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Translation from Lithuanian Translation from Lithuanian GOVERNMENT OF THE REPUBLIC OF LITHUANIA R E S O L U T I O N No. 276 Regarding the Declaration of Enterprises as Insolvent and the Method for Performing the Principal Procedures Connected with the Implementation of the Republic of Lithuania Law on Enterprise Bankruptcy Vilnius, 20 April 1993 In implementing the Republic of Lithuania Law on Enterprise Bankruptcy, the Government of the Republic of Lithuania r e s o l v e s : 1. To approve the following appendages: 1.1. The basic criteria and conditions for establishing the insolvency of enterprises; 1.2. The rehabilitation procedure for enterprises which are in a difficult economic situation and are unable to fulfil their financial liabilities; 1.3. The procedure for liquidating a bankrupt enterprise; and 1.4. The procedure for satisfying the financial liabilities of enterprises during the application of bankruptcy procedures. 2. By partly amending the 2 February 1993 Resolution No. 51 of the Government of the Republic of Lithuania "On the Enforcement of the Law on Enterprise Bankruptcy of the Republic of Lithuania", to set forth Par. 6.2 as follows: "6.2. to prepare draft amendments to the laws and resolutions connected with the enforcement of the Law on Enterprise Bankruptcy of the Republic of Lithuania by 1 July 1993." 3. To charge, by 1 July 1993: 3.1. The Ministry of Economics -- to prepare regulations for the sale of assets of bankrupt enterprises by auction and the procedure for forming and using the rehabilitation fund; 3.2. The Ministry of Justice -- to prepare a model rehabilitation agreement signed by the debtor(

  1. s)and the person(
  2. s)participating in the rehabilitation; 3.3. The Ministry of Finance -- to prepare the procedure for establishing insolvency and expected insolvency of State and State stock enterprises. Prime Minister Adolfas Ðleþevièius Minister of Economics Julius Veselka APPROVED by Resolution No. 276 of 20 April 1993 of the Government of the Republic of Lithuania The Basic Criteria and Conditions for Establishing the Insolvency of Enterprises 1. Enterprises shall be considered insolvent when they are not in the position, within the time period specified in laws and other standard acts, to satisfy the following financial liabilities: 1.1. to pay for goods received or works performed (services rendered); 1.2. to repay credits; or 1.3. to effect mandatory payments (pay interest on State capital used or taxes into State Budget of Lithuania or insurance contributions or other payments established by law). 2. The owner(
  3. s)of a debtor enterprise or the managing body thereof shall, according to their competence, adopt decisions concerning the reorganisation or liquidation of the enterprise, and shall file petitions for the declaration of the enterprise as insolvent in the court of the locality wherein the main office of the enterprise is situated; in the event that the extrajudicial bankruptcy procedure is applied, the above owner(
  4. s)or managing body of the debtor enterprise shall publicly announce its inability to satisfy the financial liabilities incumbent on the enterprise (this announcement shall be published in at least three dailies of the Republic of Lithuania and shall be published repeatedly at least five times within a ten-day period). Upon filing a petition for bankruptcy in court in the event of enterprise insolvency, the debtor must present: 2.1. the accounting balance sheet drawn up for the last accounting quarter or month preceding the day of filing of the petition; 2.2. lists of debtors and creditors and the amount of their respective debts; 2.3. information concerning the pledged property; and 2.4. other information concerning the unprofitableness of the enterprise activities as well as its financial position and property condition. State and State stock enterprises shall also present, in addition to documents specified in Pars. 2.1-2.4, the act confirming the enterprise's insolvency which, at the request of the founders, shall be executed and registered in the established manner by the Ministry of Finance. For this purpose, the Ministry of Finance shall form a commission of representatives of the Ministries of Finance and Economics, as well as of the enterprise and the founder thereof. In the event that an extra-judicial bankruptcy procedure is implemented, the above act shall be presented to the first meeting of creditors. 3. The validity of the statements of creditors concerning the improper disposal of the enterprise's assets (transferal as a gift, sale at lower prices, or other squandering) or other actions which provide grounds for the creditors to believe that their claims will not be satisfied from the debtor's assets or that the enterprise will become insolvent shall be established in accordance with the legal procedure on the basis of changes in the enterprise's financial position and property condition which occurred in the period from the creation of credit to the day of filing of the petition for bankruptcy proceedings. 