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My company (employer) is getting bankrupt

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When insolvency proceeding is instituted against the company, the employee should:

  1. apply to the designated bankruptcy administrator that the latter include the amounts owed to the employee by the bankrupt employer into the creditor's claims;
  2. specify in writing the bank account number to which benefits from the Guarantee Fund should be paid for the bankruptcy administrator.
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Once the employer has filed for bankruptcy, the employee should:
  1. Apply to the appointed insolvency administrator and submit a claim in writing for the insolvency administrator to place the employee and his debt on the list of creditors. 
  2. To apply for a payment from the Guarantee Fund to any State Social Insurance Fund Administration Institution published on the State Social Insurance Fund Board's website if the employee has not filed a permanent request for sickness benefit or has not recently received any social insurance benefits (within the last 12 months prior to the date of initiation of bankruptcy proceedings against the employer).  
 
Following the refusal to open bankruptcy proceedings against the employer and on the initiative of the Registrar of Legal Entities to commence the winding-up of the legal person, the employee should:
 
  • Apply to any State Social Insurance Fund Administration Institution published on the State Social Insurance Fund Board's website if the employee has not filed a permanent request for sickness benefit or has not recently received any social insurance benefits (within the last 12 months prior to the date of initiation of bankruptcy proceedings against the employer).  
 
If your employer goes bankrupt, you can find a designated insolvency administrator on the web page of the Audit, Accounting, Property Valuation and Insolvency Management Authority.
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The "Sodra" is the institution that collects contributions to the Guarantee Fund. The funds accumulated in the Guarantee Fund are allocated to employee benefits, when their employers become insolvent, go bankrupt.

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  1. Employees who have worked or are working in bankruptcy legal entities established in Lithuania (insurers). Also for employees who work or worked for bankrupt farmers and other natural persons who are engaged in individual activities.
  2. Employees who work or worked in bankruptcy legal entities of other European Union member states or other states of the European Economic Area whose units are established in Lithuania.
  3. Employees who have been continuously working or working in Lithuania for an insolvent employer (insurer) who is established outside Lithuania and who pursues an economic activity in the territory of not less than two Member States.
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  1. Employees of legal persons of the Republic of Lithuania who are subject to bankruptcy proceedings or if initiation of bankruptcy proceedings has been refused and the winding-up of the legal person has been commenced on the initiative of the Registrar of Legal Entities. 
  2. Employees of natural persons whose place of property interest is the Republic of Lithuania and who are subject to bankruptcy proceedings.
  3. Employees of legal persons of other Member States of the European Union or other States of the European Economic Area who are subject to insolvency proceedings, or branches established in the Republic of Lithuania by the insolvent legal person being liquidated in the administrative procedure.
  4. Employees of legal entities and their branches, natural persons of the European Union Member States who are subject to insolvency proceedings, permanently employed in the Republic of Lithuania.
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Guarantees for employees are ensured if employees began to work in the enterprise until the day when the court decided to open a bankruptcy case or the creditors decided to carry out out-of-court bankruptcy procedures.

It does not take into account whether their employment relationship continues or the employment contract expires after the judgment has been made. If employees were recruited after the opening of bankruptcy proceedings, they would not be entitled to benefits from the Guarantee Fund.

 

  Funds from the Guarantee Fund are granted only when the employer becomes insolvent and does not have enough own funds to pay with the employees.

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In the Guarantee Fund, the employer (the policyholder) pays a contribution of 0.16% to employees calculated by the income from which the state social insurance contributions are calculated.

More information on policyholders who have to pay contributions to the guarantee fund >>

In addition to contributions, the Guarantee Fund additionally includes:

  1. Interest and fines.
  2. The funds received from the employers to satisfy the administrator's requirements.
  3. Voluntary contributions from natural and legal persons, other organizations and their departments.
  4. Revenues for the provision of temporary free funds from the Guarantee Fund;
  5. Other legally received funds.

  These contributions are not paid to the Fund by the Bank of Lithuania, budgetary institutions, political parties, trade unions, religious communities and communities. Payments from the Guarantee Fund are not made to employees of the said institutions.

 

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  1. Unpaid salaries *.
  2. Compensation for unused annual leave (up to one minimum monthly salary).
  3. Termination payments (up to two minimum monthly salaries).
  4. Payment for downtime (up to one minimum monthly salaries).
  5. Compensation for damage caused by accidents at work or occupational diseases if this obligation does not go to the state.

* Compensation is 75% of the salary "before taxes" paid to the employee in the quarter preceding the redundancy, but the compensation may not exceed 3 average salaries that were in the quarter preceding the month in which the bankruptcy order was issued. Statistics Lithuania is publishing the average salaries in the country.

If a person received low income (up to 3 minimum monthly salaries) in the last calendar quarter or did not receive them at all, the compensation may not exceed 3 minimum monthly salaries.

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Employees shall be entitled to one type of benefit from the Guarantee Fund:
  • In the event of opening of insolvency proceedings against an employer:
    • if the approved employee’s claim is greater than 6 minimum monthly wages (MMW), a benefit of 6 MMW shall be paid;
    • if the amount of the approved employee's claim is less than 6 MMW, the amount of the approved employee's claim shall be paid.
  • In the event of refusal to open bankruptcy proceedings against the employer and to commence the winding-up of the legal person on the initiative of the Registrar of Legal Entities:
    • the amount of work-related income earned by the employee within three months before the date of the court order indicated in the Register of Insured Persons and Recipients of State Social Insurance Benefit; however, no more than 6 MMA after tax.
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Payments from the Guarantee Fund are granted when the employer does not have sufficient own funds to pay with employees whose requirements are approved by a court order or a resolution of the meeting of creditors. Funds from the Guarantee Fund are granted when "Sodra's" administrator is nominated by the "Sodra".

The bankruptcy administrator shall indicate in the application, according to the company's personnel and accounting records, the amounts owed by his bankrupt (insolvent) employer to his employees. Funds are requested from the Guarantee Fund to compensate for these arrears.

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  1. The funds shall not be allocated to a worker who owned, for himself or in association with his close relatives or spouse, over a period of at least one year during the last 2 years prior to the beginning of the bankruptcy, more than 50 per cent of the company's shares.
  2. Funds shall also not be awarded to a worker who has been accorded identical benefits to the authorities of other Member States.
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  1. No benefit shall be payable if the debt owed by the employer to an employee is not approved by a claim approval document (court order or decision of the creditors meeting).
  2. No benefit shall be payable to staff members to whom similar benefits have been allocated by the institutions of other Member States. 
  3. No benefit shall be payable to employees upon the refusal to open bankruptcy proceedings against their employer and the winding-up of the legal person has been commenced on the initiative of the Registrar of Legal Entities, if work-related income has not been earned by such employees within 3 months before the date of this court order.  
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Update date: 2020-03-13
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