under the provisions of set-off of tax overpayment (difference) provided for in tax legislation, shall be prohibited. Calculation of default interest and interest on all obligations of the enterprise, including late payment of amounts relating to employment relations, shall be terminated. Judicial mortgage may not be imposed. The validity of the collective agreement of the enterprise shall be restricted as prescribed by the creditors’ meeting;
4) if within 30 days from the entry into force of the ruling to initiate bankruptcy proceedings the administrator notifies the persons concerned that he will not execute the contracts which have been entered into by the enterprise and whose period of execution has not yet expired, the aforementioned contracts (including lease and loan for use contracts), except for employment contracts and contracts from which the rights of claim of the enterprise in bankruptcy arise, shall be deemed to have expired, and the claims arising by reason thereof shall be satisfied in the manner specified in Article 35 of this Law. Where the management bodies of the enterprise have transferred to the administrator not all the data about the contracts entered into by the enterprise, the obligations assumed and documents relating to the contracts entered into by the enterprise, the time limit specified in this subparagraph for notifying the persons concerned about the non-execution of such contracts shall be calculated as of the date of receipt of the data about these contracts or obligations and documents;
5) the enterprise shall be entitled to engage in economic and commercial activities, provided they reduce the losses of creditors incurred by reason of bankruptcy, and to use the income received from such activities to cover the expenses related to these activities. Where taxable objects provided for by tax legislation and laws on other compulsory contributions are created as a result of the economic and commercial activities of the enterprise, the enterprise shall pay taxes and other compulsory contributions in compliance with laws. Where claims relating to undischarged obligations and liabilities emerge as a result of the economic and commercial activities, they shall be satisfied in accordance with the procedure specified in Article 35 of this Law;
6) upon request of the creditors, the court may impose restrictions on the economic and commercial activities of the enterprise and disposal of its assets, which may not be sold, leased or pledged, used as a collateral or a guarantee for the discharge of obligations of other entities, or otherwise transferred (conveyed) without the leave of the court;
7) the enterprise shall acquire the status of an enterprise in bankruptcy;
8) the court or the judge must, not later than on the next working day, notify in writing the Register of Legal Entities of the effective ruling to initiate bankruptcy proceedings as well as the data relating to the appointed administrator (the name, surname in case of a natural person, and the name in case of a legal person), the personal number (company code in case of a legal person) and the place of residence (registered office). The court or the judge may assign the performance of the aforementioned tasks to the administrator;
9) the court or the judge shall, where possible, deliver a copy of the effective ruling to initiate the enterprise bankruptcy proceedings to the administrator on the day of entry into force of the ruling together with copies of the lists of creditors and debtors of the enterprise, indicating their addresses, amounts of liabilities and debts, the time limits for the settlement thereof, a set of financial statements for the previous financial year and the period of the reporting financial year prior to the day of filing with the court of a petition, information relating to the proceedings initiated in courts against the enterprise and recoveries without suit, the pledged assets and other liabilities, or shall send the aforementioned documents to the administrator on the same day by registered mail or courier. The administrator must, not later than on the next working day after the receipt of the aforementioned documents, arrive at the registered office of the enterprise in bankruptcy indicated in the court ruling to initiate the enterprise bankruptcy proceedings and arrange the takeover and protection of the enterprise’s assets and documents. Where, upon presenting a copy of the effective court ruling to initiate the enterprise bankruptcy proceedings and a document confirming his identity, the administrator is refused entrance to the registered office of the enterprise and/or other premises (territories) belonging to the enterprise by the right of ownership and/or other right, the administrator shall call a police officer and open the aforementioned premises (territories) in his presence. The police officer called by the administrator is under the obligation to arrive. The court or the judge may impose on a person preventing the administrator from performing the actions specified in this subparagraph a fine in the amount of up to LTL 10 000.
8. A separate appeal against the ruling to initiate bankruptcy proceedings or to appoint, temporarily substitute or remove the administrator from office must be heard by the Court of Appeal of Lithuania not later than within 14 days from the date of receipt of the case material by the Court of Appeal of Lithuania. Statements in response to separate appeals may be filed within seven working days from the date of dispatch of a copy of the separate appeal to the parties involved in the proceedings. Having dismissed the ruling whereby the initiation of bankruptcy proceedings is refused, the Court of Appeal of Lithuania may not adopt a ruling to initiate bankruptcy proceedings. The ruling of the Court of Appeal of Lithuania shall be final and not subject to appeal under cassation review.
9. The court shall have the right to accept for confirmation creditors’ claims which have been submitted in breach of the time limits specified in subparagraph 5 of paragraph 4 of this Article, provided that it recognises the reasons for missing the time limits as important. Where the arbitral award establishing creditors’ claims has been adopted after the time limits specified in subparagraph 5 of paragraph 4 of this Article, the court shall confirm the creditors’ claims as a revised list of creditors and their claims, provided that these claims have not been previously confirmed. Creditors’ petitions for the confirmation of claims which arose prior to the initiation of bankruptcy proceedings submitted after the time limits specified in subparagraph 5 of paragraph 4 of this Article shall be accepted until the day of adoption by the court of a ruling to terminate bankruptcy proceedings or a decision regarding the termination of the enterprise.
10. When the court makes a sufficiently justified assumption that the enterprise has no assets or that its assets are insufficient to cover the legal and administrative expenses, it must recommend to the person who has lodged with the court a petition for the initiation of enterprise bankruptcy proceedings to pay, within five working days from making the recommendation, into the court’s deposit account an amount fixed by the court. The amount may not exceed LTL 10 000. If the aforementioned person pays the amount fixed by the court within the time period set by the court, bankruptcy proceedings may be initiated and heard following the simplified bankruptcy procedures. The amount paid into the deposit account of the court shall be used upon the instruction of the judge hearing the bankruptcy proceedings to cover the legal and administrative expenses.
11. Having paid in the amount provided for by the provisions of paragraph 10 of this Article, the creditor shall be entitled to apply to court for the award of the paid amount from the head or the owner (owners) of the enterprise for failing to file with the court a petition for the initiation of the enterprise bankruptcy proceedings after the enterprise became insolvent. The head or the owner (owners) of the enterprise shall be liable to the creditor jointly and severally.
12. Where the creditor files a petition in relation to undischarged claims relating to employment relations, claims for the compensation for damage due to mutilation or other bodily injury, contraction of an occupational disease or death as a result of an accident at work, and the court makes a sufficiently justified assumption that the enterprise has no assets or that its assets are insufficient to cover the legal and administrative expenses, the bankruptcy proceedings shall be initiated and heard following the simplified bankruptcy procedures. The court shall determine the amount of legal and administrative expenses which may not exceed the amount specified in paragraph 10 of this Article. The administrator shall apply to court in relation to recovery of this amount from the persons specified in paragraph 11 of this Article.
13. The ruling to initiate bankruptcy proceedings or refuse to initiate bankruptcy proceedings adopted in written proceedings shall come into force within ten days of its adoption, unless an appeal has been filed.
14. The court may restrict a person’s right to hold the position of the head of a public and/or private legal person or be a member of a collegial management body for a period from three to five years if, being required by law, the person: has not filed a petition for the initiation of bankruptcy proceedings, has not transferred the assets and/or documents upon the entry into force of the ruling to initiate bankruptcy proceedings, has avoided to furnish all the information necessary for the bankruptcy process or has otherwise hindered the procedures. The court must furnish information about the restriction of a person’s right to hold the position referred to in this paragraph to the institution authorised by the Government referred to in paragraph 10 of Article 11 of this Law not later than on the next working day following the entry into force of the decision (ruling) to restrict this right. This institution must draw up a list of natural persons prohibited from holding the position of the head of a public and/or private legal person or being a member of the collegial management body due to the reason specified in this paragraph. Persons shall be entered on the list not later than within two working days from the receipt of information from the court. The following data must be indicated in the list: the name and surname of the natural person, the date of adoption of the court decision (ruling), the time limit within which the person has no right to hold the position of the head of a public and/or private legal person or be a member of the collegial management body. The list must be publicly announced on the website of the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law.
Article 11. Administrator of the Enterprise
1. The administrator of the enterprise (hereinafter referred to the “administrator”) shall be a court appointed citizen of the Republic of Lithuania or another European Union Member State or a state of the European Economic Area, any other natural person who exercises the rights of free movement within the Member States conferred upon him by European Union legal acts (hereinafter referred to as the “natural person”) or a legal person established in the Republic of Lithuania, an establishment (branch) of a legal person of another European Union Member State registered in the Republic of Lithuania (hereinafter referred to as the “legal person”) having the right to provide bankruptcy administration services who has acquired such a right pursuant to this Law and other legal acts relating to the implementation thereof. The administrator who has forfeited the right to provide bankruptcy administration services may not perform enterprise bankruptcy procedures as of the specified date of forfeiture of the right.
2. When filing with the court a petition for the initiation of enterprise bankruptcy proceedings, a person shall nominate a candidate for the position of the administrator. In the event that a petition for the initiation of enterprise bankruptcy proceedings is filed with the court by the employees of the enterprise and they do not nominate a candidate for the position of the administrator, a candidate for the position of the administrator must be nominated by the institution authorised by the Government specified in paragraph 10 of this Article in accordance with the procedure established by the Government. Persons specified in Article 5 of this Law shall also have the right to nominate their candidates for the position of the administrator. The court may, on a reasoned basis, reject the nominated candidate (candidates) for the position of the administrator (administrators) and request that another candidate for the position of the administrator be nominated where the candidate for the position of the administrator proposed to the court does not meet the requirements of this Law. The court must coordinate the candidate appointed for the position of the administrator with the institution authorised by the Government referred to in paragraph 10 of this Article in accordance with the procedure established by the Government. In the event of death of a natural person who is the administrator, another candidate appointed for the position of the administrator shall be nominated to the court not later than within three working days from learning about the death of the administrator by the institution authorised by the Government referred to in paragraph 10 of this Article, whose representatives and the chairman of the meeting of creditors, where elected, shall be present when the newly appointed administrator takes over the assets and documents of the enterprise. In that case, the court shall adopt a ruling on the appointment of the administrator not later than within three working days from receipt of the proposal from the institution authorised by the Government and the court ruling shall become effective on the day of its adoption.