4. An enterprise may not be declared insolvent if it is incapable of satisfying its financial liabilities because of circumstances which emerged through no fault of the enterprise. ___________________________ APPROVED by Resolution No. 276 of 20 April 1993 of the Government of the Republic of Lithuania The Rehabilitation Procedure for Enterprises which are in a Difficult Economic Situation and which are not in the Position to Satisfy their Financial Liabilities 1. The rehabilitation of enterprises by providing them with administrative, economic, and financial assistance shall be performed in cases where there is an actual possibility of restoring the normal functioning of the enterprises, satisfying their financial liabilities, and continuing their activities under market conditions. 2. State funds as well as resources of natural and legal persons of the Republic of Lithuania and foreign natural and legal persons may be used for the purposes of enterprise rehabilitation. 3. State funds shall be allocated for crediting rehabilitation plans for State, State stock and private capital enterprises in the following order: 3.1. for enterprises which ensure the functioning of the economy of the Republic of Lithuania (power engineering, transport, communications, health care); 3.2. for enterprises which ensure the functioning of other enterprises of the Republic of Lithuania (enterprises which have technological links with several enterprises of the Republic of Lithuania); 3.3. for enterprises which employ over 25 percent of the people capable of work in the town (settlement) where the enterprise which is going bankrupt is located; and 3.4. for other enterprises provided that their manufactured goods or rendered services are indispensable for the economy and population of the Republic of Lithuania. 4. Enterprises which are not in the position to satisfy their financial liabilities and which attempt to avoid bankruptcy (State and State stock enterprises -- on coordination with their founder) must prepare and present a plan to the Ministry of Economics concerning the enterprise's economic-financial activities (business plan), first of all indicating therein the reasons which conditioned the present state of the enterprise and specifying the concrete actions taken or planned to be taken so as to ensure the functioning of the enterprise and the satisfaction of its financial liabilities. Enterprises must also substantiate the necessity of rehabilitation and provide adequate proof of their readiness to implement the specified prepared plan. 5. An enterprise's decision to apply for rehabilitation and the prepared plan of its economic-financial activities (business plan) must be coordinated with and signed by the creditors. The value of the total amount of claims of creditors who approve of the plan must be more than a half of the value of the total amount of claims lodged by all creditors, not including the claims of creditors who were absent from the meeting of creditors without due cause (i.e. who did not have documents confirmed by court or the creditors which excuse their absence). 6. The work collective of the State or State stock enterprise which is going bankrupt shall have priority in rehabilitating the enterprise which is going bankrupt. In the event that the work collective does not exercise its right of priority to apply for the implementation of rehabilitation of the enterprise which is going bankrupt within a month from the institution of bankruptcy proceedings, participants in rehabilitation shall only be chosen by competitive bidding. Invitation for bids and the conditions of bidding shall be published in the press. Legal and natural persons of the Republic of Lithuania and foreign states may take part in competitive bidding. 7. Analysis of enterprise rehabilitation plans presented for competitive bidding specified in Par. 6 shall be performed by a group of independent experts formed under the Ministry of Economics. Representatives of the ministries -- founders of the enterprises, of the Ministry of Finance, and of banks as well as qualified experts-economists should be included in the group. 8. The Ministry of Economics shall, within a month from the receipt of the application [for rehabilitation], notify the court which instituted the bankruptcy proceedings of its decision concerning the rehabilitation of the enterprise against which bankruptcy proceedings have been instituted. Upon the adoption of decisions to rehabilitate an enterprise, bankruptcy cases shall be suspended. 9. No later than within 15 days of the filing of applications for participation in competitive bidding or, in the event that the invitation to bid was not announced, no later than within 15 days from the adoption of the decision to rehabilitate the enterprise, the Ministry of Economics shall examine the plans presented by eligible bidders, select them and make a decision on the issue. 