Company liquidation
Company liquidation (closure) is a process during which the company’s activities are permanently terminated. To liquidate a company, it is necessary to fully settle all debts with creditors, sell or otherwise dispose of the company’s assets, and terminate all obligations.
556,25 € without VAT
- 4 – 7 months.
- Preparation of required documents for the liquidation procedures;
- Representation of clients at all stages (in the registry center, Sodra, Vilnius City Municipality);
- Submission of documents to state institutions.
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How Does Company Liquidation Work?
When a company’s decision to close becomes final, the process of company liquidation begins. The first step is appointing a liquidator, who will oversee the entire liquidation process. Once a liquidator is appointed, the powers and responsibilities of the company’s management are transferred to them, and the company’s board loses its authority.
Step 1: Notification to the Registry Center
On the first day of liquidation, the liquidator must inform the Registry Center about the commencement of the process. From this point on, the company’s legal status is updated to “Liquidated.” Any documents issued during this period must be clearly marked as those of a liquidating company.
Step 2: Settling Debts and Legal Disputes
The liquidator’s primary responsibility is to ensure that the company’s debts to creditors are fully settled. Only after all debts have been cleared, and it’s confirmed that the company has no outstanding legal disputes, can the liquidation process proceed to the next stage.
Step 3: Distribution of Assets
Once debts are settled, shareholders can receive their dividends. The remaining assets are then distributed among the shareholders according to the portion of shares each one holds. This distribution must be done in proportion to the number of shares owned by each individual.
Step 4: Cancellation of Liquidation
The decision to liquidate can be reversed only before any shareholder receives their share of the assets. If a shareholder has already received their portion, the liquidation cannot be canceled. If the liquidation process is to be canceled, the Registry of Legal Entities must be immediately informed of the intent.
Types of Company Liquidation
Company liquidation or closure can occur in different ways, depending on the type of business and the circumstances. The key types of company liquidation include:
1. Voluntary Liquidation
In voluntary liquidation, the decision to close the business is made by the company’s owner (in the case of individual enterprises, or IĮ) or by the general meeting of shareholders (in the case of private limited companies, or UAB). A liquidator, who must be a natural person, is appointed to oversee the entire liquidation process. The liquidator handles the closure of the company, including settling debts, distributing assets, and filing necessary paperwork.
2. Liquidation Due to Bankruptcy
If a company faces financial distress and is unable to pay its debts, bankruptcy liquidation may occur. In this case, a court decision initiates the bankruptcy process, and a bankruptcy administrator is appointed to handle the liquidation. Even in cases where the bankruptcy process occurs without court involvement, a bankruptcy administrator is still required to manage the liquidation of the company’s assets and settle its obligations.
What You Need to Know About Liquidation
The process of company liquidation can be challenging due to the long-term obligations that need to be settled. Closing a company often involves conflicting responsibilities, such as paying off debts and fulfilling contractual agreements. In contrast, starting a business is generally easier legally, as it begins with a “clean slate”, free of obligations or liabilities.
Factors That Affect the Liquidation Process
The liquidation process tends to be shorter and simpler if most business operations have already been completed, and if there are no outstanding claims from other parties. The more streamlined the business operations, the easier it will be to wind up the company.
How to Ensure a Smooth Liquidation
To avoid delays and potential losses during liquidation, it’s highly recommended to consult with experts who specialize in business closures. These agencies or intermediaries handle similar cases regularly and can provide the right strategies for a smooth and efficient liquidation process.
Key Factors in Company Liquidation
When a company is declared bankrupt, liquidation becomes an inevitable part of the process. The liquidation procedure for a bankrupt company differs slightly from voluntary liquidation, as it is managed by a bankruptcy administrator. The administrator takes full control of the company’s operations and assets during the liquidation process.
1. Sale of Company Assets
One of the first tasks of the bankruptcy administrator is to sell the company’s assets, often through public auctions. If mutually agreed, some of these assets may be used to settle outstanding debts with creditors. The administrator’s role is to ensure the claims of creditors are satisfied to the best possible extent. Additionally, any hazardous materials, manufacturing waste, or physical assets requiring special handling are properly managed.
2. Settling Debts and Paying Taxes
Once the assets are sold, the proceeds are used to settle the company’s debts with creditors. Any remaining taxes owed to the state must also be paid. After all debts and taxes are cleared, the remaining assets, if any, are distributed back to the company’s owners in proportion to their ownership share.
3. Preservation of Documents and Final Report
After completing the liquidation process, the bankruptcy administrator ensures that all necessary documents related to the liquidation are preserved. These documents are handed over to the archive, where they are kept for the required retention period.
Once all steps are completed, and the final report is prepared and submitted to the relevant authorities, the liquidation of the bankrupt company is officially concluded.
Required Documents for Company Liquidation
When undergoing company liquidation, several important documents must be submitted to ensure the process is completed correctly and legally. Below is a list of essential documents required for liquidation:
1. Financial Statements
Initial and final financial statements must be submitted at the beginning and end of the liquidation process to show the company’s financial condition.
2. Company Formation Document
The company’s formation document, such as the articles of incorporation or statutes, must be provided to confirm the company’s legal structure and registration details.
3. Securities Excerpt (If Applicable)
If the company holds securities, an excerpt of these securities should be included as part of the liquidation documents.
4. Information About the Liquidator
Detailed information about the appointed liquidator is required, including:
- Name and surname
- Personal identification code
- Declared place of residence
5. Company Documents Related to Personnel Matters
A range of personnel-related documents must be provided, including:
- Requests for hiring/dismissal
- Requests for unpaid leave
- Orders for hiring/dismissal
- Orders for unpaid leave
- Employment contracts
- Payroll documents
- Employment contract registration journal
These documents are critical to ensure that all personnel and financial obligations are settled appropriately during the liquidation process.
Company liquidation
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