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REPUBLIC OF LITHUANIA

REPUBLIC OF LITHUANIA Official translation REPUBLIC OF LITHUANIA L A W ON RESTRUCTURING OF ENTERPRISES 20 March 2001 No IX-218 Vilnius CHAPTER ONE GENERAL PROVISIONS Article

  1. Purpose of the Law
  2. This Law shall regulate restructuring of enterprises and public agencies (hereinafter - enterprises) in temporary financial difficulties, seeking to avert bankruptcy.
  3. The purpose of this Law shall be to provide conditions for enterprises in temporary financial difficulties, which have not discontinued their economic and commercial activities, to maintain and develop these activities, to settle their debts, to restore solvency and avert bankruptcy.
  4. The Law shall apply to enterprises registered in the Republic of Lithuania in the manner prescribed by law.
  5. The Law shall not apply to banks, the central and other credit unions, other credit institutions, insurance companies, investment companies, pension and other funds, and intermediaries of public trading in securities.
  6. During restructuring, the provisions regulating activities of an enterprise, waiver of creditors’ claims or part thereof, postponement of deadlines for discharge of obligations, making of compulsory payments, charges and contributions, termination of an employment contract, restriction of the competence of the managing bodies of an enterprise, suspension of the powers of members of these bodies, and payment of severance pays and compensations to them shall apply to the extent this Law does not provide otherwise. Article
  7. Definitions
  8. Enterprise in temporary financial difficulties means an enterprise which cannot settle with its creditor/creditors on expiry of the three month period after the deadline prescribed by laws, other legal acts as well as by agreements between a creditor and an enterprise for the fulfilment of the liabilities of an enterprise, or, where the deadline has not been set forth in the agreements, on expiry of the said time period after a written demand of a creditor/creditors to fulfil the liabilities.
  9. Restructuring of an enterprise means change of the type of economic activities, upgrading of the production, rationalisation of work, sale of the enterprise assets or a part thereof, acquisition of assets of other enterprises through their merger or division, implementation of technical, economic and organisational measures intended to restore solvency of the enterprise, change in the amount of the enterprise’s liabilities to its creditors and deadlines for their discharge.
  10. Enterprise restructuring proceedings means a civil case investigated in court on the legal relations arising from restructuring of an enterprise.
  11. Enterprise under restructuring means an enterprise with respect to which restructuring proceedings have been initiated.
  12. Creditors of an enterprise (hereinafter - creditors) means natural and legal persons entitled to request from the enterprise discharge of its obligations and liabilities
  13. Claims of secured creditors means a creditor’s/pledgee’s right under a pledge agreement or a registered mortgage and/or pledge note, if the enterprise failed to discharge the obligation secured by a pledge, to demand a sale of the pledged property and satisfactions of his claims from the proceeds of the sale.
  14. Compulsory payments means taxes, charges and fees provided for by tax laws of the Republic of Lithuania, and contributions provided for by the Law on State Social Insurance and the Law on Health Insurance.
  15. Current payments means payments including compulsory payments made during restructuring of an enterprise, starting from the day of coming into effect of the court order to initiate restructuring proceedings.
  16. Principal creditor means a creditor holding the discharge of whose claims is secured by a pledge and/or mortgage, a guarantee and/or a surety, or a creditor the amount of whose claims represent at least 1/5 of the aggregate amount of claims of all creditors. CHAPTER TWO RESTRUCTURING Article
  17. Conditions for Enterprise Restructuring Restructuring of an enterprise may commence where: 1) an enterprise fails to settle with a creditor/creditors for more than three months after the deadline prescribed by laws, other legal acts, also by agreements between a creditor and an enterprise on the discharge of the enterprise’s liabilities, or for a term of the same length after a written claim of a creditor/creditors for the discharge of obligations, if the deadline has not been specified in the agreements; 2) an enterprise has not discontinued its economic and commercial activities; 3) no bankruptcy proceedings have been initiated against the enterprise or no extrajudicial bankruptcy process has been commenced. Article
  18. Proposal to Initiate Restructuring Proceedings
  19. Proposal for restructuring of an enterprise may be file in writing to the head of the enterprise administration by a creditor/creditors where his/their claims meet the conditions referred to in Article 3 of this Law. If, within 30 days from filing the proposal, the enterprise fails to satisfy the claims of a creditor/creditors or does not undertake actions specified in paragraphs 2, 5, 6 and 7 of this Article, a creditor may recover the debt in the manner prescribed by law or file a petition for initiating the enterprise restructuring proceedings in the manner set forth in Article 5

(4)of this Law.
  1. The head of the administration of the enterprise, on receiving a proposal from the creditors, a decision of the managing body of the enterprise, and approval of the founder of a state-owned or municipal enterprise, of founders of a public agency, and of the owners/partners for restructuring of an enterprise, shall, within 10 calendar days, convene a meeting of principal creditors. If at the meeting, principal creditors represent at least one half of the aggregate amount of the claims of all the creditors, they may adopt a resolution to regard this meeting as the first meeting of creditors. To adopt the resolution, at least on half of all the creditors present at the meeting must vote for it. If the proposal specified in paragraph 1 of this Article has been filed by a creditor other than the principal creditor, he must be invited to this meeting and shall have the right to vote.
  2. A written proposal for restructuring of an enterprise may be submitted to principal creditors by the head of the administration of the enterprise provided a decision on the proposal has been adopted by the management body of the enterprise and an approval of the founder of a state-owned or municipal enterprise, founders of a public agency, and of the owners/partners has been received. The guidelines of the enterprise restructuring plan shall be attached to the proposal.
  3. The first meeting of creditors shall be convened in the manner specified in paragraphs 2, 5 and 6 of this Article. A resolution of the first meeting of creditors or a meeting of principal creditors, equivalent to it, on restructuring of an enterprise shall be adopted by a majority vote and shall be held adopted where at least one half of all the principal creditors present at the meeting have given their votes for it.
  4. If there are many principal creditors and/or it is difficult to get them together while restructuring of an enterprise must be commenced immediately, the head of the enterprise administration may obtain a written consent of the creditors, with each claim amounting to 1/5 of the total amount of the registered claims at the enterprise, for the proposal on restructuring of the enterprise and approval of the nominee to the office of the enterprise administrator. If the aggregate amount of all the claims of these creditors amounts to at least one half of the total amount of creditors’ claims, the court may hold the written consents of said creditors as a resolution of the first meeting of creditors and may initiate restructuring proceedings.