3. The administrator shall:
1) submit changes in the information and documents relating to the enterprise in bankruptcy to the Register of Legal Entities in the manner prescribed by legal acts;
2) forward the information relating to the enterprise bankruptcy process to the institution authorised by the Government specified in paragraph 10 of this Article;
3) manage and use the assets of the enterprise in bankruptcy and dispose thereof as well as of its funds held in banks in the manner prescribed by this Law;
4) ensure the protection of the assets of the enterprise in bankruptcy;
5) open a separate bank account for the accumulation of funds in the course of bankruptcy process and for the settlement with creditors in the manner set forth by this Law. The basis for the opening of such a bank account shall be the court ruling to initiate bankruptcy proceedings or a decision adopted by the meeting of creditors to initiate extrajudicial bankruptcy procedures;
6) direct the economic and commercial activities of the enterprise in bankruptcy;
7) enter into fixed term contracts for the lease of the enterprise’s assets, in which the day of expiry of the lease contract must be the day of sale, transfer or return of these assets;
8) not later than within six months from the receipt of documents on the transactions entered into by the enterprise, examine the transactions entered into by the enterprise in bankruptcy within a period of at least 36 months before the initiation of bankruptcy proceedings and bring actions in court according to the location of the registered office of the enterprise in bankruptcy for the invalidation of the transactions which are contrary to the objectives of the enterprise’s activities and/or which could have led to its inability to settle with the creditors, as well as for the establishment of a fraudulent bankruptcy. In this case, it shall be considered that the administrator has learnt about the transactions from the day of receipt of the documents on the conclusion of these transactions. At the request of the administrator, the court may extend the time limit of six months specified in this subparagraph for a period not exceeding six months;
9) represent or authorise another person to represent the enterprise in bankruptcy in court, at the creditors’ meeting and when entering into transactions where the enterprise in bankruptcy continues its economic and commercial activities;
10) compile a list of creditors of the enterprise and their claims on the basis of claims filed by the creditors which have been revised based on the accounting documents of the enterprise and, not later than within one month before the expiry of the time limit set by the court for lodging of creditors’ claims, submit the list to the court for confirmation, contest unfounded claims of creditors at the meeting of creditors and in court, and in the cases specified in paragraph 3 of Article 14 of this Law – through arbitration. At the request of the administrator, the court may extend the time limit specified in this subparagraph;
11) hire and dismiss employees in accordance with the procedure laid down in the Labour Code and this Law;
12) in accordance with the procedure laid down by legal acts, submit documents to the administrator of the Guarantee Fund for the allocation of funds for the satisfaction of claims of the employees relating to employment relations;
13) during the period before the first meeting of creditors, decide on further execution of transactions entered into by the enterprise the period of execution whereof has not yet expired, and on entering into new transactions necessary for the enterprise to continue its economic and commercial activities, provided that the enterprise continues its economic and commercial activities, and, not later than within 30 days from the entry into force of the court ruling to initiate bankruptcy proceedings, inform the parties concerned of his intent or refusal to execute the transactions entered into by the enterprise the period of execution whereof has not yet expired;
14) protect the rights and interests of all creditors, also the rights and interests of the enterprise in bankruptcy and organise and carry out the necessary work relating to bankruptcy process;
15) furnish information to the institution authorised by the Government referred to in paragraph 10 of this Article, to Statistics Lithuania (according to the forms of reports prescribed by it), to the court and, in accordance with the procedure established by the meeting of creditors, to the creditors and the owner (owners);
16) organise and control the accounting of income received in the process of management, use and disposal of the assets of the enterprise in bankruptcy and the cost accounting, also, in the course of enterprise bankruptcy process and in the manner prescribed by legal acts, draw up and submit annual financial reports (the balance sheet and profit (loss) account). In cases where the enterprise has not filed tax returns and other documents, the administrator must provide the appropriate institutions with a possibility to carry out document verifications and audits for the purpose of determining data to be provided in the tax returns or other documents which have not been filed;
17) convene the meetings of creditors;
18) notify the owner (owners) of the enterprise where their resolutions are required in order to conclude a composition with the creditors;
19) be entitled to obtain from the State Tax Inspectorate, the administration agencies of the State Social Insurance Fund, Statistics Lithuania, the state enterprise Centre of Registers as well as other natural and legal persons, including banks and other credit institutions, financial and insurance companies, in the manner prescribed by legal acts, all the necessary information about the previous and current activities of the enterprise in bankruptcy or the bankrupt enterprise under his administration, its former and current employees, previously and currently held assets, etc., also obtain from the persons specified in this subparagraph copies of the enterprise’s documents, submitted reports, information, verification reports, etc. In cases where the enterprise is an entity of unlimited civil liability, he shall be entitled to receive, free of charge, from the institutions registering assets (securities) according to the procedure established by laws information relating to the assets (securities) registered in the name of the owner (owners) of the enterprise and from the banks, other credit institutions and insurance companies – information about the funds held or to be received by them;
20) execute other decisions of the court and/or the meeting and committee of creditors;
21) submit documents relating to the discharge of the obligation of compensation for damage resulting from accidents at work or contraction of an occupational disease and particulars of the recipients of the compensation for damage to the territorial branches of the State Social Insurance Fund according to their place of residence where, in the cases provided for by law, compensation for damage is assigned to the State;
22) present to the Ministry of Agriculture documents relating to the allocation of funds for the settlement of claims of natural and legal persons for the agricultural produce purchased for processing;
23) take measures to recover debts from the debtors of the enterprise, except for the part of the debt in respect of which an application has been lodged for a set-off under the provisions of set-off of tax overpayment (difference) provided for in tax legislation;
24) file with the court (courts) an application for his removal from the position of the administrator of all the enterprises under his administration not later than one the next working day following the day on which he becomes aware of the forfeiture of the right to provide bankruptcy administration services. He shall present a copy of the application for his removal to the chairmen of the meeting of creditors of all the enterprises under his administration on the same day.
25) submit for approval a report on his activities to the first meeting of creditors and, at the request of the meeting of creditors, other reports on his activities. The report on the activities of the administrator submitted for approval to the first meeting of creditors must contain information about the participants of the enterprise; its authorised capital (if any); property seizures; the number of former employees, circumstances of dismissal of the employees; the employees recruited in the course of bankruptcy process; financial claims of creditors lodged, submitted to the court for confirmation and contested, establishing the sequence and stages of their satisfaction; receivables; lists of fixed and current assets, specifying the book value of the assets with marks of their pledge; purchase, sale and write-offs of fixed assets within a period of the last 36 months before the initiation of bankruptcy proceedings, specifying the name of the assets, the date and value of their purchase, sale and write-offs; transactions entered into within a period of the last 36 months before the initiation of bankruptcy proceedings, specifying the date of conclusion thereof, parties to and character of the transactions; profit and expenditure after the entry into force of the court ruling to initiate bankruptcy proceedings; use for the administration of bankruptcy of the amount of funds confirmed by the court allowed to be used to cover the expenses relating to bankruptcy administration until the approval of an estimate of administrative expenses; profit and expenditure of economic and commercial activities, if carried out; other information relevant to creditors.
4. A creditor of the enterprise against which bankruptcy proceedings have been initiated (a person in employment relations with the creditor or, where the creditor is a legal person, a member of its management bodies), a person who, under laws or other legal acts, has no right to be the head of the enterprise, the owner of the enterprise or its parent enterprise or subsidiary, a member of its management bodies, the head, his deputies (directors), the chief accountant (accountant), the head of a structural division in charge of keeping of the enterprise’s accounts, a shareholder holding or having held by the right of ownership within the last 36 months prior to the initiation of bankruptcy proceedings more than 10 per cent of the shares of the enterprise in bankruptcy and bankrupt enterprise or its parent enterprise or subsidiary may not be appointed administrator. These restrictions shall also apply to the persons referred to in this paragraph who were employed in the enterprise in bankruptcy and bankrupt enterprise and were dismissed within the last 36 months prior to the initiation of bankruptcy proceedings. The administrator may not have legal interest in the outcome of the proceedings. The restrictions specified in this paragraph placed on the administrator shall also apply in respect of the head of a legal person entitled to provide bankruptcy administration services, his deputies (directors), the chief accountant (accountant), the head of a structural division in charge of keeping of the enterprise’s accounts, members of the management body of the legal person and participants of the legal person.
5. The meeting of creditors shall authorise the chairman of the meeting of creditors to conclude a contract of agency with the administrator on behalf of the enterprise.
6. The administrator must, in accordance with the procedure established by laws, compensate for the damage resulting from failure to carry out or improper carrying out of his and/or his assistant’s (assistants’) duties.
7. The ruling concerning temporary substitution of the administrator in the event of his temporary incapacity for work or in other cases when he is temporarily unable to perform his duties shall be adopted by the court at the initiative of the administrator upon the approval of the chairman of the meeting of creditors. If the administrator is unable to apply to court due to an illness, the ruling concerning his temporary substitution in case of his temporary incapacity for work shall be adopted by the court on the recommendation of the chairman of the meeting of creditors.
8. The court may remove the administrator from office in the following cases:
1) where the administrator files with the court an application for his resignation;
2) where the meeting (committee) of creditors of the enterprise or the creditor (creditors) specified in subparagraph 4 of paragraph 2 of Article 21 of this Law make a reasoned application for removal of the administrator from office. In this case the court shall, not later than within 15 days from the date of application, under a ruling adopt a decision regarding the removal of the administrator from office and, where the administrator is removed from office, shall appoint another administrator in the manner prescribed by this Law. The court shall dismiss the application for removal of the administrator from office where it establishes that the decision of the meeting (committee) of creditors to remove the administrator from office was adopted in violation of the decision-making procedure of the meeting (committee) of creditors provided for by the Law or the creditor (creditors) who has filed an application for replacement of the administrator does not meet the requirement set in subparagraph 4 of paragraph 2 of Article 21 of this Law or where the granting of the application would violate the interests of the creditors who voted against the decision of the meeting (committee) of creditors, who did not participate in the meeting (committee) of creditors or who did not submit the application, or the public interest. At the request of the creditor, the court may recognise the ruling on the removal of the administrator from office and appointment of a new administrator as promptly enforceable;
3) where the administrator, in the manner laid down in subparagraph 24 of paragraph 3 of this Article, files with the court an application for his removal from office, or the chairman of the meeting of creditors, in the manner laid down in subparagraph 13 of Article 23 of this Law, applies for removal from office of the administrator who has forfeited the right to provide bankruptcy administration services and appointment of another administrator, or the court receives information from other sources that the administrator has forfeited the right to provide bankruptcy administration services. The court shall, not later than within 15 days from the date of receipt of information, adopt a ruling on the removal of the administrator from all the enterprises under his administration to which this court had appointed him and appoint another administrator (administrators) in accordance with the procedure laid down by this Law.
