What to Consider When Closing a Company in Lithuania

Why closing a company in Lithuania is not “just a petition”?

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nClosing a UAB or other types of companies you established in Lithuania is not just about stopping business activities and locking the door. Incorrect or incomplete liquidation processes; can lead to tax audits, administrative fines, personal liability for managers and partners, and even criminal investigations.

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nEspecially in foreign-owned companies; it is critically important to make a legally clean closure without leaving any debts or obligations with tax authorities, the Social Security institution, employees, and creditors. In this guide, we will address the key points you need to pay attention to when closing a company in Lithuania; step by step, in terms of legal framework, process steps, timelines, employees, taxes, and documents.

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The legal framework for company closure in Lithuania

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nThe liquidation and closure processes in Lithuania are primarily regulated by the Lithuanian Companies Act and relevant secondary legislation. Depending on the company’s financial situation and legal position, there are three main types of closures:

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• Voluntary liquidation (solvent companies): If the company can fully pay its debts, partners or managers can decide to close the company voluntarily.

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• Voluntary liquidation by creditors (insolvent companies): This comes into play if the company cannot meet its obligations but a liquidation agreement is reached with creditors.

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• Mandatory (court-ordered) liquidation: The company is liquidated by court order in cases of legal violations, serious breaches, or failure to fulfill obligations.

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nWith recent regulations, Lithuania has digitized most processes and made it mandatory for companies to complete the liquidation process within one year. In mandatory cases, this period can be extended, but it is considered an exception.

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First step: Decision to close and initiation of the process

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nThe liquidation process always begins with a general assembly decision. For voluntary liquidation:

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• The agenda of the general assembly includes the item “liquidation and closure of the company”.

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• A minimum of 2/3 majority approval from the partners present at the meeting is required.

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• From the moment the decision is made, the company must cease its commercial activities; no new transactions that would create risks should be conducted.

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nBefore making the decision, be sure to review the following areas:

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• Financial reporting: Have the annual financial statements been submitted to the Commercial Registry (Register of Legal Entities) on time?

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• Tax declarations: Are there any delays, omissions, or errors in VAT, corporate tax, and other declarations?

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• Contracts: Have ongoing commercial contracts, leases, supplier agreements, and potential compensation/penalty clauses been carefully reviewed?

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nMaking a liquidation decision without this pre-check can lead to unexpected creditor claims, tax assessments, and litigation risks in the later stages of the process.

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Appointment of a liquidator: All responsibilities are consolidated in one hand

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nNot only is the closure decision made at the general assembly; a liquidator (or a board of liquidators) must also be appointed at the same meeting. The liquidator:

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• Can be the current company director, an employee of the company, or an external individual.

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• Must provide written consent to accept the position.

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• Submits personal data such as identity, address, and passport information to official authorities.

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nThe liquidator is personally responsible for all transactions during the liquidation process – including the accuracy of financial statements, payment of tax and social security debts, notifications to creditors, and archiving documents. Therefore, rather than formally appointing a name, it is necessary to choose a professional with the experience to manage the process.

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Notification and announcement obligation to creditors

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nLithuanian legislation requires both public and direct notifications to creditors for a transparent liquidation process. After the decision in the general assembly:

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• The company publishes 3 announcements, 30 days apart in the publication channel specified in its articles of association.

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• Sends written notifications to each creditor. This way, a formal invitation is made for creditors to submit their claims within a certain period.

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nShortcomings at this stage can be used against you in compensation lawsuits that may arise later. Even if the liquidation is completed, creditors who have not been properly informed can seek their rights through the courts.

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Timeline of the liquidation process: How much time is available at each stage?

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nAccording to the regulations, the liquidation process progresses in several main phases after the liquidator is appointed. While it varies depending on the size of the company in practice, the following timelines are indicative:

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• Decision to close the company: General assembly decision – no time limitation, but the goal is to complete the entire process within one year.

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• Appointment of the liquidator: Simultaneously with or immediately after the general assembly – no time limitation.