  5. If the head of the enterprise administration failed to obtain written consents referred to in paragraph 5 of this Article, or if the principal creditors failed to adopt a resolution on holding a meeting of the principal creditors as the first meeting of creditors, the head of the enterprise administration may convene the first meeting of creditors.
  6. On receiving written consents of creditors referred to in paragraph 5 of this Article, or on adoption of a resolution at the first meeting of creditors on restructuring the enterprise, the head of the enterprise administration shall, within five calendar days, file a petition in the court on initiating restructuring proceedings. Article
  7. Petition to the Court on Initiating Restructuring Proceedings
  8. A petition on initiating the enterprise restructuring proceedings may be filed in the court by the head of the enterprise administration.
  9. A petition to the district court of the locality where the enterprise’s registered office is located shall be filed in the manner specified in the Code of Civil Procedure.
  10. The petition shall be accompanied by the following documents: 1) a resolution of the first meeting of creditors, the list of creditors compiled on the basis of the documentation of the enterprise specifying the amounts of liabilities of the enterprise to the creditors, deadlines for discharging the liabilities and ways of securing the discharge of liabilities; 2) nomination of the candidate to the post of the enterprise administrator and a copy of the certificate attesting the right of the nominee to provide administration services; 3) documents certifying that the enterprise meets the conditions specified in Article 3 of this Law; 4) a decision of the management body of the enterprise, and acceptance by the founder of a state-owned or municipal enterprise, founders of a public agency, owners (partners) of the restructuring of the enterprise; 5) guidelines for the enterprise restructuring plan approved by the principal creditors of the first meeting of creditors; 6) a list of civil cases in which financial claims have been entered against the enterprise and claims of the enterprise against other persons; 7) the balance sheet of the enterprise for the preceding reporting period, a statement of inventory of the assets band other documents that may be necessary for initiating restructuring proceedings.
  11. An petition for restructuring of an enterprise may be filed in the court by creditors pursuant to a resolution of the first meeting of creditors even without a decision of the managing body of the enterprise and the consent of the founders of a public agency, and owners. In such a case the first meeting of creditors may be called by any of the creditors. The petition shall be accompanied by the documents specified in paragraph 3
(1),
(2)and
(5)of this Article. 5.On receiving the petition of creditors and the resolution of the meeting to apply to the court to initiate the enterprise restructuring proceedings referred to in paragraph 4 of this Article, the court shall notify the enterprise about the petition and shall request it to produce the documents specified in paragraph 3
(6)
(7)of this Article. On hearing an explanation of the head of the enterprise administration, the court may commence the enterprise restructuring proceedings even without a decision of the managing body of the enterprise and the consent of the founders of a public agency and owners/partners, and may obligate the head of the enterprise administration to formulate the enterprise restructuring plan which must be discussed and filed in the court in the manner specified in Article 15 of this Law. Article
  1. Preparation for Investigation of the Restructuring Case in the Court Upon receiving a petition to initiate restructuring proceedings the court may: 1) obligate the managing bodies of the enterprise, the head of the enterprise administration, and the senior financier/accountant to produce to the court additional documents necessary for investigation of the restructuring case; 2) to summon to appear in the court the owner of the enterprise, members of its managing bodies, the head of the administration, the chief financier/accountant and other executive officers, to request written explanations relating to initiating restructuring proceedings; 3) to notify the district/city local authorities in the territory whereof the enterprise under restructuring or its branches are located. Article
  2. Initiating Restructuring Proceedings in the Court The court shall initiate restructuring proceedings where the conditions specified in Articles 3 and 4 of this Law are met, and shall investigate the case in the manner prescribed by the Code of Civil Procedure unless this Law provides otherwise.
  3. The court shall refuse to initiate restructuring proceedings where: 1) the enterprise, prior to making an order by the court to initiate restructuring proceedings, satisfies the claims of a creditor/creditors who applied to the court to initiate restructuring proceedings; 2) documents specified in Article 5
(3),
(4), and
(5)have not been produced to the court; 3) bankruptcy proceedings have been initiated against the enterprise.
  1. When making an order to initiate restructuring proceedings the court must, at the same time, appoint the enterprise administrator for the period of developing the restructuring plan or any other period established by the meeting of creditors, obligate the head of the enterprise administration or the administrator to inform the court about claims entered against the enterprise or claims made by the enterprise against other persons in the cases initiated during the period of developing the restructuring plan.
  2. After coming into effect of the court order to initiate restructuring proceedings the court must, within five calendar days: 1) send a notice about initiating restructuring proceedings to other courts where cases are pending for claims and employees’ claims entered against the enterprise for payments relating to labour relations and compensation for bodily harm or other injury, an occupational disease or death due to an accident at work; 2) notify the investigation authorities if in criminal cases civil claims have been entered by creditors of the enterprise in restructuring, and take over all the documents of relevance to these claims.
  3. The court order to initiate restructuring proceedings must specify the following: 1) data about the enterprise under restructuring recorded in the register of enterprises and the date of filing of the petition to initiate restructuring proceedings; 2) the name, surname, address, telephones of the appointed enterprise administrator and for what period he has been appointed; 3) the date of formulating and filing in the court of the enterprise restructuring plan and other documents necessary for investigating the restructuring case; 4) the time limits, which may not be shorter than 30 calendar days and not longer than 45 calendar days, for submitting to the enterprise the claims of the creditors.