9. Upon removing the administrator from office and appointing another administrator, the court shall establish the time limit during which the former administrator must transfer the assets of the enterprise according to the balance sheet drawn up on the basis of the data available on the day of removal from office as well as all the documents to the newly appointed administrator. Where the removed administrator, without a valid excuse, fails to transfer the assets and documents of the enterprise within the specified time limit or transfers not all the assets and/or documents, the court or the judge may impose on the removed administrator (where the administrator is a legal person, its head) a fine in the amount of up to LTL 10 000.
10. The activities of the administrator shall be supervised and information about the enterprise bankruptcy process shall be submitted for publishing to the supplement Informaciniai pranešimai to the official gazette Valstybės žinios by the institution authorised by the Government.
11. The administrator (a natural person) must:
1) comply with the legal acts and requirements set in the Code of Conduct for Bankruptcy and Restructuring Administrators;
2) continuously improve his professional qualifications.
12. The administrator (a legal person) must ensure the continuous improvement of professional qualifications of its employees or owner where the legal person is an individual enterprise, or its general partners where the legal person is a partnership, who are entitled to provide bankruptcy administration services.
13. The professional civil liability of an administrator for the damage caused to natural or legal persons in the course of carrying out of bankruptcy procedures in respect of enterprises in bankruptcy and bankrupt enterprises shall be covered by compulsory insurance.
14. The object of compulsory insurance of an administrator against professional civil liability shall be the civil liability of the administrator for the damage caused by unlawful actions of the administrator and/or his employees in the course of carrying out of bankruptcy procedures in respect of enterprises in bankruptcy and bankrupt enterprises during the period of validity of the insurance contract.
15. An insured event shall mean unlawful actions (act or omission) committed by the administrator and/or his employees in the course of carrying out of bankruptcy procedures in respect of enterprises in bankruptcy and bankrupt enterprises during the period of validity of the insurance contract constituting grounds for incurring civil liability by the insured person and lodgement of a claim for compensation in compliance with the conditions laid down in the rules for compulsory insurance of the administrator against professional civil liability.
16. An administrator shall be covered by compulsory insurance against professional civil liability by entering into a contract of compulsory insurance of the administrator against professional civil liability. The policyholder of compulsory insurance of an administrator against professional civil liability shall be the administrator. The minimum sum insured in respect of compulsory insurance of an administrator against professional civil liability shall be LTL 200 000 for one insured event and LTL 500 000 for all insured events during one year. Upon payment of an insurance benefit in the case of an insured event and reduction of the minimum sum insured provided for in this Article, the administrator must, within one month, take out insurance against civil liability in order to restore the compulsory minimum sum insured.
17. The administrator may also take out additional insurance of an administrator against professional civil liability for the damage caused to natural or legal persons in the course of carrying out of bankruptcy procedures in respect of enterprises in bankruptcy and bankrupt enterprises.
18. The insurer holding an insurance licence issued by the Insurance Supervisory Commission of the Republic of Lithuania which entitles to engage in compulsory insurance of administrators against professional civil liability must conclude a contract of compulsory insurance of administrators against professional civil liability with the administrator who has submitted an application and all the documents necessary for concluding such a contract. The rules for compulsory insurance of administrators against professional civil liability shall be approved by the Government or an institution authorised by it.
19. Seeking to administer an enterprise in bankruptcy or a bankrupt enterprise, the administrator must present a copy of the Certificate of Compulsory Insurance of an Administrator against Professional Civil Liability to the court, the meeting of creditors, in case of extrajudicial bankruptcy procedures, and to the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law.
20. Damage caused by the unlawful actions of the administrator and/or his employees in the course of carrying out of bankruptcy procedures in respect of enterprises in bankruptcy and bankrupt enterprises during the period of validity of the insurance contract which exceeds LTL 1 000 shall be compensated by the insurer by paying out an insurance benefit not exceeding the sum insured. Where the insurance benefit is not sufficient to compensate for the damage in full, the difference between the insurance benefit and the actual amount of damage shall be covered by the administrator who has caused the damage.
Article 111. Assistant Administrator
1. An assistant administrator shall be a natural person who has acquired the right to work as assistant administrator and concluded an employment contract with the administrator to work as assistant administrator in accordance with the procedure laid down in this Law and other legal acts.
2. By a written assignment of the administrator and not earlier than after one year from the date of conclusion of the employment contract referred to in paragraph 1 of this Article, an assistant administrator shall have the right to perform the functions of the administrator specified in subparagraphs 1, 2, 15, 18 of paragraph 3 of Article 11 of this Law and, by assignment of the administrator, to organise and carry out other necessary work relating to bankruptcy process.
CHAPTER THREE1
RIGHT TO PROVIDE ENTERPRISE BANKRUPTCY ADMINISTRATION SERVICES AND THE RIGHT TO WORK AS ASSISTANT ADMINISTRATOR
Article 112. Requirements for Persons Seeking to Acquire the Right to Provide Enterprise Bankruptcy Administration Services and Persons Seeking to Acquire the Right to Work as Assistant Administrators
1. A natural person seeking to acquire the right to provide bankruptcy administration services must:
1) be of good repute;
2) hold a social science degree or equivalent degree in law or economics (a bachelor’s qualification degree in law or economics and a master’s qualification degree in law or economics) or a lawyer’s professional qualification degree (one-cycle university education in law);
3) have a work record of at least two years as an assistant administrator over the last three years or a work record of at least five years as a head of an enterprise over the last seven years or be recognised as an advocate in accordance with the procedure established by legal acts;
4) pass a qualification exam;
5) have a command of the Lithuanian language.
2. A natural person seeking to acquire the right to work as assistant administrator must comply with the requirements set in subparagraphs 1, 2, 4 and 5 of paragraph 1 of this Article.
3. A natural person may not be regarded to be of good repute if he:
1) has been convicted of a crime against the economy and business practice, the financial system or the civil service and public interest or other serious or grave crime and the conviction has not expired yet;
2) has been dismissed from work, from the office or has lost the right to engage in the relevant activity for non-compliance with the requirement of good repute set forth in laws or for breach of ethics, and less than three years have passed from the dismissal from work, from the office or loss of the right to engage in the relevant activity or the right to provide bankruptcy administration services;
3) abuses psychotropic, narcotic, toxic substances or alcohol.
4. The head of a legal person seeking to provide enterprise bankruptcy administration services must be entitled to provide bankruptcy administration services. Seeking to acquire the right to provide bankruptcy administration services, a legal person must ensure that at least two employees of the legal person, including the owner (where the legal person is an individual enterprise) or a general member (where the legal person is a partnership), hold a bankruptcy administrator certificate.
Article 113. Qualification Examination
A qualification examination shall mean a test of knowledge of a natural person seeking to acquire the right to provide enterprise bankruptcy administration services or the right to work as assistant administrator and shall be prepared by the Commission for Attestation of Bankruptcy and Restructuring Administrators (hereinafter referred to as the “Commission”). The qualification examination shall be prepared based on the attestation programmes for administrators and assistant administrators approved by the Commission. A natural person who has failed the qualification examination or has failed to arrive for the examination may retake it not earlier than after three months. A natural person who has failed to arrive for the examination for valid reasons (due to an illness or other facts and circumstances unforeseeable by the natural person, substantiated by documents), upon submitting an explanation for failure to participate in the examination and an application for permission to take the examination, may take it before the lapse of the set period of three months. The number of retakes of the qualification examination shall not be limited.
Article 114. Commission
1. The Commission shall perform attestation of natural persons seeking to acquire the right to provide enterprise bankruptcy administration services or to work as assistant administrators as well as other functions set forth by this Law and other legal acts.
2. The Commission shall consist of five members: representatives of the Ministry of Economy, the Ministry of Finance or an institution authorised by it, the Ministry of Social Security and Labour and two representatives of the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law. All the members of the Commission must hold a university degree of higher education or equivalent degree and at least three members of the Commission must hold a social science degree in law or economics (a bachelor’s qualification degree in law or economics and a master’s qualification degree in law or economics) or a lawyer’s professional qualification degree (one-cycle university education in law).
3. The composition of the Commission shall be approved by the Minister of Economy. The Commission shall be formed for a period of five years. The Commission shall be formed and operate in accordance with the procedure established by the Government or an institution authorised by it.
4. The Commission shall have the right to obtain documents and other information related to the implementation of its functions from state and municipal institutions.
Article 115. Issuance of Bankruptcy Administrator and Assistant Bankruptcy Administrator Certificates and Cancelation of Validity thereof
1. Bankruptcy administrator and assistant bankruptcy administrator certificates shall be issued to a citizen of the Republic of Lithuania, another European Union Member State or a state of the European Economic Area (hereinafter referred to as the “Member State”) or any other natural person who exercises the rights of free movement within the Member States conferred upon him by European Union legal acts and who meets the requirements specified in paragraphs 1 or 2 of Article 112 of this Law. A bankruptcy administrator certificate shall attest to a person’s qualification as bankruptcy administrator. An assistant bankruptcy administrator certificate shall entitle to work as assistant administrator.
2. Bankruptcy administrator and assistant bankruptcy administrator certificates shall be issued and their validity shall be cancelled by the Ministry of Economy on the recommendation of the Commission in accordance with the procedure established by the Government or an institution authorised by it.
3. A bankruptcy administrator certificate shall not be issued to a person who does not meet the requirements set in subparagraphs 1, 2, 3, 5 of paragraph 1 of Article 112 of this Law and has failed to pass the qualification examination. A bankruptcy administrator certificate shall be issued to the applicant or a reasoned refusal to issue the certificate must be presented to him in writing not later than within 30 days from the date of the qualification examination.
4. Bankruptcy administrator and assistant bankruptcy administrator certificates shall be valid for an indefinite period of time.
5. The validity of a bankruptcy administrator certificate shall be cancelled where:
1) that is requested by the administrator;
2) it transpires that incorrect data have been submitted to obtain the bankruptcy administrator certificate;
3) the administrator commits violations specified in paragraph 1 of Article 117 of this Law while the penalty for the violations specified in paragraph 1 of Article 117 of this Law is still in force;
4) the administrator no longer meets the good repute requirements set in paragraph 3 of Article 112 of this Law;
5) the administrator dies.