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• Inventory and opening balance sheet: The liquidator identifies all assets and liabilities within 1 month after the decision.

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• Termination of employees: All employment contracts must be terminated and rights paid within 2 months.

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• Monetization and distribution of assets: Generally, payments to creditors and asset sales are completed within 6 months.

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• Notification to the registration authority: Necessary final documents are submitted to the Registry within 5 business days after preparation.

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nAs a rule, the company must conclude the liquidation within one year. In special cases, the court or relevant authority may grant an extension, but concrete justifications are required for this (ongoing lawsuits, unsold large assets, etc.).

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Financial and asset management: From opening balance sheet to asset distribution

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nAfter the liquidator is appointed, the first critical step is to prepare the liquidation opening balance sheet. This balance sheet:

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• Shows all of the company’s assets (cash, fixtures, inventory, real estate, intellectual property, etc.)

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• Shows all debts and obligations (tax debts, social security premiums, loan debts, supplier receivables, employee rights, etc.) in detail.

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nThen the liquidator:

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• Conducts a full inventory audit within 1 month.

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• Presents this inventory and opening balance sheet to the partners at a second general assembly meeting.

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• Sells or collects the company assets primarily to pay creditors’ receivables.

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• Distributes the remaining assets/income among the partners after all creditors are satisfied.

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nIf the liquidation exceeds a financial year, the liquidator must also prepare annual liquidation accounts and reports at the end of each financial year. Neglecting this obligation can lead to both administrative fines and prolongation of the liquidation process.

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Employees: Termination, compensation, and the critical two-month period

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nEmployee rights in Lithuania are under special protection during the liquidation process. After the decision to close the company is made, the liquidator must:

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• Terminate all employees’ contracts within 2 months at the latest.

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• Prepare termination orders, payroll, and account statements for each employee.

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• Accurately calculate unpaid wages, overtime, leave pay, and other receivables.

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• Pay the legally due severance and notice compensations, along with relevant taxes and social security contributions.

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nFailing to complete payments to employees within the 2-month legal period is considered a “serious violation” and may lead to both administrative and potential criminal sanctions.

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Final settlement with tax authorities and creditors

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nFor the liquidation process to be completed, the company must achieve full reconciliation with all public and private creditors. The liquidator particularly reviews the following items:

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• Contributions and premiums to the State Social Insurance Fund (SODRA).

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• Mandatory health insurance premiums.

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• Income and corporate tax obligations.

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• All private creditors’ (banks, suppliers, lessors, etc.) receivables.

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nThe liquidation cannot be completed without the State Tax Inspectorate formally confirming that there are no tax debts related to the company. Therefore, the liquidator:

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• Checks tax declarations for all periods and completes any missing ones.

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• Proactively communicates with the tax authority to minimize the risk of late fees, penalties, and additional assessments.

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Mandatory document package: Which documents must be completed for closure?

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nTo deregister the company at the Register of Legal Entities (Centre of Registers), a comprehensive set of documents is required. These can be broadly grouped into four categories:

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1. Financial documents

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• Liquidation opening balance sheet

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• Income statement (profit-loss) for the last reporting period

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• Accounting records and financial statements covering all periods in which the company operated

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2. Documents related to the liquidator

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• General assembly decision regarding the appointment of the liquidator/board of liquidators

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• Liquidator’s written declaration of acceptance of duties

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• Identifying information of the liquidator such as identity, address, and passport

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3. Employee documents

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• All employment contracts and their annexes

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• Hiring and termination orders

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• Personal files for each employee

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• Payroll calculation, accrual, and payment records

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• Employment contracts registry

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4. Documents related to creditors and insolvency (if any)

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• Creditors’ approval/objection statements regarding the liquidation plan

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• List of creditors and each one’s claim amount and priority

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• Documents showing the company’s insolvency status (if necessary)

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Final registration and legal termination of the company

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nAfter all obligations are fulfilled, and accounts with employees and creditors are settled, the liquidator applies to the Register of Legal Entities for the company’s deregistration. This application typically includes the following documents:

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• Liquidator’s liquidation report and decision

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• Final financial statements

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• Official application form for deregistration of the company

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• Liquidation minutes/deed of liquidation

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• Certificate indicating that the company records have been transferred to the relevant regional data archive

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• Tax clearance letter obtained from the State Tax Inspectorate “no tax debt”

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nIf the documents are complete and accurate, the registry authority usually grants approval for the registration process within 5 business days. After approval, the cessation of the company’s activities is officially published, and the legal entity ceases to exist.