  4. The court shall have the right to accept creditors’ claims which have been submitted in breach of the time limits specified in paragraph 5
(4)of this Article provided the causes for missing the time limit have been accepted as sufficient. Creditors’ petitions about their claims accruing before initiating restructuring proceedings shall be accepted only by the day when the court makes an order to approve the plan of the enterprise restructuring. The information about the claims filed shall be transferred forthwith to administrator of the enterprise under restructuring. Article
  1. Relation between Restructuring and Bankruptcy If a petition to initiate the enterprise restructuring proceedings is filed at the time when the court is considering a bankruptcy petition but when an order to initiate bankruptcy proceedings has not yet been made, consideration of the bankruptcy petition shall be suspended until an order is made to initiate or to refuse to initiate restructuring proceedings. Where a bankruptcy petition is filed after a petition for initiating restructuring proceedings has been accepted, consideration of the bankruptcy petition shall be suspended until an order is made to initiate or to refuse to initiate restructuring proceedings. Article
  2. Liabilities of the Enterprise under Restructuring and Meeting the Liabilities to the Enterprise under Restructuring
  3. From the day when a decision to initiate restructuring proceedings becomes effective the following shall apply: 1) it shall be prohibited to discharge liabilities which were not discharged before the day when the court order to initiate the enterprise restructuring proceedings became effective, including payment of interest, default interest and compulsory payments, to recover debts from the enterprise in a judicial or extrajudicial manner, to apply judgement mortgage, servitudes, usufruct, to offset claims, to pledge, with the exception of cases under subparagraph 5 of this paragraph, sell or transfer in any other way the assets of the enterprise necessary for the continuation of its activities,; 2) calculation of default interest and late penalties for all liabilities of the enterprise which accrued before the day when the court order to initiate the enterprise restructuring proceedings became effective, including late penalties for making payments related to labour relations, shall be stayed; 3) recovery under writs of execution and a set-off of the claims shall be suspended if they are not provided for in the restructuring plan; 4) the enterprise must discharge its obligations to the creditor according to the schedule and amounts set forth in the restructuring plan. 5) if it is necessary, during the restructuring, to sell the pledged property, the property must be sold by the consent of the pledgee after the annulment of its pledge and/or mortgage, with the exception of cases when the buyer agrees to buy the pledged property; 6) creditors, including the administrators of compulsory payments, may make concessions with regard to the discharge of debts which accrued before the day when the court order to initiate restructuring proceedings became effective, relinquish the aggregate amount of the claims or a part thereof, and/or replace the pecuniary obligation by any other obligation - to give its consent that the enterprise o settles from the assets of the enterprise and its shares in the manner prescribed by the Government of the Republic of Lithuania.
  4. From the date when the court order to discontinue restructuring proceedings becomes effective all agreements on the relinquishment of the aggregate amount of the creditors’ claims or a part thereof, on the of pecuniary obligation to any other another type of obligation and on the extension of due dates for the discharge of obligations shall become null and void unless the enterprise and the creditors have agreed otherwise. Compulsory payments, calculation of interest and default interest and recoveries, with the exception of the discharged obligations, shall be renewed from the moment when their calculation started and shall be calculated for the period of initiating restructuring proceedings as well as for the period of investigation of the restructuring case in the court; waivers of creditors’ claims shall also be invalidated. This provision shall apply to the arrears in current payments which accrued during the period of restructuring. Article
  5. Current Payments
  6. During restructuring the enterprise must make all the current payments unless it has entered into agreements with the creditors about the deferral of the payments or their replacement by to any other obligation. Creditors’ petitions about failure to make current payments when due, with the exception of compulsory payments, shall be considered by the court which shall also determine forms of recovery and their schedules. The compulsory payments not paid when due shall be recovered by the administrators of compulsory payments.
  7. By the decision of the managing body of the enterprise and the request of the committee/meeting of creditors, administrators of compulsory payments may, pursuant to the provisions of the Law on Tax Administration and other tax legislation, defer claims or waive the claims arising from pecuniary obligations which accrued during restructuring but only for a period not longer then the implementation of the restructuring plan. Article
  8. Simplified Procedure of Initiating the Enterprise Restructuring Proceedings
  9. The enterprise restructuring proceedings may be initiated in a more simplified manner where its restructuring plan is drawn up prior to the filing in the court of a petition to initiate the enterprise restructuring proceedings.
  10. When using a simplified procedure for initiating restructuring proceedings, the head of the enterprise administration or a representative of the creditors shall file in the court, together with the petition to initiate the enterprise restructuring proceedings, the restructuring plan of the enterprise which must be accepted by all the creditors, a decision of the managing body of the enterprise, consent of the founder of a state-owned or municipal enterprise, founders of a public agency, owners/ partners for restructuring of the enterprise and their acceptance of the restructuring plan as well an opinion of an independent expert about feasibility of the plan and measures of its implementation. The expert shall be remunerated by the enterprise under restructuring.
  11. Upon receiving the documents referred to in paragraph 2 of this Article, the court or a judge shall, within 15 calendar days, examine them and make an order whether to institute or refuse to institute the enterprise restructuring proceedings, and whether to approve or disapprove the restructuring plan of the enterprise.
  12. The restructuring plan shall be implemented in the manner set forth in this Law.
  13. An independent expert shall be responsible for the credibility of his opinion and shall be held liable for the damage caused to the creditors through a faulty opinion in the manner prescribed by the laws of the Republic of Lithuania. Article
  14. Production of Information and a Commercial/Industrial Secret
  15. The head of the administration of the enterprise under restructuring must produce the information relating to the investigation of a restructuring case to the court, the administrator of the enterprise, chairman of the creditors’ committee and the investor specified in the restructuring plan if they so request.