6. The validity of a bankruptcy administrator certificate shall be cancelled on the grounds specified in subparagraphs 2 and 3 of paragraph 5 of this Article where the institution authorised by the Government indicated in paragraph 10 of Article 11 of this Law, upon issuing a written warning to the administrator of the possible cancellation of validity of the certificate, does not receive, within 15 working days from the date of dispatch of the warning, new information and documents as a result of which the issue of cancellation of validity of the certificate might be returned to the Commission for reconsideration.
7. The provisions of paragraphs 3, 5 and 6 of this Article shall mutatis mutandis apply to the issuance of assistant bankruptcy administrator certificates and cancellation of validity thereof.
8. State fees and charges shall be levied for taking and retaking of the qualification examination by persons seeking to acquire the right to provide enterprise bankruptcy administration services or the right to work as assistant administrator, and for the issuance of bankruptcy administrator and assistant bankruptcy administrator certificates and duplicates thereof.
Article 116. Compilation of a List of Persons Providing Enterprise Bankruptcy Administration Services
1. The institution authorised by the Government specified in paragraph 10 of Article 11 of this Law shall, in accordance with the procedure established by the Government or the institution authorised by the Government, compile a list of persons providing enterprise bankruptcy administration services (hereinafter referred to as the “List”). Natural and legal persons entered on the List shall acquire the right to provide enterprise bankruptcy administration services as of the date of entering on the List.
2. The following shall be entered on the List:
1) natural persons who have been issued a bankruptcy administrator certificate in accordance with the procedure laid down in paragraph 2 of Article 115 of this Law;
2) legal persons complying with the requirements set forth in paragraph 4 of Article 112 of this Law.
3. The decision to enter a natural and/or legal person on the List shall, not later than within 10 working days from the date of issuance of a bankruptcy administrator certificate to the natural person and/or the date of submission by the legal person of documents evidencing the compliance with the requirements laid down in paragraph 4 of Article 112, be adopted by the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law and announced on its website.
4. The institution authorised by the Government specified in paragraph 10 of Article 11 of this Law must refuse to enter a legal person on the List and give a reasoned notice thereof to the legal person by registered mail not later than within 10 working days from the date of submission of the documents where the legal person does not comply with the requirements laid down in paragraph 4 of Article 112 of this Law.
5. The institution authorised by the Government specified in paragraph 10 of Article 11 of this Law shall remove the persons referred to in paragraph 1 of this Article from the List where:
1) that is requested by the legal or natural person;
2) the validity of a bankruptcy administrator certificate of the natural person is cancelled;
3) bankruptcy proceedings are initiated in respect of the legal person or out-of-court bankruptcy procedures are under way, restructuring proceedings are initiated or the legal person is in liquidation;
4) it transpires that in order to be entered on the List, the legal person has submitted incorrect data;
5) the legal person does not comply with the requirements set forth in paragraph 4 of Article 112 of this Law.
6. A legal person shall be removed from the List on the grounds specified in subparagraphs 4 and 5 of paragraph 5 of this Article where the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law, having warned the legal person in writing of the possible removal from the List, does not receive, within 15 working days from the date of dispatch of the warning, new information and documents as a result of which the legal person should not be removed from the List.
Note. Persons who were entitled to provide bankruptcy administration services on the day of entry into force of this Law (No XI-1867) shall be entered on the list of persons providing enterprise bankruptcy administration services regardless of the requirements set in Article 116.
Article 117. Liability of Administrator and Assistant Administrator
1. An administrator may be subject to a penalty in accordance with the procedure established by the Government or an institution authorised by it for failure to execute or properly execute the requirements laid down in legal acts regulating enterprise bankruptcy, procedural court documents (decisions, orders, rulings and resolutions), resolutions of the meeting of creditors and committee of creditors or other violations discovered in the course of inspection of the administrator’s activities. The institution authorised by the Government specified in paragraph 10 of Article 11 of this Law shall impose the following penalties:
1) a warning;
2) a public warning which shall, not later than within five working days from the date of adoption of the decision, be announced on the website of the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law.
2. Upon establishing repeated violations specified in paragraph 1 of this Article with the penalty being still in force or failure to comply with the requirements of good repute as well as in the cases laid down in paragraph 5 of Article 116 of this Law, the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law must apply to the Commission regarding the decision to propose to cancel the validity of a bankruptcy administrator certificate and to remove him from the List.
3. The penalty imposed on the administrator shall be valid for one year.
4. The provisions of paragraphs 1, 2 and 3 of this Article shall mutatis mutandis apply to assistant administrator.
5. The decision to impose a penalty may be appealed against in accordance with the procedure set forth in the Law on Administrative Proceedings.
CHAPTER FOUR
EXTRAJUDICIAL BANKRUPTCY PROCEDURES
Article 12. Preparation for Extrajudicial Bankruptcy Procedures
1. Extrajudicial bankruptcy procedures may be applied provided that no action has been brought in court in which property claims, including claims relating to employment relations, have been entered against the enterprise, also if no recovery is made from the enterprise under the writs of execution issued by courts or other institutions.
2. If the enterprise is unable and will not be able to settle with the creditor (creditors), the head or the owner (owners) of the enterprise, intending to seek the creditors’ consent to carry out extrajudicial bankruptcy procedures, must notify every creditor in writing of the proposal to carry out extrajudicial bankruptcy procedures, specifying the date and venue of the meeting of creditors.
3. The meeting of creditors shall be convened not later than within 20 days from the dispatch of the proposal specified in paragraph 2 of this Article to the creditors.
4. The resolution to carry out extrajudicial bankruptcy procedures may be adopted by the meeting of creditors if the resolution is voted in favour of in open voting by the creditors whose claims, in terms of value, account for at least 3/4 of the amount of all the liabilities of the enterprise on the day of adoption of the resolution, including those which have not yet matured.
5. If the meeting of creditors does not adopt the resolution to carry out extrajudicial bankruptcy procedures, the persons listed in paragraph 1 of Article 5 of this Law may file with the court a petition for the initiation of bankruptcy proceedings. In this case, the time limits for filing of the petition set in paragraph 1 of Article 6 and the provisions of paragraph 2 of this Article shall not apply, provided that the petition is filed with the court not later than within 30 days after the meeting of creditors.
Article 13. Extrajudicial Bankruptcy Procedures
1. Extrajudicial bankruptcy procedures shall be carried out in compliance with this Law. The issues assigned to the competence of the court shall be considered and decided upon by the meeting of creditors.
2. The administrator shall be appointed by the meeting of creditors in accordance with the provisions of Article 11 of this Law.
3. The procedure for executing the resolutions of the meeting of creditors and satisfaction of the creditors’ claims shall be established in accordance with the procedure and terms of hearing of bankruptcy cases by the court prescribed by this Law.
4. The administrator shall, within three working days from the meeting of creditors at which the creditors adopted a decision to carry out extrajudicial bankruptcy procedures, notify the employees of the enterprise in writing of the intended termination of the employment contracts and terminate the employment contracts with them after 15 working days of such notification. The administrator shall, not later than within three working days from the meeting of creditors referred to in this paragraph, notify the territorial labour exchange office, the municipal institution and representatives of the employees of the enterprise of the intended dismissal of employees. A dismissed employee shall be paid severance pay in the amount specified in paragraph 2 of Article 19 of this Law and settlement with him shall be effected in accordance with the procedure laid down in Article 35 of this Law.
5. In case of extrajudicial bankruptcy procedures, the consequences specified in paragraph 7 of Article 10, Article 16 and paragraphs 2 and 3 of Article 27 of this Law shall arise.
CHAPTER FOUR(1)
SIMPLIFIED BANKRUPTCY PROCEdureS
Article 13(1). Simplified Bankruptcy Procedures
1. In the cases provided for in paragraphs 10 and 12 of Article 10 of this Law and/or when the administrator establishes during the examination of the enterprise bankruptcy case that the enterprise has no assets or that its assets are insufficient to cover the legal and administrative expenses, the court may adopt a ruling to apply the simplified bankruptcy procedures in respect of the enterprise. Such procedures may not last longer than one year from the day of entry into force of the ruling to apply the simplified bankruptcy procedures. Bankruptcy procedure of liquidation must be applied during the simplified bankruptcy procedures. The issues relating to the sale of assets, assigned under this Law to the competence of the meeting of creditors, shall be resolved by the court.
2. Having adopted a ruling to apply the simplified bankruptcy procedures in respect of the enterprise, the court must:
1) forthwith submit the information relating to the court ruling to apply the simplified bankruptcy procedures in respect of the enterprise to the Register of Legal Entities, the enterprise, the creditors and the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law;
2) appoint the administrator if he has not been appointed;
3) approve the estimate of administrative expenses to be submitted by the administrator not later than within five working days from the entry into force of the court ruling to apply the simplified bankruptcy procedures in respect of the enterprise, which may not exceed the amount specified in paragraph 10 of Article 10 of this Law;
4) Repealed as of 1 July 2008;
5) confirm the creditors’ claims (if they have not been confirmed) according to the list presented by the administrator, drawn up based on the data of the accounting documents of the enterprise.
3. The court or the judge may assign the administrator of the enterprise to perform the actions specified in subparagraph 1 of paragraph 2 of this Article.
4. A contract of agency with the administrator shall not be concluded. The effective court ruling to apply the simplified bankruptcy procedures in respect of the enterprise shall be the basis for the performance of enterprise bankruptcy procedures by the administrator. The estimate of administrative expenses and the procedure for using the funds allocated for the administrative expenses shall be approved and amended by the court. The court shall also approve the annual financial reports (the balance sheet and profit (loss) account) drawn up in the course of bankruptcy process.
5. Proceeds from the sale of assets and the rights of claim shall be allocated for covering the legal and administrative expenses. Where after the commencement of the simplified bankruptcy procedures it is established that the proceeds from the sale of the assets of the enterprise and the rights of claim will be twice as much as is required for covering the legal and administrative expenses, the court shall adopt a ruling to terminate carrying out of the simplified bankruptcy procedures and a ruling to perform enterprise bankruptcy procedures in accordance with the general procedure laid down in this Law for the hearing of bankruptcy proceedings in court.
6. At the request of the administrator, the court shall, not later than within 30 days from the entry into force of the ruling to apply the simplified bankruptcy process in respect of the enterprise, declare the enterprise bankrupt and adopt a ruling to liquidate the enterprise due to bankruptcy and approve the duration of the simplified bankruptcy process.
