Civil Liability of a Company Director in the Vicinity of Insolvency: The Lithuanian Approach

Abstract

Little has been achieved at the EU level and internationally to harmonise the various approaches taken by national laws regarding the nature and extent of directors’ obligations in the vicinity of insolvency. The first steps towards harmonisation can be seen in the Restructuring Directive, which aims to provide initial guidance on the duties of directors where there is a likelihood of insolvency. Lithuania is one of the countries which has most recently implemented a comprehensive insolvency reform, trying to better conform to the modern realities of business and promote the corporate rescue paradigm through the national legal regime. The new Law on Insolvency of Legal Persons introduced a range of changes that directly and indirectly impact the director’s civil liability approach. The aim of this paper is to provide comprehensive insights from a comparative perspective on the Lithuanian approach to the regime of a director’s civil liability in the vicinity of insolvency through an analysis of the conditions and sources of such liability in the context of the new legal regime of insolvency. The paper discusses the general features and doctrine of the legal regime regarding a director’s civil liability in Lithuania. Secondly, it sets out the types of insolvency-related duties of directors, analyses the current state of harmonisation at the EU level in that regard, and then discusses the Lithuanian approach. Finally, it determines the main factors influencing the future of the legal regime of a director’s liability, including the reactions of the legislators to the COVID-19 outbreak.