  16. The information which constitutes a commercial/industrial secret but which is necessary for the drafting of the restructuring plan and assessment of its feasibility must be produced to the administrator of the enterprise, the chairman of the creditors’ committee, a member of the creditors’ committee, a creditor, a shareholder, the future investor and the court at their request subject to their written promise to keep a commercial/ industrial secret. CHAPTER THREE THE ENTERPRISE RESTRUCTURING PLAN Article
  17. The Enterprise Restructuring Plan
  18. The enterprise restructuring plan must specify the following: 1) aims and duration of restructuring; 2) the enterprise’s business plan for the period of restructuring. This plan must provide for measures to insure a long-term solvency of the enterprise, the schedule for the implementation of these measures, persons responsible for their implementation, sources of financing and the anticipated results; 3) assets necessary for economic and commercial activities of the enterprise, and assets which will be sold; 4) the arrangements for sale of the assets and the purpose of the proceeds obtained; 5) assets which are to be re-appraised or written off in the manner prescribed by the legal acts of the Republic of Lithuania; 6) agreements to be terminated, agreements which are not useful for the enterprise and creditors, with the exception of employment contracts concluded prior to the day of commencement of restructuring proceedings; 7) the amount of anticipated credits, their terms and conditions, as well as ways of guaranteeing performance of credit agreements; 8) future arrangements with creditors over reduced satisfaction of their claims for the enterprise during its restructuring; 9) a list of creditors, the amounts of their claims and schedules for meeting their claims (in accordance with the order of priority of satisfying the claims and the procedure as specified in Article 14 of this Law); claims arising through termination of unexpired lease, loan-for-use and other contracts. The list of creditors shall also include creditors who have entered property claims against the enterprise with the court but for whom court decisions civil actions pertaining to said claims have not yet been adopted or have not become effective. The amount of claims of these creditors shall be determined on the basis of the amounts specified in their statements of claim or statements of pecuniary claims. When decisions of other courts under Article 7
(4)become effective, the restructuring plan must be modified by revising accordingly the aggregate sum of creditors’ claims specified in it. Creditors’ claims shall be reduced by the amounts paid prior to the meeting of creditors where the restructuring plan was approved; 10) groups of creditors, the sum of claims of each group and the aggregate amount of claims, and the arrangement for their satisfaction with account of the provision set forth in subparagraph 8 of this Article; 11) claims against the enterprise and claims of the enterprise against other legal persons entered in other civil cases; 12) the number of employees to be laid off owing to the changes in the production of the plant or in the organisation of its work. The employees shall be laid off in the manner set forth in the Law on the Employment Contract; 13) the arrangement for covering contingency losses arising during the restructuring for the groups referred to in subparagraph 10 of this paragraph; 14) the procedure of reporting about implementation of the restructuring plan by the head of the enterprise administration to the creditors, the managing bodies of the enterprise, its owner, the investors and the administrator; 15) the procedure of reporting by the enterprise administrator to the meeting of creditors and the creditors’ committee; 16) restrictions on the competence of the head of the enterprise administration and other managing bodies of the enterprise due to the implementation of the enterprise restructuring plan; 17) an estimate of administrative expenses; 18) loans received or receivable on behalf of the State or with a State guarantee, the schedule of their payment and their amounts where a lender or a guarantor agreed to waive or reduce claims, to postpone the repayment of the loan or gave new guarantees; 19) the guarantees provided by the creditor/creditors who initiated restructuring of the enterprise, when a decision of a managing body of the enterprise and consent of the founders, owners/partners for restructuring of the enterprise has not been obtained. Such guarantees may include a pledge of the creditor’s/creditors’ property and/or its mortgage, a bank guarantee and/or a surety.
  1. Duration of restructuring of the enterprise shall be determined in the restructuring plan. It may not be longer than four calendar years. The head of the enterprise administration or the administrator of the enterprise if such has been appointed may, by a decision of a meeting of creditors, file a petition in the court for extension of the enterprise restructuring. The court or a judge may extend the duration of restructuring of the enterprise but not longer than for a period of one calendar year.
  2. Modifications in the restructuring plan shall be approved by the court in the same manner as the restructuring plan. 4 If State aid for restructuring of an enterprise is intended, a provider of State aid shall, before filing of the enterprise restructuring plan in the court, get the approval of the Competition Council for the measures of State aid provided for in the restructuring plan, which must conform to the requirements of the Law on Monitoring of State Aid to Undertakings. Article
  3. Sequence and Procedure of Satisfaction of Creditors’ Claims
  4. The following sequence of meeting creditors’ claims must be set forth in the restructuring plan: 1) claims of a creditor subject to a pledge and/or mortgage ( interest and default interest not included) shall be satisfied first of all out the proceeds of the sale of the pledged property of the enterprise. If the proceeds of the sale are insufficient, the remaining amount of the creditors claims shall be satisfied second in sequence; 2) first in line for satisfaction shall stand claims of the employees relating to employment relations, claims for compensation for bodily harm or some other injury, an occupational disease or death due to an accident at work, and persons’ claims for payment for agricultural produce purchased for processing; 3) second in line for satisfaction shall stand claims for compulsory payments, income tax of natural persons included, and loans granted on behalf of the State or on a State guarantee , as well as all remaining claims of the creditors.
  5. If the restructuring plan does not provide for the sale of the pledged property, claims of a secured creditor or creditors shall be satisfied in the manner laid down in paragraph 1
(2)of this Article (first in line) and in the manner set forth in paragraphs 3 and 4 of this Article.
  1. When drawing up the enterprise restructuring plan, provisions shall be made to satisfy claims of the creditors in two stages. During the first stage, claims of the creditors, interest and default interest not included, shall be satisfied in accordance with the established sequence; during the second stage - the remaining portion of claims of the creditors (the interest and default interest) shall be satisfied according to the same sequence.
  2. Claims of the creditors of each successive sequence shall be satisfied following full satisfaction of the claims of the creditors of the preceding sequence. If funds are insufficient to satisfy all the claims of one sequence in full, said claims shall be satisfied in proportion to the amount due to each creditor during a time period not longer than provided for in the restructuring plan. Article
  3. Consideration and Confirmation of the Enterprise Restructuring Plan
  4. The draft restructuring plan together with the opinion of the enterprise administrator that implementation of the measures provided for in the restructuring plan shall restore solvency of the enterprise, a resolution of the managing body of the enterprise and the consent of the founder of a State-owned or municipal enterprise, the founders of a public agency, and of the owners/partners for restructuring of the enterprise shall be forwarded by the head of the enterprise administration to the members of the committee of the creditors and the principal creditors at least 15 calendar days before the meeting of the creditors where the restructuring plan will be discussed.
  5. For creditors other than the principal creditors the amount of whose claims is less than 1/5 of the aggregate amount of all the creditors of the enterprise the head of the enterprise administration must provide a possibility to familiarize themselves with the draft restructuring plan and make their suggestions to the authors of the draft concerning its modification.
  6. The enterprise restructuring plan may also be submitted for consideration at the meeting of the creditors by the creditors who assume responsibility for the plan they have drafted.
  7. The creditors’ meeting shall accept the enterprise restructuring plan if it finds that the implementation of the plan will restore solvency of the enterprise. In order to be accepted, it is necessary that creditors with at least ¾ of all the proven aggregate amount of claims vote for the restructuring plan.