7. Where the proceeds from the sale of the unpledged assets of the enterprise and the rights of claim exceed the amount that is required for covering the legal and administrative expenses, but do not exceed the amount specified in paragraph 5 of this Article, the remaining funds shall be allocated to satisfy the claims of the employees of the enterprise – the creditors, relating to employment relations.
8. Upon satisfaction of the claims specified in paragraph 6 of this Article, the remaining amounts may be used to satisfy the claims of the creditor referred to in paragraph 11 of Article 10 of this Law. If the aforementioned creditor is awarded a certain amount from the persons specified in paragraph 11 of Article 10 of this Law, the amount payable in satisfaction of claims should be reduced by the amount awarded.
9. In case there are any funds remaining after full satisfaction of the claims of employees – creditors and after settlement with the creditor indicated in paragraph 7 of this Article, the funds must be transferred to the account of the Guarantee Fund.
10. A separate appeal may be filed against the court ruling to apply the simplified bankruptcy procedures.
11. The meetings of creditors shall not be convened in the course of the simplified bankruptcy procedures.
CHAPTER FIVE
PROTECTION OF INTERESTS OF THE DEBTOR, CREDITORS AND THIRD PARTIES
in the event of initiation of BANKRUPTCY PROCEEDINGS
Article 14. Disposal of the Assets of the Enterprise in Bankruptcy
1. From the entry into force of the ruling to initiate bankruptcy proceedings:
1) the right to manage, use and dispose of the assets (funds) of the enterprise in bankruptcy shall be granted only to the administrator. No creditor of the enterprise or other person shall have the right to take over the assets and funds owned by the enterprise in bankruptcy in the manner other than prescribed by this Law;
2) persons who have leased, borrowed, are safekeeping or using or managing the assets of the enterprise in bankruptcy on any other grounds shall be prohibited from entering into transactions relating to these assets with third parties.
2. All transactions entered into in breach of the provisions of paragraph 1 of this Article shall be invalid as of their conclusion.
3. Claims for the invalidation of transactions and other claims of the administrator against the debtors of the enterprise in bankruptcy and bankrupt enterprise shall be examined in court according to the location of the registered office of the enterprise in bankruptcy. Where the parties have agreed to refer these claims to arbitration prior to the initiation of bankruptcy proceedings, they shall be examined in court or through arbitration in accordance with the provisions of the Law on Commercial Arbitration.
Article 15. Satisfaction of Claims Filed with the Court Prior to the Initiation of Bankruptcy Proceedings
1. The head of the enterprise must, within five days from the receipt of the documents referred to in paragraph 4 of Article 6, notify the court of the initiated proceedings in which property claims have been entered against the enterprise, including claims relating to employment relations, as well as of the criminal proceedings in which financial claims have been entered against the enterprise and/or the assets of the enterprise have been seized.
2. All civil cases pending in court in which financial claims, including claims relating to employment relations, have been filed against the enterprise shall, in the cases set forth by the procedural law, be referred to the court which initiated the bankruptcy proceedings. Where, in the cases set forth by the procedural law, the case is not referred to the court hearing the bankruptcy case, the court shall, not later than within three working days, inform the court hearing the bankruptcy case about the decision adopted and effective in the case. Examination of claims filed for arbitration shall be subject to the provisions of the Law on Commercial Arbitration.
3. The administrator or a person authorised by him shall represent the enterprise in the proceedings for the recovery of assets from other parties for the benefit of the enterprise in bankruptcy initiated prior to the initiation of bankruptcy proceedings from the date of entry into force of the ruling to initiate bankruptcy proceedings.
Article 16. Terms of Payment
All the terms of payment of debts of the enterprise in bankruptcy shall be considered to have matured as of the day of initiation of bankruptcy proceedings. This provision shall be repealed when the court ruling to terminate bankruptcy proceedings becomes effective.
Article 17. Discharge of Obligations of and to an Enterprise in Bankruptcy
1. The administrator may, in accordance with the procedure and in cases provided for by this Law, continue to execute the transactions entered into by the enterprise in bankruptcy prior to the initiation of bankruptcy proceedings.
2. The administrator must, within the time limit set in subparagraph 4 of paragraph 7 of Article 10 of this Law, notify the parties concerned of the adopted decision to continue the execution of contracts entered into by the enterprise prior to the date of entry into force of the ruling to initiate bankruptcy proceedings.
Article 18. Delivery of Writs of Seizure and Execution
1. The bailiff shall, not later than within 15 days from the entry into force of the court ruling to initiate bankruptcy proceedings, deliver to the court hearing the bankruptcy case the writs of seizure of the assets of the enterprise which had been seized prior to the initiation of the enterprise bankruptcy proceedings in order to enforce the decisions taken by courts and other institutions but had not been sold as well as the writs of execution in relation to recovery from the enterprise, except for the cases specified in paragraph 4 of Article 33 of this Law, and shall notify the trustee of the assets and the claimant about the delivery of the aforementioned documents or about the sale of the assets in the case specified in paragraph 4 of Article 33 of this Law. The creditor’s claims which have not been satisfied by the bailiff shall be satisfied in accordance with the procedure laid down by this Law. If the bailiff fails to deliver to the court the aforementioned documents within the specified time limit, the court or the judge may impose on the bailiff a fine in the amount of up to LTL 10 000.
2. If the assets of the enterprise against which bankruptcy proceedings have been initiated were seized in criminal proceedings, all documents relating to the seizure of the assets shall be forwarded to the court hearing the bankruptcy case within one month from the entry into force of the court ruling to initiate bankruptcy proceedings and the trustee of the assets shall be notified thereof.
3. The issues relating to the seizure of the assets specified in paragraphs 1 and 2 of this Article shall be resolved by the court hearing the bankruptcy case. Pending the lifting of seizure, the trustee of the assets shall have all the rights and duties related to the protection of these assets.
Article 19. Regulation of Employment Relations
1. The administrator shall, within three working days from the entry into force of the court ruling to initiate bankruptcy proceedings against the enterprise, notify the employees of the enterprise in writing of the intended termination of the employment contracts and terminate the employment contracts with them after 15 working days from such notification. The administrator shall, not later than within three working days from the entry into force of the court ruling to initiate bankruptcy proceedings against the enterprise, notify the territorial labour exchange office, the municipal institution and representatives of the employees of the enterprise of the intended dismissal of employees.
2. Upon termination of the employment contract, the dismissed employee shall be paid severance pay in the amount of his two average monthly salaries.
3. Settlement with the employee to be dismissed shall be effected in accordance with the procedure laid down in Article 35 of this Law.
4. The number of employees according to positions who are to be recruited under fixed-term agreements for work during the enterprises bankruptcy process shall be determined by the meeting of creditors. The list of such employees shall be drawn up by the administrator.
Article 20. Fraudulent Bankruptcy
If the court hearing the enterprise bankruptcy case establishes a fraudulent bankruptcy, the administrator must review all transactions of the enterprise in bankruptcy concluded within the period of five years prior to the initiation of bankruptcy proceedings and bring an action in court according to the location of the registered office of the enterprise in bankruptcy for the invalidation of the transactions which are contrary to the interests of the enterprise and/or which could have led to its inability to settle with the creditors. In this case, it shall be considered that the administrator has learnt about the transactions from the day of receipt of the documents regarding the conclusion of these transactions.
Article 21. Rights of Creditors in Bankruptcy Proceedings
1. Upon the initiation of bankruptcy proceedings in court, the creditors shall have the right to refer their claims to the administrator within the time limit fixed by the court, along with the documents substantiating the claims, also to specify how the enterprise has secured the discharge of these claims.
2. The creditors whose claims have been confirmed by the court shall have the right:
1) to take part in the meetings of creditors and protect their claims;
2) in accordance with the procedure laid down by the meeting of creditors, to receive from the administrator information about the course of bankruptcy proceedings;
3) to apply to court for the establishment of a fraudulent bankruptcy and to question the resolutions adopted by the meeting of creditors;
4) to apply to court regarding the replacement of the administrator, where the claims of the creditor (creditors) confirmed by the court, in terms of value, account for more than half of the amount of all the confirmed claims of creditors;
5) at any time during the course of bankruptcy process, to perform set-off under the provisions of set-off of tax overpayment (difference) provided for in tax legislation.
3. The institutions specified in subparagraphs 1, 3, 4 and 6 of Article 3 of this Law shall be represented in bankruptcy proceedings and at the meetings of creditors by persons authorised by them.
Article 22. Convening of the Meeting of Creditors
1. The first meeting of creditors must be convened not later than within 30 working days from the entry into force of the court ruling to confirm the creditors’ claims. The chairman of the meeting of creditors must be elected at this meeting. Until the election of the chairman, the meeting of creditors shall be chaired by the administrator. A person shall be considered elected as the chairman of the meeting of creditors if voted in favour of by the creditors the amount of whose claims confirmed by the court (in case of extrajudicial bankruptcy procedures – confirmed by the meeting of creditors), in terms of value, accounts for more than half of the amount of the claims confirmed by the court (in case of extrajudicial bankruptcy procedures – confirmed by the meeting of creditors) of all the creditors attending the meeting. Where the chairman of the meeting of creditors is elected from several persons, a person shall be considered elected as the chairman of the meeting of creditors if voted in favour of by the creditors the amount of whose claims confirmed by the court (in case of extrajudicial bankruptcy procedures – confirmed by the meeting of creditors), in terms of value, is the largest, as compared to the amount of claims confirmed by the court (in case of extrajudicial bankruptcy procedures – confirmed by the meeting of creditors) of the creditors who have voted in favour of other candidates.
2. Upon the initiation of bankruptcy proceedings, the first meeting of creditors shall be convened by the court or, on its instruction, by the administrator.
3. Subsequent meetings of creditors shall be convened by the court, the administrator or the chairman of the meeting of creditors. A creditor (creditors), the amount of whose claims, in terms of value, accounts for at least 10% of the amount of all the creditors’ claims confirmed by the court in the manner prescribed by this Law shall be entitled to request convening the meeting of creditors.
4. The procedure for convening the meeting of creditors shall be established by the meeting of creditors.
5. The administrator shall present to the meeting of creditors the court ruling to confirm each creditor’s claims.
6. The owner (owners) of the enterprise in bankruptcy and bankrupt enterprise or his (their) authorised representative, the administrator and the authorised representative of the municipality wherein the immovable property of the enterprise in bankruptcy and the bankrupt enterprise is located shall have the right to attend the meetings of creditors. Only creditors shall be entitled to vote.
