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Bankruptcy litigation

We advise clients on opening bankruptcy proceedings and prepare necessary court documents. On the other hand, we also act on behalf of defendants when they face unfair attempts that bankruptcy proceedings are initiated instead of recovering debt in the ordinary court proceedings. 

If necessary, we also represent our clients in the creditors' meetings or otherwise assist them enforcing the rights after bankruptcy proceedings are opened. 

Knowledge & Insights

The right to initiate bankruptcy proceedings

Under certain circumstances, a creditor is entitled to initiate bankruptcy proceedings against the debt instead of simply claiming for a debt recovery through ordinary court proceedings. Such petition indeed may serve as additional initiative for debtors or their shareholders to consider meeting the obligations and settling the debt instead of facing liquidation proceedings. The commencement of insolvency proceedings may lead to cross default situations, and debtors are very reluctant to admit such situations. Some owners of a company may be unwilling to leave their company bankrupt, and offer additional funding to settle the debt or enter into alternative commercial arrangements. 

It should be also taken into consideration that opening of the bankruptcy proceedings has often been used as means of debtor's intimidation, and the Lithuanian courts maintain the view that a petition without a sound reason may amount to the abuse of procedural rights and serve as a basis for the claimant to fine him or her up to 5792,4€  and 50% of such fine can be awarded to a defendant's benefit.

Making a petition to open bankruptcy proceedings

A relevant person (creditor, owner, head of the company, liquidator) are entitled to make a petition to the court to open the case for insolvency if any of the following circumstances is outstanding:

(1) The company does not pay salary or other payments related to the remuneration;
(2) The company does not pay for the goods or services, does not return the credit, or does not abide by other pecuniary obligations as in accordance with its contractual arrangements;
(3) The company does not pay taxes and other mandatory contributions or amounts awarded by a court;
(4) The company made a statement that it was not going to meet its obligations;
(5) The company has no assets or revenue from which the debts can be recovered and for this reason the bailiff returned the enforcement documents to the creditor.

If any of the circumstances specified in subparagraph (1)-(3) are outstanding, a creditor has to notify the indebted company about the intention to open bankruptcy proceedings via a bailiff or courier and set a 30-day term to pay the debt. If the company does not meet the obligations to repay the debt, the creditor is entitled to serve this company a petition regarding opening the bankruptcy proceedings. 

 Requirements for a petition for bankruptcy proceedings 

The petition must correspond to general requirements that are applicable for a claim. In addition, the application for opening insolvency proceedings (unless should application is made by an employee) should also include the proposed bankruptcy administrator. The petition for bankruptcy must be supported by the following documents:

Court proceedings 

The court must within one (1) month from the day of receipt of such petition pass a ruling on the initiation of insolvency proceedings or refusal to initiate the insolvency proceedings (under exceptional circumstances such term can be extended). 

Before passing a ruling on the initiation of bankruptcy proceedings, the court will examine the company’s financial statements in order to check whether the company is in fact an insolvent market player or just a company that currently suffers certain financial difficulties and it is likely that it will be able to pass through this period and become profitable.

Having decided to pass the ruling on the opening of the bankruptcy proceedings, the court must also elect the bankruptcy administrator. As of 1 January 2015, bankruptcy administrators are selected on a random basis, which contributes to the transparency of bankruptcy proceedings. 

Šulija Partners Law Firm Vilnius, registered office Jogailos street 11, Vilnius, LT-01116, Lithuania, fax +370 52051926, e-mail:

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