  8. When the meeting of creditors decides that voting for the restructuring plan shall take place in groups of creditors , for the plan to be accepted it is necessary that groups of creditors specified in Article 21
(3)(1-5) vote for the plan, and that within each group, the creditors with at least 2/3 of the proven aggregate amount of claims accept the restructuring plan. 6. The meeting of creditors must return the draft restructuring plan for modification to the head of the enterprise, the founder of a State-owned or municipal enterprise, the founders of a public agency, and the owners/partners if the plan does not provide for measures to ensure the implementation of all the obligations of the enterprise laid down in the restructuring plan, including obligations to the State or obligations to pay loans taken on behalf of the State or with a State guarantee as well as obligations under Article 13
(1)
(9). The head of the enterprise administration, taking into account all the comments and suggestions made during the meeting, shall, within 15 calendar days, submit to the creditors’ meeting and bodies of the enterprise a modified draft restructuring plan. The modified restructuring plan shall be submitted for discussion after which it shall be put to the vote in the same manner as the first version of the plan.
  1. The administrator of the enterprise, on receiving a resolution of the creditors’ meeting, a decision of the managing body of the enterprise to accept the draft restructuring plan, and consent of the founder of a State-owned or municipal enterprise, the founders of a public agency, and the owners/partners for the restructuring of the enterprise, shall, within 5 calendar days from the day of adoption of the resolution, file the draft plan in the court the court.
  2. Under Article 5 of this Law, the enterprise restructuring plan must be filed in the court within 4 months from the day when the court order to initiate restructuring proceedings becomes effective. The court has the right to extend this time period but no longer than for one more month.. If the restructuring plan is not filed by the prescribed date or if the court does not confirm it, the court shall issue an order to discontinue the enterprise restructuring proceedings.
  3. The head of the enterprise administration and, where appointed, the administrator of the enterprise shall be responsible, within the limits of their competence, for the implementation of the restructuring plan. CHAPTER FOUR MANAGING OF THE ENTERPRISE UNDER RESTRUCTURING Article
  4. Managing of the Enterprise and its Assets under Restructuring
  5. The restructuring plan shall be implemented, all property owned or held in trust by the enterprise shall be disposed of and economic activities of the enterprise shall be directed by the managing bodies of the enterprise within the limits of their competence pursuant to the Articles of Association of the enterprise and other documents regulating the activities of the enterprise, in compliance with the restrictions established in the restructuring plan or the court order.
  6. During the period of drafting the restructuring plan, the activities of the managing bodies of the enterprise shall be supervised by the enterprise administrator appointed by the court. During the period of the implementation of the restructuring plan, activities of said bodies shall be supervised by the chairman of the meeting/committee of creditors and the enterprise administrator, if such has been appointed, within the limits of their competence.
  7. During the period of drafting the restructuring plan, the enterprise under restructuring, may not, without leave of the court: 1) sell the enterprise or a part thereof, long-term assets or property rights; 2) assign the enterprise or a part thereof, long-term assets or property rights, or transfer them for use without remuneration; 3) grant guarantees, give sureties, pledge or secure discharge of the obligations in any other way, with the exception of the cases specified in Article 9
(1)
(5)
(6)of this Law. 4. Contracts entered into in breach of the requirements laid down in paragraph 3 of this Article shall be held invalid from the moment they were concluded, with the exception of the cases specified in Article 9
(1)
(5)
(6).
  1. If the chairman of the meeting/committee of the creditors or, the enterprise administrator, if such has been appointed, establish that the head of the enterprise administration caused damage to the creditors and/or are not implementing the restructuring plan or are implementing it unsatisfactorily, or failed to rectify the shortcomings brought to their notice, they must request forthwith that the head of the enterprise administration give a written explanation why the restructuring plan is not being implemented, why the shortcomings brought to his notice by the enterprise administrator have not been rectified, and notify accordingly the committee/meeting of the creditors and, by the decision of the committee/meeting of creditors, seek compensation for damage in the court.
  2. The meeting of the creditors, having considered the information of the chairman of the creditors’ meeting/committee or of the enterprise administrator about failure to comply with the requirements to rectify the shortcomings or about their improper fulfilment, about the damage caused by the head of the enterprise administration or the members of the managing bodies of the enterprise, may adopt a resolution requesting suspension of the powers of the members of the managing bodies of the enterprise or removal from office of the head of the enterprise administration, and may recommend to the court persons to be included as candidates in the new managing bodies of the enterprise. Representatives of creditors, including those referred to in Article 23
(1), and of investors may be delegated as candidates to the new managing bodies of the enterprise.
  1. On receiving the resolution of the creditors’ meeting referred to in paragraph 6 of this Article, with a request to suspend the powers of the members of the managing bodies of the enterprise and/or remove from office the head of the enterprise administration, the court, shall, if it finds that the causes specified by the creditors are warranted, suspend the powers of the managing bodies of the enterprise or remove from office the head of the enterprise administration and determine time limit during which the new managing bodies of the enterprise must be formed and/or the head of the enterprise administration must be appointed.
  2. The new head of the enterprise administration, shall, within 15 calendar days from the day of his appointment, cancel employment contracts with the former head of the enterprise administration and other members of the managing bodies of the enterprise where such contracts were concluded. These persons shall not be paid a severance pay and a compensation, with the exception of a pecuniary compensation for the holiday that has not been used.
  3. Members of the managing bodies of the enterprise and the head of the enterprise administration shall be held liable for the damage caused to the enterprise as prescribed by law. Article
  4. The Enterprise Administrator
  5. The candidate to he post of the administrator of the enterprise under restructuring shall be nominated by the head of the enterprise or the chairman of the creditors’ meeting subject to a favourable opinion of the managing body of the enterprise and a resolution of the creditors’ meeting.
  6. The head of the enterprise administration shall be appointed for the period of drafting the restructuring plan until the confirmation of the plan in the court. By a resolution of the creditor’s meeting, the court may also appoint the enterprise administrator for the period of the implementation of the plan. The period for which the enterprise administrator may be appointed shall be determined by the court on the motion of the creditors’ meeting. 3) A natural or a legal person certified to provide services of administering restructuring of enterprises may be appointed to the office of the enterprise administrator. 4.A creditor of the enterprise with respect to which restructuring proceedings have been initiated, a creditor/person in employment relations with the creditor or a member of his managing bodies, a person who, under laws or other legal acts, has no right to be the head of the administration, the owner of the enterprise or the owner of a parent enterprise or a subsidiary, a member of the supervisory board or the board of the enterprise, the head of the administration, his deputies/directors, the chief financier/accountant, a shareholder holding by the right of ownership more than 10 per cent of the shares of the enterprise, its parent enterprise or subsidiary may not be appointed the enterprise administrator. These restrictions shall also be applicable to the persons referred to in this paragraph who were employed in the enterprise under restructuring and were removed from their posts in the course of the last 12 months prior to the initiation of restructuring proceedings.