Article 23. Rights of the Meeting of Creditors
The meeting of creditors shall have the following rights:
1) to elect the chairman of the meeting of creditors who must be only a creditor (where the creditor is a legal person – his authorised representative). The chairman of the meeting of creditors (committee of creditors) may not be elected a creditor – former head of the enterprise (irrespective of the grounds for and time of dismissal), the owner and close relatives or spouses of the persons specified in this subparagraph or persons who have registered partnership in accordance with the procedure set forth by laws;
2) to decide on the formation of the committee of creditors, elect the committee, change its composition, delegate to the committee all or part of the rights of the meeting of creditors;
3) to investigate the creditors’ complaints relating to the actions of the administrator;
4) to request that the administrator present reports about his activities and to approve these reports. If the administrator’s report is not approved by the meeting of creditors, it may be approved by the court;
5) to approve the estimate of administrative expenses, change the estimate, establish the sequence of and procedure for covering the administrative expenses, as well as to approve the selling price of the assets of the enterprise and the annual financial reports (the balance sheet and profit (loss) account) drawn up in the course of the enterprise bankruptcy process;
6) to decide on the continuity, renewal, restriction or termination of economic and commercial activities of the enterprise, on the approval of the estimate etc., to submit proposals to the court on restriction or termination of commercial and economic activities of the enterprise as well as on the imposition of restrictions on the disposal of the assets of the enterprise;
7) to determine the number of employees according to positions to be employed in the course of bankruptcy process;
8) to decide on the issue of restriction of the collective agreement of the enterprise;
9) to fix the remuneration of the administrator;
10) to authorise the chairman of the meeting of creditors to conclude a contract of agency with the administrator on behalf of the enterprise within 10 working days from the meeting of creditors and to apply to court for the substitution of the administrator during his temporary incapacity for work if the administrator is unable to apply to court himself due to an illness;
11) to establish the manner whereby the creditors and the owner (owners) of the enterprise receive from the administrator information about the course of the enterprise bankruptcy proceedings;
12) to adopt a resolution on the conclusion of a composition with the creditors;
13) to apply to court requesting to replace the administrator. Where the meeting of creditors adopts a resolution regarding the removal of the administrator and appointment of a new administrator, the chairman of the meeting of creditors must, not later than within five working days from the adoption of the resolution by the meeting of creditors, apply to court for removal of this administrator and nominate another candidate for the position of the administrator. Upon receipt of a copy of the application for removal of the administrator specified in subparagraph 24 of paragraph 3 of Article 11 of this Law, the chairman of the meeting of creditors may, not later than within five working days from the receipt of the copy, nominate to the court another candidate for the position of the administrator. Having learnt, in the manner set forth by legal acts, that the administrator has forfeited the right to provide bankruptcy administration services and has not applied to court for his removal in accordance with the provisions of subparagraph 24 of paragraph 3 of Article 11 of this Law, the chairman of the meeting of creditors must, within the time limit specified in this subparagraph, apply to court for the removal of this administrator and nominate another candidate for the position of the administrator. Another nominee for the position of the administrator must be approved by the meeting of creditors;
14) to elect a person to chair the meeting of creditors where the chairman of the meeting of creditors is not present at the meeting;
15) to propose to the court that the liquidation procedure be applied in respect of the enterprise. Creditors may adopt a decision to propose that this procedure be applied already at the first meeting of creditors;
16) in case extrajudicial enterprise bankruptcy procedures are applied, to adopt resolutions which would be adopted by the court in investigation of bankruptcy in court;
17) to deal with other issues assigned to the competence of the meeting of creditors by this Law.
Article 24. Procedure for Adopting Resolutions of the Meeting of Creditors
1. A resolution of the meeting of creditors shall be deemed adopted if voted in favour of by open ballot by the creditors the amount of whose claims confirmed by the court (in case of extrajudicial bankruptcy procedures – confirmed by the meeting of creditors), in terms of value, accounts for over half of the amount of the confirmed claims of all the creditors, except where this Law provides otherwise. The creditors’ claims confirmed by the court (in case of extrajudicial bankruptcy procedures – by the meeting of creditors) and the amount thereof must be reduced by the amount of sums paid out prior to the meeting. A creditor shall have the right to submit his written opinion (for or against) on each resolution to the meeting of creditors. These opinions shall be included in the results of the voting at the meeting of creditors (including the repeat meeting) and must be announced during the meeting of creditors.
2. If the number of votes at the meeting proves insufficient for adopting a resolution, the administrator shall, within 15 days, convene a repeat meeting of creditors. The repeat meeting shall have the right to adopt resolutions only based on the agenda of the preceding meeting, except for the resolutions regarding the extrajudicial enterprise bankruptcy procedures and a composition with the creditors.
3. A resolution shall be deemed adopted at the repeat meeting of creditors if voted in favour of by open ballot by creditors whose amount of claims confirmed by the court, in terms of value, accounts for over half of the amount of the confirmed claims of all the creditors attending the meeting.
4. Resolutions of the meeting of creditors shall be binding on all the creditors. Where bankruptcy proceedings have been initiated in court, the chairman of the meeting of creditors must, not later than within five working days from the adoption of the resolution, submit a copy of the minutes of the meeting of creditors to the court hearing the bankruptcy case.
5. The resolution of the meeting of creditors may be appealed against in court not later than within 14 days from the day when the creditor learnt or should have learnt of the adoption of the resolution.
Article 25. Committee of Creditors
1. The committee of creditors may be elected by the first or any subsequent meetings of creditors. The chairman of the meeting of creditors shall also be the chairman of the committee of creditors. The committee of creditors must elect at least one person authorised to defend claims relating to employment relations, where the enterprise has to satisfy the claims of the employees related to employment relations, claims for the compensation for damage due to mutilation or other bodily injury, contraction of an occupational disease or death as a result of an accident at work. The committee of creditors must be comprised of at least five members.
2. The committee of creditors shall control the course of bankruptcy process, the activities of the administrator, shall protect the interests of creditors in the periods between the meetings of creditors.
3. The rights of the committee of creditors shall be established by the meeting of creditors.
4. The resolutions of the committee of creditors shall be valid if the committee’s meeting is attended by more than half of the members of the committee. One member of the committee of creditors shall have one vote. The committee of creditors shall adopt resolutions by simple majority vote and in the event of a tie, the chairman’s vote shall be casting. The committee of creditors must notify all creditors of the adopted resolutions in the manner laid down by the meeting of creditors. Where bankruptcy proceedings have been initiated in court, the chairman of the committee of creditors must, not later than within five working days from the adoption of the resolution, submit a copy of the minutes of the committee of creditors to the court.
Article 26. Confirmation of Creditors’ Claims
1. The creditors’ claims shall be confirmed by the court not later than within 45 days from the receipt of the list of creditors and their claims. Adjustments to the list of creditors and their claims made in connection with the bankruptcy process shall be confirmed by the court ruling before the court adopts a ruling to terminate bankruptcy proceedings or a decision on the termination of the enterprise.
2. Creditors shall be entitled to the general or limited waiver of their claims. The creditor shall notify the court of his waiver of claims in writing. The court shall accept the waiver of claims by adopting a ruling, reduce the amount of the creditors’ claims accordingly and, in case of the creditor’s general waiver, strike him off the list of creditors.
3. In the course of bankruptcy process, the creditor’s claims may be transferred to another creditor or person. The sequence of these claims, established in accordance with the provisions of Article 35 of this Law, shall not change.
4. Where after the initiation of bankruptcy proceedings the tax administrator performs set-off under the provisions of set-off of tax overpayment (difference) provided for in tax legislation, the claims reduced by the amount offset shall be submitted to the court for confirmation.
5. Rulings regarding the confirmation of the creditors’ claims shall be adopted by the court in written proceedings. Upon the request of the participating parties, oral proceedings may be allowed. The issue relating to the confirmation of the creditors’ claims contested by the administrator shall be resolved by the court at the court sitting upon notifying thereof the administrator and persons whose claims are contested.
6. A separate appeal against the court rulings to confirm or refuse to confirm the creditors’ claims may be filed only by the administrator and creditors with respect to whom the rulings have been adopted. Other creditors may appeal against such rulings only provided that the amount of financial claims confirmed by these rulings exceeds LTL 250 and the amount of the confirmed financial claims of the creditor who is filing the appeal exceeds LTL 250. The separate appeal must be heard by the court within 30 days from its receipt by the court of appeals.
Article 27. Termination of Bankruptcy Proceedings
1. Bankruptcy proceedings shall be terminated when:
1) all creditors waive their claims and the court adopts a ruling to accept the waivers;
2) the enterprise in bankruptcy settles with all the creditors (creditor) and the administrator submits to the court documents in proof thereof;
3) a composition with the creditors is concluded and the court approves it.
2. (Repealed as of 17 November 2004).
3. Upon the termination of the enterprise bankruptcy proceedings, all taxes and compulsory contributions as well as interest and default interest shall be calculated from the entry into force of the court ruling to terminate the proceedings and the validity of the restricted collective agreement shall be restored.
CHAPTER SIX
COMPOSITION WITH the CREDITORS
Article 28. Conclusion of a Composition with the Creditors
1. The proposal to conclude a composition with the creditors may be filed by the creditors, the administrator and the owner (owners) of the enterprise.
2. The composition with the creditors shall be signed by all the creditors whose claims have not been satisfied in the course of bankruptcy process before the conclusion of the composition with the creditors, or by their authorised representative and the administrator, after the latter has received the written consent of the owner (owners) of the enterprise or the management body which has the right to take a decision to reorganise or liquidate the enterprise.
3. The composition with the creditors may be concluded at any stage in the course of bankruptcy process until the entry into force of the ruling to liquidate the enterprise by reason of bankruptcy.
Article 29. Contents of the Composition with the Creditors and the Procedure for Approval thereof
1. The following must be included in the composition with the creditors:
1) concessions made to the enterprise and the creditors’ claims;
2) liabilities of the enterprise;
3) ways of and time limits for the satisfaction of the creditors’ claims;
4) liability of the enterprise in case of failure to comply with the composition with the creditors.
2. The composition with the creditors shall be approved by the court. If bankruptcy proceedings have been initiated against a public limited liability company or a private limited liability company, the court, in its resolution to approve the composition with the creditors, shall name the person whom it charges to convene the general meeting of creditors.
3. The court shall refuse to approve the composition with the creditors if actions provided for therein contradict the laws or infringe the rights and interests of any person which are protected under law.
