Skip to content
Insolvency lawyerTadas Ugintas
LT

Company restructuring

Company restructuring

The company has orders and staff, but debts no longer allow it to pay creditors on time? Restructuring can make it possible to save the business and avoid bankruptcy, but only if the company is still viable and the process starts in time.

Restructuring proceedings under the Lithuanian Law on Insolvency of Legal Entities are not limited to insolvent companies. It is enough that there is a real likelihood of the company becoming insolvent within the next three months. The earlier the situation is assessed, the more tools remain: negotiations with creditors, ending loss-making contracts, finding financing, selling assets not needed for the business.

We act on both sides: for companies, including Lithuanian subsidiaries of foreign groups, and for creditors, including foreign suppliers, lenders and investors, whose Lithuanian debtor is restructuring.

For the company and its shareholders

We can help you:

  • assess whether the company meets the conditions for restructuring and whether the court is likely to find it viable;
  • gather the financial and operational data on which viability is based: contracts, order book, cash flow forecasts, staff, assets and liabilities;
  • prepare the application to open restructuring proceedings, including the notice and offer to creditors that usually has to precede it;
  • prepare a restructuring plan with specific, financially sound measures and a realistic timetable, usually no longer than four years;
  • structure shareholder or investor financing so that it supports the plan and is protected as new or interim financing;
  • negotiate with creditors and represent the company when creditors vote on the plan in classes;
  • represent the company in court when a creditor applies for bankruptcy at the same time;
  • assess whether it is possible to move from insolvency proceedings to restructuring if insolvency proceedings have already been opened.

The court will not approve a plan built on general promises. It needs to show what will be done, when, at what cost and with what financial result, and the company must keep paying its current taxes and other current obligations throughout.

For creditors of a company in restructuring

When your Lithuanian debtor opens restructuring proceedings, earlier debts can no longer be enforced individually, and the plan will decide how and when you are paid. We can:

  • check that your claim is included at its correct amount and in the correct class;
  • review the debtor’s viability, financial data and cash flow forecasts;
  • compare what the plan offers you with what you could expect in bankruptcy;
  • negotiate the terms of the plan and vote on your behalf;
  • object to the plan in court if it treats you unfairly or its measures are not realistic;
  • monitor whether the approved plan is carried out, and act if it is not.

Even if your class votes against the plan, the court may in certain cases approve it, provided the conditions protecting dissenting creditors are met. It is better to raise objections while the plan is being negotiated than after it has been approved.

Why an insolvency administrator’s view matters

As an insolvency administrator, Tadas Ugintas sees the process from both sides: he knows which documents the court and creditors check first, why plans are most often rejected and what happens to creditors when a restructuring fails and the company goes bankrupt.

We act for clients throughout Lithuania. The initial assessment can be done remotely, in English.

For more on the conditions, the plan and case law, see the article Company restructuring in Lithuania: when can it help avoid bankruptcy?.

ArticleRestructuringCompany restructuring in Lithuania: when can it help avoid bankruptcy?When can restructuring help a Lithuanian company avoid bankruptcy? Viability, the procedure, the plan, creditor voting and what it means for foreign creditors.

Frequently asked questions

Our Lithuanian subsidiary is in financial difficulty. Can the foreign parent company help it through restructuring?

Yes, and it often decides the outcome. The court looks at whether the company is viable and how the plan will be financed. Financing or other support committed by shareholders or investors is one of the factors the court considers, and new and interim financing in restructuring enjoys protection under the law. The commitment needs to be specific and documented, not a general statement of intent.

Our Lithuanian customer has started restructuring proceedings. What should we do as a foreign creditor?

Make sure your claim is included in the proceedings at its correct amount, review the draft plan and vote in your class. Check what the plan offers you compared with what you could expect if the debtor went bankrupt, and whether the measures in the plan are realistic. If the plan treats you unfairly, objections can be raised with the court before it decides whether to approve it.

Can an insolvent company be restructured?

Yes. Insolvency does not in itself rule out restructuring. What matters is whether the company is viable and can overcome its financial difficulties within a reasonable period. If the company is both insolvent and not viable, restructuring would not serve its purpose.

A creditor has already filed for bankruptcy. Is restructuring still possible?

It is. A creditor's bankruptcy application alone does not rule out restructuring. If insolvency proceedings have already been opened, restructuring is decided under a special procedure within those proceedings, as long as the ruling to liquidate the company for insolvency has not become final.

Does the company have to pay taxes during restructuring?

Yes. The company must pay its current taxes. If it fails to pay taxes after the ruling opening restructuring proceedings, the court may refuse to approve the plan.

How long does restructuring take?

Implementation of the plan usually cannot exceed four years. The period can be extended under conditions set by law, but the total duration is also limited.

Do all creditors have to approve the plan?

Not necessarily. The plan is voted on by classes of creditors. In cases provided for by law, the court may approve the plan even if one class does not support it, provided the conditions protecting dissenting creditors are met.

Other services