  7. After the court decision to initiate the enterprise restructuring proceedings becomes effective, the enterprise administrator, if such has been appointed, shall: 1) within 5 calendar days submit a copy of the court order to initiate restructuring proceedings to the creditors or their representatives, the Ministry of Finance if the enterprise and its branches are recipients of a loan on behalf of the State or with a State guarantee, to the administrators of compulsory payments, credit institutions and insurance companies providing services to this enterprise and its branches, local authorities of the district/city in the territory whereof the enterprise and its branches are located, administrators of the Register of Enterprises who registered the enterprise and its branches, the Securities Commission if restructuring proceedings have been initiated to a company, to the Competition Council if the aggregate amount of State aid which is being provided by creditors or which they intend to provide is in excess of de minimis aid provided for in the Law on Monitoring of State Aid to Undertakings; he shall also publicly announce in a national daily newspaper about initiation of the enterprise restructuring proceedings and the time period during which the creditors may enter their claims against the enterprise under restructuring; 2) within 10 calendar days furnish to the court information about claims against the enterprise and/or claims by the enterprise filed in other cases; 3) within the time period determined by the court, which must not be longer than the period for drafting the restructuring plan, draw up a report about the economic and commercial activities of the enterprise for the preceding year and submit it to the creditors’ meeting together with the draft enterprise restructuring plan; 4) check the contracts entered into by the enterprise under restructuring during the period of at least 12 months preceding initiation of restructuring proceedings, give a notice to the creditors’ committee/meeting and by a resolution of the creditors’ committee/meeting bring actions in the court investigating the restructuring case for the invalidation of the contracts which are contrary to the objectives of the enterprise and/or which might have led to the inability of the enterprise to settle with creditors; 5) supervise or organize formulation of the enterprise restructuring plan; 6) call creditors’ meetings; 7) subject to its acceptance by the creditors and the managing body of the enterprise, file the enterprise restructuring plan with the court for confirmation; 8) pursuant to the legislation regulating employment relations, notify the territorial labour exchange and the local authorities about the intended redundancies; 9) give a notice to the court and the creditors’ committee about failure to carry out the restructuring plan or its improper carrying out and the damage caused to the creditors or the enterprise, and apply to the court with a request for discontinuation of the restructuring proceedings and compensation for damage.
  8. The enterprise administrator shall perform his duties under a contract of agency concluded with the enterprise.
  9. On the motion of the creditors’ meeting, the court, having listened to the explanations of the enterprise administrator, may order removal from office of the enterprise administrator and cancellation of his powers.
  10. Following the removal from office of the enterprise administrator or acceptance of his resignation, the court shall appoint another person as the administrator in the manner laid down in this Article.
  11. The expenses needed for the activities of the enterprise administrator shall be covered by the enterprise under restructuring. The estimate of administration expenses, where the salary of the administrator shall be given in a separate line, shall be approved by the creditors’ meeting subject to a written consent of the head of the enterprise administration or a resolution of the managing body of the enterprise.
  12. In the event of temporary disability of the enterprise administrator or in other cases when he is not able to perform his duties, the chairman of the creditors’ committee/meeting shall be acting administrator of the enterprise, or, on the motion of the creditors’ committee/meeting, the court shall order a temporary replacement of the administrator.
  13. The enterprise administrator shall be held liable for the damage caused to the enterprise and/or creditors pursuant to the laws of the Republic of Lithuania.
  14. If the enterprise administrator has not been appointed for the period of the implementation of the restructuring plan, the functions specified in paragraph 5
(1)
(2)
(5)
(7)of this Article shall be performed by the head of the enterprise administration. Article
  1. Rights of the Chairman of the Creditors’ Meeting/Committee and the Enterprise Administrator
  2. While performing the duties assigned to them the chairman of the creditors’ meeting/committee and the enterprise administrator shall have the right : 1) to enter the premises belonging to the enterprise, to inspect the accounts, correspondence, other business documents and data bases of the enterprise; 2) to take part in the formulation and discussion of the enterprise restructuring plan and other meetings of the managing bodies of the enterprise and address them; 3) to request that the managing bodies of the enterprise hire an auditor and other experts when this is necessary for the performance of his duties. The expenses for remuneration for the work of auditors and experts must be provided for in the enterprise restructuring plan. 4) to make a motion that the creditors’ meeting revises the estimate of administrative expenses necessary for drafting of the restructuring plan and remuneration to the enterprise administrator; 5) to be informed about all the decisions adopted by the managing bodies of the enterprise. CHAPTER FIVE CREDITORS OF THE ENTERPRISE UNDER RESTRUCTURING Article
  3. Rights of the Creditors of the Enterprise under Restructuring
  4. After restructuring proceedings have been initiated, the creditors shall have the right: 1) within a period determined by the court, which must not be shorter than 30 and not longer than 45 calendar days after the day when the court order to initiate restructuring proceedings becomes effective, to enter their claims and file them with the enterprise administrator attaching thereto proof of claim verified by documents. If the creditors, for a valid reason, were not able to enter their claims in due time, they may, by stating the reason for passing the deadline, file the claims in the court and the enterprise administrator by the date of confirmation of the restructuring plan in the court; 2) to take part in creditors’ meeting and protect their interests; 3) to obtain, in the manner laid down in the restructuring plan, information from the head of the enterprise administration and the enterprise administrator about the course of the enterprise restructuring; 4) to make unconditional or conditional concessions with regard to payment of debt obligations which arose before the commencement of restructuring proceedings in the court: to extend the deadlines for discharge of the creditors’ claims, to suspend calculation and recovery of interest and default interest, to waive all claims/a part thereof, to replace a pecuniary obligation by any other obligation - to agree that the enterprise settles by its property and debentures in the manner established by the Government of the Republic of Lithuania. A creditor shall file his written statement about waiver of his claims/a part thereof, extension of the deadlines for the discharge of obligations or their suspension, replacement of a pecuniary obligation by any other obligation with the enterprise administrator and the court; 5) to request compensation for damage sustained by the creditors due to the fault of the members of the managing bodies of the enterprise, the head of the enterprise administration, the chairman of the creditors’ committee or the enterprise administrator; 6) to submit proposals to the enterprise administrator or the head of the enterprise administration relating to the restructuring plan; 7) to appeal against the resolutions of the creditors’ meeting or committee to the court.