4. The composition with the creditors shall come into force as of the entry into force of the court resolution to approve the composition.
5. After the entry into force of the court ruling to approve the composition with the creditors, the bankruptcy proceedings against the enterprise shall be terminated.
6. In case of extrajudicial bankruptcy procedures, the composition with the creditors shall be attested by a notary.
7. (Repealed as of 1 January 2003).
8. Upon the entry into force of the court ruling to approve the composition with the creditors, the administrator shall, within five working days, give a written notice thereof to the credit institutions providing services to the enterprise, the administrators of taxes and state social insurance and compulsory health insurance, the institution exercising the rights and duties of the owner of a state or municipal enterprise, the Register of Legal Entities, the Ministry of Finance if the enterprise has been granted a loan from the funds borrowed on behalf of the State or a loan with the State guarantee, also the Bank of Lithuania if the composition with the creditors is concluded with a financial brokerage firm or a public limited liability company considered to be an issuer of securities under the Law on Securities and to the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law.
CHAPTER SEVEN
LIQUIDATION OF A BANKRUPT ENTERPRISE
Article 30. Declaring of an Enterprise Bankrupt
1. Upon hearing the bankruptcy case and declaring an enterprise bankrupt, the court shall adopt a ruling to put the enterprise into liquidation by reason of bankruptcy.
2. The court shall declare the enterprise bankrupt and adopt a ruling to put the enterprise into liquidation if no ruling to conclude a composition with the creditors is adopted within three months from the entry into force of the ruling to confirm the creditors’ claims and the court has not extended this time limit. The court may extend the time limit only if so requested by the meeting of creditors. Upon receiving the proposal of the meeting of creditors to apply the liquidation procedure in respect of the enterprise earlier than within three months from the entry into force of the ruling to confirm the creditors’ claims, the court must forthwith resolve the issue of declaring the enterprise bankrupt and liquidation thereof.
3. Upon declaring the enterprise bankrupt and adopting a resolution to put the enterprise into liquidation by reason of bankruptcy, the court shall confirm the amount of revised claims of each creditor, the procedure of liquidation, other orders and instructions necessary for carrying out the liquidation procedure.
4. The functions of the liquidator of the enterprise shall be performed by the administrator in the manner prescribed by this Law.
Article 31. Rights and Duties of the Administrator in the Course of Liquidation of a Bankrupt Enterprise
When carrying out the liquidation of a bankrupt enterprise, the administrator shall:
1) dispose of the assets and funds of the enterprise and ensure the protection thereof;
2) organise the sale of the assets according to the procedure prescribed by this Law and sell or transfer the assets to the creditors;
3) satisfy the creditors’ claims confirmed in accordance with the procedure established by this Law;
4) submit documents relating to the discharge of the obligation of compensation for damage resulting from accidents at work or contraction of an occupational disease and particulars of the recipients of the compensation for damage to the territorial branches of the State Social Insurance Fund according to their place of residence where, in the cases provided for by law, the compensation for damage is transferred to the State;
5) manage the waste, contaminated soil and earth in the manner prescribed by laws;
6) return the assets remaining after the settlement with the creditors to the owner (owners) of the bankrupt enterprise;
7) in the manner prescribed by laws, transfer to the archive the documents of the enterprise which are to be archived;
8) submit to the court statements on the return, writing off or transfer of the remaining assets;
9) forward the data relating to the liquidated enterprise to the institution authorised by the Government referred to in paragraph 10 of Article 11 of this Law.
Article 32. Liquidation of a Bankrupt Enterprise
1. An enterprise shall acquire the status of bankrupt enterprise from the entry into force of the court ruling to liquidate the enterprise by reason of bankruptcy.
2. The administrator must, not later than within five working days from the entry into force of the court ruling to liquidate the enterprise by reason of bankruptcy, submit the information relating to the bankrupt enterprise to the institution authorised by the Government referred to in paragraph 10 of Article 11 of this Law, present the documents to the Register of Legal Entities, give notice of the adopted ruling to the owner (owners) of the bankrupt enterprise, the credit institutions providing services to the enterprise, the administrators of taxes, state social insurance and compulsory health insurance, the Ministry of Finance if the enterprise is the recipient a loan from the funds borrowed on behalf of the State or a loan with the State guarantee, the Labour Exchange, as well as the Bank of Lithuania in the event of liquidation of a financial brokerage firm, a management company, an investment company or a public limited liability company considered to be an issuer of securities under the Law on Securities.
3. (Repealed as of 1 January 2003).
4. Upon submission by the administrator of the documents specified in subparagraph 8 of Article 31 of this Law and the certificate issued by the Regional Department of Environmental Protection under the Ministry of Environment, the court hearing the enterprise bankruptcy case shall adopt a decision on the termination of the enterprise.
5. The administrator shall, not later than within five working days from the entry into force of the court decision regarding the termination of the enterprise or from the date of adoption by the meeting of creditors of the decision on the termination of the enterprise, submit an application to the Register of Legal Entities for the removal from the register of the enterprise liquidated by reason of bankruptcy. The administrator must attach to the application the court decision regarding the termination of the enterprise or the decision of the meeting of creditors on the termination of the enterprise, the originals of the registration certificate of the enterprise and its documents of incorporation and the certificate that the documents have been transferred to the archive for further safekeeping and shall indicate the addresses of the banks and other credit institutions which provide services to the enterprise.
6. The Register of Legal Entities shall remove the enterprise from the register within five working days from the receipt of the court decision regarding the termination of the enterprise and shall notify thereof the administrators of taxes and state social insurance and compulsory health insurance as well as banks and other credit institutions which have provided services to the enterprise and the institution authorised by the Government specified in paragraph 10 of Article 11 of this Law.
CHAPTER EIGHT
PROCEDURE for the SALE OF ASSETS of ENTERPRISEs AND
SATISFACTION OF CREDITORS’ CLAIMS IN THE COURSE OF
bankruptcy process
Article 33. Procedure for the Sale and Transfer of Assets
1. The assets of an enterprise in bankruptcy or a bankrupt enterprise, where the enterprise is an entity of unlimited civil liability and does not have any assets or its assets are insufficient for covering the administrative and legal expenses and for satisfaction of the creditors’ claims, the assets held by its owner (owners), including the assets held by joint ownership, in respect of which recovery may be executed in accordance with the procedure set forth by legal acts, shall be sold:
1) animals, products and other easily perishable products or assets which are likely to quickly lose their commercial value shall be sold at a price set (in case of pledged assets – upon coordination with the pledgee) by the administrator, taking into account the actual transaction prices of analogous objects (goods) on the market;
2) immovable property and pledged assets, except for the cases referred to in subparagraph 1 of paragraph 1 and paragraphs 4 and 5 of this Article, shall be sold at auction in accordance with the procedure established by the Government;
3) the procedure for the sale of other assets as well as immovable property unsold at two auctions shall be established by the meeting of creditors. Upon a decision of the meeting of creditors, these assets may be sold in the manner specified in subparagraph 2 of this paragraph.
2. Unsold assets may be transferred to the creditors. The statement of transfer of the assets shall be approved by the administrator.
3. The sale and purchase agreement or the statement of transfer of assets shall be held equivalent to the contract attested by a notary and shall be considered as documents confirming the right of ownership.
4. Where the sale of the pledged assets has been announced prior to the date of initiation of bankruptcy proceedings, the bailiff shall complete the sale of the assets in accordance with the procedure laid down in the Code of Civil Procedure and, upon the sale of the assets at auction, transfer the proceeds to the account of the enterprise in bankruptcy.
5. The securities (shares, bonds and other securities) held by the enterprise in bankruptcy or the bankrupt enterprise must be sold in accordance with the procedure laid down by legal acts regulating trading in securities. The shares of private limited liability companies shall be sold in accordance with the procedure established by the meeting of creditors. The shareholders of the private limited liability company whose shares are offered for sale shall have the right of pre-emption. The shares shall be sold to the highest bidder.
6. Pledged assets shall be sold at auction according to the procedure established by the Government, upon notifying the pledgee and the mortgage creditor. The pledgee or the mortgage creditor may, not later than within 20 days from the auction, apply to the meeting of creditors with a proposal to take over the unsold pledged assets for the initial sale price fixed at the auction, where the auction has failed due to the fact that the buyer has not paid the total amount within the set time limit, for the buying price of the assets at the auction which was announced failed. Where the price of the assets taken over is higher than the claims of the pledgee and/or the mortgage creditor confirmed by the court, the resulting difference must be paid to the account of the enterprise in bankruptcy not later than within 10 days from the transfer of these assets. In the event of failure to sell the pledged assets at two auctions and to transfer the assets to the pledgee or the mortgage creditor, the procedure for the appraisal and sale thereof shall be established by the meeting of creditors. Where the buyer pays the full price for the acquired pledged assets, the amount due to the pledgee or the mortgage creditor, upon deduction of the amount approved by the meeting of creditors for covering the administrative expenses, not later than within 10 days from the date of receiving the price, must be credited to the account specified by the pledgee or the mortgage creditor. In all cases where the administrator transfers the unsold pledged assets to the pledgee or the mortgage creditor, the said persons shall, not later than within 10 days from the transfer of the assets, cover the expenses of asset administration incurred by the administrator, specified in the estimate of administrative expenses approved by the meeting of creditors. Upon receiving the sale and purchase agreement of the pledged assets or the statement of transfer thereof, the mortgage judge shall, within three working days from the receipt of these documents, adopt a ruling to terminate the mortgage or pledge.
Version of paragraph 6 as of 1 July 2012:
6. Pledged assets shall be sold at auction according to the procedure established by the Government, upon notifying the pledgee and the mortgage creditor. The pledgee or the mortgage creditor may, not later than within 20 days from the auction, apply to the meeting of creditors with a proposal to take over the unsold pledged assets for the initial sale price fixed at the auction, where the auction has failed due to the fact that the buyer has not paid the total amount within the set time limit, for the buying price of the assets at the auction which was announced failed. Where the price of the assets taken over is higher than the claims of the pledgee and/or the mortgage creditor confirmed by the court, the resulting difference must be paid to the account of the enterprise in bankruptcy not later than within 10 days from the transfer of these assets. In the event of failure to sell the pledged assets at two auctions and to transfer the assets to the pledgee or the mortgage creditor, the procedure for the appraisal and sale thereof shall be established by the meeting of creditors. Where the buyer pays the full price for the acquired pledged assets, the amount due to the pledgee or the mortgage creditor, upon deduction of the amount approved by the meeting of creditors for covering the administrative expenses, not later than within 10 days from the date of receiving the price, must be credited to the account specified by the pledgee or the mortgage creditor. In all cases where the administrator transfers the unsold pledged assets to the pledgee or the mortgage creditor, the said persons shall, not later than within 10 days from the transfer of the assets, cover the expenses of asset administration incurred by the administrator, specified in the estimate of administrative expenses approved by the meeting of creditors. Mortgage (pledge) shall terminate after the sale of the pledged assets. The administrator shall, in accordance with the procedure established by law, forward information about the termination of mortgage (pledge) to the notary or the court (in case of judicial mortgage).
