Reorganisations and capital injections

We provide a legal advice and draft relevant corporate documentation necessary for implementation of all types of reorganisations. In particular, assist our clients on the following matters:   

• Preparation and negotiation of the terms of reorganisation and auxiliary transactional documentation 
• Advising on tax implications relevant to reorganisations 
• Advising on regulatory requirements affecting reorganisations: environmental law implications, antitrust laws and notification duties; labour law requirements  
• Advising on legal aspects relating to post-merger integration of companies participating in the merger
• Advising on capital injections and outflows and relevant tax implications.

Knowledge & Insights

Reorganisations

Lithuanian corporate laws make a distinction between acquisitions and reorganisations. Reorganisation occurs where the target is merged with another company. After such merger, one company survives only – this may be the target or the buyer’s subsidiary. However, as a result of the reorganisation a company may be split into two entities.

By reason of the Lithuanian law, the shareholders of both companies participating in the merger need to adopt the corporate decisions to initiate the reorganization process and the preparation of the terms of reorganization. Currently, such decisions need to be adopted by at least 2/3 of the shareholders of each company. Further, the management bodies of the company (the board of the directors or the sole general manager, depending on the structure of the company) have to prepare the terms of reorganization and the new articles of association of the company that will continue operations following the reorganisation. The terms of reorganisation must be published in the daily specified in the articles of association of each company and be submitted to the Register of Legal Entities.

The procedures of reorganization might differ, if the merger (reorganisation) is carried out by non-affiliated companies, or if the parent company owns less than 90% of the subsidiary’s shares. In such cases the terms of reorganisation must be much more detailed, auditing may be necessary, additional reports need to be prepared by the managing bodies and submitted to the Register of Legal Entities and the general meeting of shareholders, etc.  

The final decision on the reorganization, approving the terms of reorganization and the new articles of association of a surviving company, shall be adopted by the shareholders of both companies. The same quorum of 2/3 applies. The new articles of the association approved by the public notary are registered in the Register of Legal  Entities, the wounded up company is deregistered from the register and all the assets, rights and obligations of the deregistered company are transferred to the surviving company.

Capital injections 

Most shareholders consider financing their companies by providing loans. However, sometimes the increase of share capital may be required by applicable laws or the shareholders decide to go beyond the minimal threshold and so reaffirm credibility of their company. 

In case the own capital of a company is lower than ½ of the share capital specified in the articles of association of a company, the board or the head of the company (in case the board is not formed) must not later than three (3) months after it learns or must have learned about the outstanding situation convene the shareholders' meeting to consider the question of capital injection. In either case, this issue must be resolved not later than in six (6) months after the board learned about this situation. 

The increase of the share capital must be made by amending articles of association of a company. The share capital shall be deemed as increased after the amended articles of association are registered in the Register of Legal Persons. The company must submit the notarial deed approving the amended articles of association to the Register of Legal Persons, the interim financial reports if the decision to increase the share capital was adopted after six (6) months following the expiration of the financial year, and the valuation report if the shares were paid by non-monetary contributions.