  5. Administrators of compulsory payments, who themselves are creditors, shall make decisions to provide concessions referred to in paragraph 1
(4)of this Article in the manner laid down in legal acts. Article
  1. Rights of the Creditors’ Meeting of the Enterprise under Restructuring
  2. The meeting of principal creditors shall adopt a resolution on recognising the meeting as the first meeting of creditors provided the conditions for convening the first meeting of creditors, specified in Article 4 of this Law, are met.
  3. The first meeting of creditors shall: 1) elect the chairman of the first meeting of creditors, the creditors’ committee and its chairman provided the creditors the amount of whose claims makes up at least 2/3 of the aggregate amount of all the creditors’ claims take part in the meeting; 2) adopt a resolution to apply to the court for initiating the enterprise restructuring proceedings; 3) nominate the candidature of the enterprise administrator and the terms and conditions of the contract of agency (the remuneration, duration of the contract of agency, responsibility, etc.), determine the amount of remuneration to be paid to the enterprise administrator for administering the enterprise during restructuring, including the period from the day when the court order to initiate restructuring proceedings becomes effective until the day when the contract of agency is concluded with him or until the day of the first meeting of creditors; 4) approve the estimate of administration expenses; 5) approve the guidelines of the enterprise restructuring plan; 6) determine the procedure of convening creditors’ meetings; 7) where a resolution is passed that voting for acceptance of the enterprise restructuring plan is to be held in creditors’ groups, form these groups.
  4. Other meetings of creditors shall have the right: 1) replace the chairman of the creditors’ meeting if he fails to perform the duties of the chairman; 2) elect the committee of creditors, change its composition, mandate to it all or part of the rights of a creditors’ meeting. A decision to mandate all the rights of a creditors’ meeting to the creditors’ committee must be approved by the creditors the amount of whose claims makes up at least ¾ of the aggregate amount of claims of all the creditors confirmed in the restructuring plan; 3) direct the creditor’s committee, the chairman of the creditors’ meeting or the enterprise administrator to monitor the implementation of the restructuring plan; 4) nominate the candidature of the enterprise administrator if it decides to appoint the enterprise administrator for the period of the implementation of the restructuring plan or replace the incumbent enterprise administrator; 5) direct the head of the enterprise administrator to conclude or change the contract of agency; 6) change the estimate of administrative expenses of the enterprise; 7) request the enterprise administrator to submit reports of his activities; 8) apply to the court to suspend the powers of the members of the managing bodies of the enterprise or remove members from the managing bodies of the enterprise, or remove from office the head of the enterprise administration; 9) adopt a resolution to apply to the court to confirm the enterprise restructuring plan or its modification; 10) adopt a resolution to make a motion to the court to discontinue or terminate the enterprise restructuring proceedings if a consensus has been reached between the managing bodies of the enterprise and the investors on discontinuation or termination of restructuring of the enterprise; 11) request from the head of the enterprise administration reports about the activities of the enterprise, information and explanations; 12) form groups of creditors specified in Article 21
(3)of this Law if they were not formed at the first meeting of the creditors. Article
  1. Procedure of Adoption of Resolutions of the Creditors’ Meeting of the Enterprise under Restructuring
  2. Meetings shall be considered to have taken place where they are attended by creditors whose amount of claims is bigger than one half of the aggregate amount of the claims of all creditors.
  3. By a resolution of the meeting, creditors shall vote in a body or by groups. Where they vote in a body, a resolution of the creditors’ s meeting is held to be adopted when it was voted for by the creditors whose amount of claims confirmed by the court makes up in terms of value at least one half of the amount of confirmed claims of all the creditors, unless this Law provides otherwise. If the meeting decides to take a vote by groups, the resolution shall be held to be adopted in each group if it was voted in favour of by the creditors the amount of whose claims made up at least 2/3 of the aggregate amount of claims by the creditors in this group, unless this Law provides otherwise. The total sum of votes given in all groups must not be less than 2/3 of the aggregate amount of claims of all the creditors.
  4. For a vote by groups the following groups shall be formed: 1) of creditors whose claims are secured by a pledge and/or mortgage; 2) of the employees whose claims arise from payments related to employment relations, compensation for bodily harm or some other injury, an occupational disease or death through accident at work, as well as claims to pay for agricultural produce purchased for processing; 3) administrators of compulsory payments; 4) persons who have given long-term loans which have not yet become due for payment provided the claims of these persons are not secured by a pledge or a mortgage; 5) other creditors.
  5. A creditor shall have the right to submit his opinion (for or against) in writing to the creditors’ meeting on each resolution. These opinions shall be included in the results of voting of the creditors’ meeting and must be duly announced during the meeting.
  6. If there were not enough votes for adoption of a resolution at the meeting because there was no quorum, the enterprise administrator may convene a repeat meeting of creditors. This meeting shall have the right to adopt resolutions only subject to the agenda of the previous meeting.
  7. A resolution shall be held adopted at the repeat meeting of creditors when it was voted for in favour in an open ballot by the creditors the amount of whose claims in terms of value makes up more than one-half of the amount of confirmed claims of the creditors taking part in the meeting, with the exception of a resolution on the acceptance of the restructuring plan, and on the discontinuation or termination of restructuring.
  8. Resolutions of the creditors’ meeting shall be mandatory for all the creditors. The chairman of the creditors’ meeting must, within five calendar days from the day when the resolution was adopted, notify in writing the head of the enterprise administration, the enterprise administrator and the creditors’ committee. Article
  9. Creditors’ Committee of the Enterprise under Restructuring
  10. The creditors’ committee may be elected by the first or other meetings of the creditors. The creditors’ committee must have at least five members. The chairman of the creditors’ meeting shall also be the chairman of the creditors’ committee.
  11. The following may be members of the creditors’ committee: 1) a person authorised to protect the claims of the employees relating to employment relations where the enterprise must meet such claims of the employees, compensate the damage due to bodily harm or any other injury, an occupational disease or death through an accident at work; 2) a person representing interests of the creditors whose claims are secured by a pledge/ mortgage.