10. Within 10 days of the adoption of the decision specified in Par. 9, the participants in the rehabilitation must convene a meeting, prepare an agreement, and appoint a representative for carrying out the functions of administrator of rehabilitation. The said agreement must contain an obligation to satisfy all the claims of the creditors within the time period coordinated with them, must state the duration of rehabilitation, must establish the obligations of every participant in the rehabilitation to the creditors (including cases of refusal to participate in rehabilitation on its commencement), and must specify the amounts allocated by every participant for the repayment of the debtor's credits and for the restoration of the enterprise's solvency, the portion of the debtor's property acquired into ownership on the completion of rehabilitation, as well as other conditions deemed mandatory by the participants in rehabilitation and creditors. Upon the completion of the rehabilitation of an enterprise, its executors shall acquire ownership right to the portion of property invested in the enterprise during rehabilitation. Participants in the rehabilitation shall have the right to acquire a portion of fixed assets assessed at their book value and equivalent to the sum of the discharged trade liabilities. The duration of the rehabilitation of an enterprise may not exceed 18 months. On the proposal of persons performing the rehabilitation, the court may extend the period for up to 6 months. Rehabilitation shall be considered commenced from the day the court passes an order on said rehabilitation or, in case where extrajudicial bankruptcy procedure is implemented, from the day the meeting of creditors adopts a decision to rehabilitate the enterprise. On the expiration of 12 months from the beginning of rehabilitation, at least 1/3 of the total amount of the creditors' claims must be satisfied. During rehabilitation, the satisfaction of creditors' claims must be carried out in observance of the following order of priority: claims secured by pledge; court and administrative expenses connected with the investigation of the case and preparation of rehabilitation; unpaid claims for goods supplied in the period from the institution of the enterprise bankruptcy proceedings or public declaration of the enterprise as an enterprise which is going bankrupt to the day the court or the creditors and participants in rehabilitation adopt a decision to rehabilitate the enterprise, as well as other claims arising from the decisions adopted by the liquidator during the period of investigation of the case or participants in rehabilitation during rehabilitation; claims for taxes and other payments to the budget as well as mandatory State social insurance contributions; and claims which are not secured by mortgage and other claims. Participants in rehabilitation must fulfil all obligations to creditors and shall be jointly liable for them unless the agreement provides otherwise. 11. During the rehabilitation period, the founder of the State or State stock enterprise which is going bankrupt, the owner(
  5. s)of the enterprise, or any of the creditors or the work collective may submit an application to court concerning ineffective performance of rehabilitation or actions of the participants in rehabilitation which violate the interests of the founder, the owner(s), the creditors or the work collective. The court shall investigate said applications and shall pass appropriate decisions thereon. 12. The court may terminate rehabilitation upon the expiration of the time period assigned for performing rehabilitation, upon failure to fulfil the requirements set forth in the agreement of participants in rehabilitation, or upon clarification that the rehabilitation was ineffective. Upon termination of rehabilitation, the court shall pass a decision to continue the bankruptcy proceedings against the enterprise in accordance with the procedure established by law. 13. Upon the implementation of the goals set forth in the rehabilitation plan, the court shall pass an order to dismiss the enterprise bankruptcy case. The proceedings shall be terminated in pursuance of the rehabilitation agreement between the participants in rehabilitation and the creditors. ______________________ APPROVED by Resolution No. 276 of 20 April 1993 of the Government of the Republic of Lithuania The Procedure for the Liquidation of Bankrupt Enterprises 1. Upon adopting a decision to liquidate a bankrupt enterprise, the court or the meeting of creditors shall: 1.1. make a public announcement thereof (the announcement shall be published in at least three dailies of the Republic of Lithuania and shall be repeated at least 5 times within 10 days); 1.2. announce the adopted decision to: 1.2.1. the creditors; 1.2.2. the owner(
