July 1st, 2020
Due to long-lasting liquidation procedure in Lithuania a large number of inactive legal entities avoid deregistration, thus the number of entities, which practically not operating or have a status of a legal entity in liquidation procedure, increases.
This situation is mostly discovered during annual financial reporting period - inactive companies or companies in liquidation procedure often do not provide this data, it largely reflects to registered but de facto inactive legal entities.
Considering this situation the Ministry of Economy and Innovation of the Republic of Lithuania has initiated a temporary law on a simplified procedure of liquidation and deregistration of legal entities. The draft law is currently being prepared for coordination.
The said law aims to deregister around 15 percent of inactive legal entities from the Commercial Register of the Republic of Lithuania. The law would apply with certain restrictions - legal entities must have the status of a legal entity in liquidation procedure or have not been engaged in activities for at least 5 years.
The Commercial Register of the Republic of Lithuania after identifying the case of an inactive legal entity will send a notice to the address of the registered office of such legal entity no later than the next business day and publish that information in the electronic publications of the Commercial Register of the Republic of Lithuania. A subject of this law and the creditors of that legal person will be able to express a reasoned objection to the deregistration of the legal person under the simplified procedure within 30 days from the receipt of the notification.
It should be emphasized that despite the simplified deregistration procedure, the participants (shareholders, members) of such a liquidated and deregistered legal entity will be held liable to the creditors of the deregistered company for another 3 years after the liquidation of the legal entity.
According to the draft law, it is planned that the temporary law on the simplified procedure of liquidation and deregistration of legal entities will be valid for 6 months, starting from 1 July 2020.
Thus, we would encourage the shareholders and general managers of legal entities to check whether their companies do not meet the conditions specified in the draft law, and we would recommend for companies with debtors to monitor electronic publications of the Commercial Register of the Republic of Lithuania to follow whether the simplified procedure of liquidation and deregistration would be applied for debtors.
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