  12. An investor/investors or his/their representative authorised to protect creditors’ claims to pay for the purchased agricultural produce intended for processing if no payment has been made for it, any creditor or a person/persons authorised by him/them may be a member of the creditors’ committee.
  13. A representative appointed by the local authority in whose territory the enterprise and its subsidiaries are located may take part in the activities of the creditors’ committee of the enterprise under restructuring. This person shall have no right to vote in the creditors’ committee.
  14. The creditors’ committee shall monitor restructuring and shall represent the interests of the creditors between the meetings.
  15. The rights and duties of the creditors’ committee shall be established by the creditors’ meeting.
  16. The sessions of the creditors’ committee shall be considered to have taken place provided more than a half of its members are present. One member of the creditors’ committee shall have one vote. Resolutions adopted by the creditors’ committee shall be valid if more than a half of all the members of the committee voted in favour of them. In the event of a tie, the chairman shall have the casting vote. In the manner established by the creditors’ meeting, the creditors’ committee must notify the heads of the enterprise administration, the enterprise administrator and the creditors about the resolutions adopted.
  17. The creditors may, in the manner laid down by the Civil Code, lodge a complaint with the creditors’ meeting or the court, against the decisions adopted by the creditors’ committee.
  18. The chairman of the creditors’ committee shall: 1) inform the creditors’ committee, the meeting and the court about the implementation of the restructuring plan; 2) if it becomes evident that the results of the implementation of the measures laid down in the restructuring plan do not conform or will not be able to conform to the requirements of the restructuring plan, notify forthwith in writing the head of the enterprise administration, the creditors’ committee, the creditors’ meeting and the enterprise administrator if such has been appointed; 3) under direction of the creditors’ committee, perform the functions of the enterprise administrator; 4) sign the statement about the implementation of the restructuring plan. Article
  19. Convocation of the Creditors’ Meetings of the Enterprise under Restructuring
  20. The first meeting of creditors on initiating the enterprise restructuring proceedings shall be convened by the head of the enterprise administration. All the creditors, also including those to whom the obligations of the enterprise will expire during the period of the enterprise restructuring set forth in the guidelines of the restructuring plan. The creditors must be sent a written notice about convocation of the first meeting which must also be announced in a national daily newspaper not later than 10 calendar days before the day of the meeting. A list of creditors and the amount of their claims shall be drawn up by the head of the enterprise administration on the basis of the documents available at the enterprise.
  21. Other meetings of creditors shall be convened by the enterprise administrator, the chairman of the creditors’ meeting or the court. The head of the enterprise administration and the creditors the amount of whose claims makes up at least 10 per cent of the aggregate amount of claims of all the creditors shall also have the right to request that the chairman of the creditors’ committee convene a creditors’ meeting. CHAPTER SIX DISCONTINUATION OF THE RESTRUCTURING PROCEEDINGS AND TERMINATION OF RESTRUCTURING Article
  22. Discontinuation of Restructuring Proceedings
  23. The court shall discontinue the enterprise restructuring proceedings if there is at least one of the following conditions: 1) the terms and conditions specified in Article 15
(8)are not complied with; 2) it becomes evident during restructuring that erroneous information about the economic situation at the enterprise has been produced, owing to which implementation of the restructuring plan is impossible, and this is duly confirmed by the creditors’ committee/meeting; 3) it becomes evident that the measures provided for in the restructuring plan will not be implemented, and the enterprise fails to prove that the restructuring plan will be implemented.
  1. A creditors’ meeting, upon receipt of a written petition of the managing body of the enterprise, its owner and investor/investors to discontinue restructuring of the enterprise, may adopt a resolution to apply to the court for discontinuation of restructuring proceedings and direct the head of the enterprise administration to apply to the court. This resolution must be approved by the creditors the amount of whose claims makes up at least ¾ of all claims allowed by the court which have not yet been satisfied.
  2. If during the implementation of the restructuring plan grounds emerge to institute bankruptcy proceedings against the enterprise and the court receives a petition for bankruptcy, the court shall issue an order to discontinue restructuring proceedings and initiate bankruptcy proceedings against the enterprise in the manner set forth in the Law on Enterprise Bankruptcy.
  3. The head of the enterprise administration must, within 5 calendar days from coming into effect of the court order to discontinue the enterprise restructuring proceedings, notify about it the institutions specified in Article 17
(5)
(1). Article
  1. Termination of Restructuring of the Enterprise
  2. After the enterprise restructuring plan has been implemented, the head of the enterprise administration and the enterprise administrator, if such has been appointed, must, within 10 calendar days, draft a statement about implementation of the restructuring plan. The statement must be signed by the head of the enterprise administration, the enterprise administrator, if such has been appointed, the owner/a person authorised by him, the investor/investors, and the chairman of the committee/meeting of creditors. The statement must be confirmed by the court.
  3. The head of the enterprise administration must, within 5 calendar days, file the statement referred to in paragraph 1 of this Article in the court.
  4. The amount of the assets of the enterprise shall be determined in terms of its balance value according to the financial accounts drawn up on the basis of the data on the day of termination of restructuring of the enterprise.
  5. Upon receipt of the statement under paragraph 1 of this Article, the court shall adopt a decision; 1) to confirm the submitted statement that the restructuring plan has been implemented; 2) to terminate the restructuring proceedings.
  6. The head of the enterprise administration must, within 5 calendar days from the day on which the court decision became effective, notify the institutions referred to in Article 17
(5)
(1)about the court decision to terminate the enterprise restructuring proceedings. CHAPTER SEVEN FINAL PROVISIONS Article
  1. Entry into Force This Law, with the exception of Article 27, shall enter into force as of 1 July
  2. Article
  3. Proposals to the Government The Government or a body authorised by it shall, by 1 June 2001, determine the following: 1) the procedure for furnishing and announcing information about the enterprise under restructuring and the course of restructuring; 2) the procedure for representation of the persons authorised by state institutions in restructuring; 3) the procedure of granting the right to natural and legal persons to provide services of administration of restructuring. I promulgate this Law passed by the Seimas of the Republic of Lithuania PRESIDENT OF THE REPUBLIC VALDAS ADAMKUS

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