  6. s)of the bankrupt enterprise. If a joint venture or a foreign capital enterprise goes bankrupt, the Ministry of Foreign Affairs shall be notified; 1.2.3. the founders of the bankrupt State or State stock enterprise; 1.2.4. the finance and banking institutions servicing the enterprise; and 1.2.5. the manager of the Enterprise Register. 1.3. approve the liquidation commission and obligate it to organise and commence, within 2 months, the sale of the bankrupt enterprise's property, and to satisfy the claims of the creditors in the manner established by law. Appointed to the liquidation commission shall be the liquidator (the chairperson of the liquidation commission), representatives nominated by the meeting of creditors, representatives of the finance institutions (tax inspectorate, social insurance inspectorate) and banking institutions servicing the enterprise, as well as one representative each of the founder of the State or State stock enterprise and the labour exchange. 2. Upon the declaration of an enterprise as bankrupt: 2.1. its commercial activities shall be terminated; 2.2. the assets of the enterprise as well as its property liabilities and rights shall be conveyed to the liquidation commission; 2.3. all the debts of the enterprise to its creditors and those of its debtors owed to the enterprise shall be deemed to be matured; and 2.4. the payment of all financial liabilities shall be suspended. 3. The liquidation commission shall: 3.1. make an inventory and assessment of the assets of the bankrupt enterprise and establish the part of it which will be sold; 3.2. dispose of the assets of the bankrupt enterprise and ensure the protection thereof; 3.3. take appropriate measures to recover debts owed to the bankrupt enterprise by its debtors; 3.4. organise the sale of assets of the bankrupt enterprise and satisfy the claims of its creditors in accordance with the procedure established by law; 3.5. submit contracts signed by the bankrupt enterprise concerning the sale or gift of property or other actions related thereto to the court during the 12 month period prior to the institution of bankruptcy proceedings in order to establish the lawfulness of said contracts if, by signing them, the owned property was attempted to be concealed or sold at a price lower than the effective market price at the time, or if the bankrupt enterprise was already insolvent during the signing of such contracts or became insolvent while performing said contracts and could violate the interests of the creditors; and 3.6. return the property which remains after the creditors' claims have been satisfied to the owner(
  7. s)of the bankrupt enterprise, or, in the case that a State or State stock enterprise goes bankrupt, to the person authorized by the founder. Upon completing its work, the liquidation commission shall present the liquidation balance sheet and the deed of return of the remaining property to the court. 4. Property subject to sale shall not include: pledged assets (if this is requested by the creditor who received the pledge); property taken on lease by the debtor(s); property taken into custody; and personal property of the enterprise's employees or the debtor, unless the enterprise foundation documents or the laws of the Republic of Lithuania provide otherwise. In certain cases, production, communal, social and cultural facilities which are on the balance of the bankrupt enterprise and are of vital importance to the infrastructure of the locality where the property of the enterprise is located may not be included in the property subject to sale. 5. The liquidation commission shall sell the assets of the bankrupt enterprise by open bidding (auction) or another manner approved by the meeting of creditors. In the event that two or more claimants wish to acquire a bankrupt enterprise which has been put up for sale or a part of the assets thereof, the liquidation commission shall announce a bidding (auction). The sale of property by bidding (auction) must be conducted in accordance with the Regulations of the Sale of Assets of Bankrupt Enterprises by Bidding (Auction). 6. The employees of a bankrupt enterprise shall be discharged in accordance with the procedure established by law. _____________________________ APPROVED by Resolution No. 276 of 20 April 1993 of the Government of the Republic of Lithuania The Procedure for Satisfying the Financial Liabilities of Enterprises during Bankruptcy Procedures 1. Upon the adoption of a court order to institute enterprise bankruptcy proceedings or upon the adoption of a decision by the meeting of creditors to perform an extrajudicial (out of court) bankruptcy procedure, the debtor enterprise shall have the right to continue its economic activities and must effect current payments connected with said activities. 2. The day after the institution of bankruptcy proceedings or after the adoption of a decision by the meeting of creditors to commence the performance of an extrajudicial bankruptcy procedure, the computation of a late charge for taxes not paid into the State budget of Lithuania by the due date as well as interest on, and late charge for, credits shall be terminated. The above payments shall be renewed the day after the signing of the settlement between the creditors and the debtor, or upon the completion of the reorganisation or rehabilitation of the enterprise. __________________________

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