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Risks of non-compliance: Civil, administrative, and criminal liability

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nActing contrary to the legislation during the liquidation process is not limited to administrative fines. Possible consequences include:

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• Civil liability: Creditors may file a compensation lawsuit against company partners, managers, or the liquidator if they believe their rights have been violated.

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• Criminal liability: Serious violations such as intentional creditor harm, fraudulent asset concealment, and forgery may lead to criminal investigations.

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• Administrative sanctions and fines: High administrative fines may arise in cases of non-compliance with deadlines, failure to submit declarations, or non-payment of employee rights.

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nAt this point, special attention must be paid to the personal liability of the liquidator. If the liquidation processes are not conducted properly, they may face claims and sanctions even in the following years.

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Additional points to consider for foreign partners and group companies

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nCompanies opening in Lithuania from Turkey or another country must consider not only Lithuanian legislation but also their tax and reporting obligations in their own countries during the closure process:

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• Intra-group borrowings and transfer pricing records must be consistent during the liquidation process.

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• Company closure may trigger permanent establishment status and related tax obligations in Turkey or another country.

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• If managers or partners obtained residence permits or visas through the company, the impact of the company’s closure on residence permits should be considered.

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Why is professional support critical in this complex process?

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nWhen closing a company in Lithuania, it is necessary to manage corporate law, labor law, tax, payroll, international reporting, and immigration law simultaneously. Especially in foreign-owned and multinational structures, a single misstep can lead to tax audits or litigation risks that emerge years later.

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nAs Corpenza, we provide integrated consulting on:

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• Planning liquidation and closure structures as much as company establishment,

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• International accounting, payroll (payroll/EOR), and tax optimization in Lithuania and other EU countries,

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• Sending personnel abroad, structuring the tax and social security aspects with the posted worker model,

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• Planning subsequent steps such as establishing a company in a new country, residence permits or citizenship by investment

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nIf you are in the process of closing a company in Lithuania, establishing the liquidation strategy correctly in the first step and managing taxes, employees, creditors, and international obligations within a single framework ensures a risk-free and predictable progression of the process.

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Conclusion: Closing a company in Lithuania is a risk management process

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nIn summary, when closing a company in Lithuania:

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• Correctly structure the general assembly decision and 2/3 majority requirement and the appointment of the liquidator.

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• Fulfill the obligations for announcements and written notifications to creditors within the deadlines.

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• Prepare the opening balance sheet, inventory, and annual liquidation reports in accordance with the legislation.

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• Pay employee rights completely within 2 months at the latest.

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• Do not attempt to complete the liquidation without settling all debts with the State Tax Inspectorate and Social Security.

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• Remember that your company will not be legally considered terminated without submitting all necessary documents to the Register of Legal Entities.

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nA well-planned and professionally conducted liquidation protects both company partners and managers from future legal risks and opens a clean slate for steps you will take in new countries.

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Disclaimer

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nThis text has been prepared for general informational purposes.

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nNone of the statements here constitute legal, financial, tax, or investment advice.

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nThe processes for closing and liquidating companies in Lithuania may vary depending on the type of company, field of activity, financial situation, and current legislative changes.

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nFor each specific case, be sure to check the current announcements and legislation of the relevant official institutions before making decisions and obtain individual consultancy from a qualified legal expert, financial advisor, or relevant professionals.

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nCorpenza does not accept responsibility for the consequences arising from decisions made based on the information in this text.