7. If not all the assets of the bankrupt enterprise have been sold or transferred to the creditors and not all claims of the creditors have been satisfied within 24 months from the entry into force of the court ruling to declare the enterprise bankrupt, these assets must be written off as not having market value, upon the decision of the creditors whose claims have not been satisfied due to insufficiency of funds. The assets of the bankrupt enterprise which have been written off (except for immovable property) must, not later than within 30 days from the date of their writing off, be used or destroyed in the manner established by the meeting of creditors. The administrator must, under the statement of transfer, gratuitously transfer the immovable property which has been written off, not later than within 30 days from the date of its writing off, to the municipality in the territory whereof the immovable property is located. The municipality must take over such property within the specified time limit. At the request of the meeting of creditors, the court may extend the 24-month time limit referred to in this paragraph.
8. Radioactive substances, equipment containing radioactive substances and generators of ionising radiation may be sold or transferred only in accordance with the procedure established by the Law on Radiation Protection and other legal acts regulating radiation protection of the population and the environment.
Article 34. Satisfaction of the Creditor’s Claims Secured by Pledge and/or Mortgage
The creditor’s claims secured by pledge and/or mortgage shall be satisfied first of all from the proceeds obtained from the sale of the pledged assets of the enterprise or by transferring the pledged assets. Where the pledged assets are sold at a price higher than the amount of claims secured by the pledge and/or mortgage, the remaining balance of the funds shall be allocated for the satisfaction of claims of other creditors in accordance with the procedure set forth in Article 35 of this Law.
Article 35. Sequence of and Procedure for Satisfaction of the Creditors’ Claims
1. The creditors’ claims shall be satisfied in two stages. During the first stage, the creditors’ claims shall be satisfied in the sequence established in this Article, not including the computed interest and default interest, while during the second stage, the remaining part of the creditors’ claims (interest and default interest) shall be satisfied in the same sequence.
2. First in line for satisfaction shall be claims of the employees relating to employment relations; claims for the compensation for damage due to mutilation or other bodily injury, contraction of an occupational disease or death as a result of an accident at work; claims of natural and legal persons for payment for agricultural produce purchased for processing.
3. Second in line for satisfaction shall be claims for payment of taxes and other payments into the budget as well as compulsory state social insurance contributions and compulsory health insurance contributions; claims relating to loans granted from the funds borrowed on behalf of the State and loans granted with the guarantee of the State or guarantee institutions the discharge of whose liabilities is guaranteed by the State, relating to assistance granted from the EU funds.
4. Third in line for satisfaction shall be all the remaining creditors’ claims.
5. The computed income tax payable on the remuneration of individuals shall not be attributed to the creditors’ claims standing first in line for satisfaction. This claim must stand second in line for satisfaction. Where claims of employees relating to employment relations referred to in paragraph 2 of this Article, claims for the compensation for damage due to mutilation or other bodily injury, contraction of an occupational disease or death as a result of an accident at work have been satisfied from the funds of the Guarantee Fund or where a decision is adopted to pay the compensation for damage for the enterprise from the state budget, while the claims of natural and legal persons for payment for agricultural produce purchased for processing have been satisfied from the funds allocated by the Ministry of Agriculture, the recourse claims of the Guarantee Fund, the territorial department of the State Social Insurance Fund Board and the Ministry of Agriculture arising by reason of that must stand second in line for satisfaction.
6. During each stage, the creditors’ claims of each successive sequence shall be satisfied following full satisfaction of the creditors’ claims of the respective stage of the preceding sequence. If funds are insufficient to satisfy in full all the claims of one stage of one sequence, such claims shall be satisfied in proportion to the amount due to each creditor. Where the principle of proportionality, referred to in this paragraph, has not been complied with in the course of satisfying the creditors’ claims standing first in line for satisfaction from the funds of the Guarantee Fund or the Ministry of Agriculture in accordance with the procedure established by legal acts, the resulting discrepancies in proportionality must be adjusted when satisfying the remaining unsatisfied claims of these creditors from the funds of the enterprise.
7. Claims relating to employment relations of the employees of an enterprise in bankruptcy or a bankrupt enterprise, referred to in paragraph 2 of this Article, may be satisfied from the funds of the Guarantee Fund, whereas claims of natural and legal persons for payment for agricultural produce purchased for processing may be satisfied according to the procedure laid down by the Government. The confirmed claims of an employee or a natural and legal person shall be reduced by the amount of the sum paid from the above Funds.
8. In case of the set-off between the enterprise and the creditor, the creditor’s claims shall be reduced by the amount offset, including the computed interest and default interest. Where the offset amount is not sufficient to satisfy all the creditors’ claims, the part of the claim without the interest and default interest shall be satisfied first of all, the remaining part of the claims shall be satisfied in accordance with the procedure set forth in this Article, having regard to the satisfaction of claims in two stages as established in paragraph 1 of this Article.
Article 36. Administrative Expenses
1. Expenses relating to administration of the enterprise bankruptcy shall be paid first of all from all types of funds of an enterprise in bankruptcy and a bankrupt enterprise (proceeds from the sale of assets of the enterprise, including pledged assets, debts repaid to the enterprise, earnings from economic activities, rent of property and other funds received in the course of bankruptcy process). Where the enterprise has no funds or they are insufficient to cover the expenses relating to bankruptcy administration, the expenses shall be paid in accordance with the procedure established by the Government.
2. The estimate of administrative expenses shall be approved and amended by the meeting of creditors, which shall also establish the procedure for disposal of the administrative expenses.
3. Bankruptcy administration expenses shall comprise remuneration for the administrator, remuneration for an assistant administrator (administrators), amounts paid in connection with employment relations to employees of the enterprise whose participation in the bankruptcy process is necessary, except for those participating in the economic and commercial activities, auditing expenses, expenses related to property appraisal and sale, management of waste and contaminated soil and earth as well as other expenses approved by the meeting of creditors. Expenses related to economic and commercial activities may not be assigned to the bankruptcy administration expenses.
4. The first meeting of creditors must fix the amount of remuneration to be paid to the administrator for the administration of the enterprise during the bankruptcy process, including the period from the entry into force of the court ruling to initiate enterprise bankruptcy proceedings until the date of conclusion of a contract of agency with him or the date of the first meeting of creditors.
5. The amount of remuneration payable to the administrator (having regard to whether or not the enterprise in bankruptcy and/or the bankrupt enterprise continues (carries on) its activities, the type and amount of the assets of the enterprise being sold, also the complexity and number of proceedings initiated and civil claims brought against the enterprise) and the procedure for payment of remuneration (the remuneration may be paid in a lump sum upon completion of the bankruptcy process or by instalments in the course of the bankruptcy process) shall be established in the contract of agency.
chapter NINE
FINAL PROVISIONS
Article 37. Entry into Force and Application of the Law
1. This Law shall enter into force as of 1 July 2001.
2. The Law of the Republic of Lithuania on Enterprise Bankruptcy (Valstybes žinios, 1997, No 64-1500; 1998, No 109-2996, No 114-3189; 2000, No 32-889) shall apply and regulate bankruptcy procedures only in respect of the enterprises against which bankruptcy proceedings have been initiated or extrajudicial bankruptcy process has been initiated prior to the entry into force of this Law.
3. The procedure set forth in this Law shall also apply to the investigation of bankruptcy cases of the enterprises which, prior to the entry into force of this Law, were subject to extrajudicial bankruptcy procedures, but which were referred to court for hearing by the decision of the meeting of creditors after 1 July 2001.
4. The administrative expenses of enterprises in respect of which bankruptcy proceedings were initiated prior to 1 July 2001 may be revised pursuant to the provisions of Article 36 of this Law.
5. The provisions of paragraph 4 of Article 33 of this Law shall apply in respect of enterprises which acquired the status of the enterprise in liquidation by reason of bankruptcy prior to 1 July 2001. The 24-month period fixed for the liquidation procedure in paragraph 4 of Article 33 shall start as of 1 July 2001. The provisions of paragraph 6 of Article 32 of this Law shall apply when removing the aforementioned enterprises from the register.
6. The Government or an institution authorised by it shall establish:
1) the procedure for submitting and publishing information relating to the enterprise bankruptcy procedures;
2) the procedure for representation in the course of bankruptcy procedures by persons authorised by public authorities;
3) the procedure for selling the assets of the enterprise in bankruptcy or bankrupt enterprise by auction;
4) the procedure for issuing bankruptcy administrator and assistant bankruptcy administrator certificates and drawing up the list of persons providing enterprise bankruptcy administration services, the procedure for supervision of activities of bankruptcy administrators.
7. The provisions of paragraphs 4 and 7 of Article 10, paragraph 2 of Article 13(1), paragraph 8 of Article 29, and paragraphs 2, 5 and 6 of Article 32 of this Law relating to the Register of Legal Entities shall apply from the commencement of operation of the Register of Legal Entities.
8. Prior to the commencement of operation of the Register of Legal Entities:
1) changes in the data and amendments to the documents prescribed by legal acts shall be submitted to the manager of the Register of Enterprises;
2) the administrator shall submit an application specified in paragraph 5 of Article 32 to the manager of the Register of Enterprises;
3) the actions referred to in paragraph 6 of Article 32 shall be performed by the manager of the Register of Enterprises.
Annex to
Republic of Lithuania
Enterprise Bankruptcy Law
LEGAL ACTS OF THE EUROPEAN UNION IMPLEMENTED BY THIS LAW
1. Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings (OJ 2004 special edition, Chapter 19, Volume 1, p. 191) with the latest amendments adopted by Council Regulation (EC) No 694/2006 of 27 April 2006 (OJ 2006 L 121, p. 1) amending the lists of insolvency proceedings, winding-up proceedings and liquidators in Annexes A, B and C to Regulation (EC) No 1346/2000 on insolvency proceedings (OJ 2006 L 121, p.1).
