Decrease Share Capital Lithuania
Optimize Your Corporate Structure with AM Law’s Trusted Legal Guidance
In the evolving world of business, maintaining an efficient capital structure is key to long-term sustainability. While many businesses look to increase share capital for expansion, there are also strategic reasons for reducing it. Whether you’re reorganizing, managing debt, or aligning your company’s capital with actual operations, decreasing share capital in Lithuania is a legally supported and often beneficial move.
At AM Law, we provide end-to-end legal services for companies seeking to reduce their registered share capital in accordance with Lithuanian law—ensuring full compliance, transparency, and peace of mind.
What Is a Share Capital Decrease?
A share capital decrease is the legal process of lowering a company’s registered capital as reflected in its Articles of Association and the Register of Legal Entities. This reduction does not necessarily reflect a loss—it’s often a smart financial move to:
Optimize company taxation and reporting obligations
Align capital with the company’s actual needs
Repay excess or unused capital to shareholders
Cover financial losses from previous periods
Simplify corporate restructuring or liquidation
When Should You Consider Decreasing Share Capital?
While it may sound counterintuitive, reducing share capital can actually strengthen your company’s position. Here are common scenarios:
1. Your Capital No Longer Reflects Actual Business Activity
Many startups or holding companies register with a high initial capital to build credibility but later find that the capital exceeds operational needs.
2. You Want to Return Surplus Capital to Shareholders
If your company has more funds than necessary for operations, reducing capital and redistributing it can improve shareholder value.
3. You’re Covering Company Losses
Companies that have incurred significant financial losses can cover them by reducing capital, thereby cleaning up their balance sheets and improving solvency ratios.
4. You’re Undergoing Corporate Restructuring
As part of a merger, acquisition, or split-off, adjusting share capital ensures the company’s structure reflects its new direction and ownership.
Legal Framework in Lithuania
Capital reduction in Lithuania is governed by the Law on Companies of the Republic of Lithuania. This law outlines when and how a company can decrease its capital and the protections that must be in place for creditors and shareholders.
The process requires:
Compliance with financial and legal safeguards
Shareholder approval via a general meeting
Amendments to the Articles of Association
Registration with the Centre of Registers
Public notice (for creditor protection)
Methods to Reduce Share Capital
There are multiple ways to legally reduce capital. AM Law will help you choose the best method depending on your goals.
1. Reduce Nominal Value of Shares
The company lowers the nominal value of all existing shares while keeping the number of shares unchanged.
2. Cancel a Portion of Shares
The company cancels a set number of shares, reducing the total count and thus the capital.
3. Buy Back and Cancel Shares
The company repurchases its own shares from shareholders and cancels them. This method is common in restructuring or ownership changes.
Step-by-Step Process with AM Law
Reducing share capital involves careful coordination between legal, financial, and corporate governance. Here’s how we support your journey:
Step 1: Initial Consultation
We evaluate the reason for capital reduction, the company’s financial structure, and legal objectives.
Step 2: Document Preparation
Our team prepares all the required legal documents, including:
- Shareholder resolution
- Amended Articles of Association
- Notification forms for the Centre of Registers
- Drafts of creditor notifications (if applicable)
Step 3: Shareholder Approval
A general shareholders’ meeting is held. The capital reduction must be approved by the majority set in your Articles or law (typically 2/3).
Step 4: Notify Creditors
A public announcement is made via the Public Register. Creditors must be notified and given a set period (minimum 30 days) to raise objections or claims.
Step 5: Register the Changes
After the creditor period, AM Law submits the documents to the Centre of Registers to officially reduce the capital and update the company record.
Step 6: Follow-Up
If funds are being returned to shareholders or applied to debt, we assist with payout documentation and banking compliance.
Important Legal Safeguards
Reducing capital is a sensitive legal process, especially when it involves cash payouts or balance sheet restructuring. Lithuania’s legal system puts several safeguards in place:
- Creditor Protection: Creditors must be given the opportunity to object and demand security for claims.
- No Reduction Below Legal Minimum: The minimum share capital for a UAB is €1,000. The reduction must not go below this amount.
- Full Disclosure: Shareholders and authorities must be fully informed through resolutions, public notice, and amendments.
At AM Law, we ensure every step is taken with full compliance, transparency, and accuracy.
Case Study: Strategic Capital Reduction in Action
Client: A UK-based holding company with a Lithuanian UAB subsidiary.
Goal: Reduce the subsidiary’s capital by €100,000 after operational downsizing.
AM Law Solution:
- Conducted financial due diligence and ensured capital could be legally reduced
- Advised on optimal reduction method—cancelling unused shares
- Managed communication with local creditors and ensured legal notices were published
- Completed Centre of Registers filings and secured formal registration
- Oversaw tax neutrality for the client’s home jurisdiction
Result: Capital was reduced successfully within 5 weeks, allowing the parent company to repatriate funds and streamline the business.
Frequently Asked Questions
Is reducing capital a sign of financial weakness?
Not necessarily. Many businesses reduce capital as a strategic financial decision, not due to losses.
How long does the process take?
The process can take 4–8 weeks, depending on creditor response time and document readiness.
Can I reduce capital to zero and close the company?
No. If you’re closing the company, a separate liquidation process is required. However, capital can be reduced to the legal minimum before liquidation.
Will shareholders be taxed if they receive returned capital?
Possibly. Tax rules depend on the nature of the capital return and the shareholder’s tax residency. AM Law works with tax professionals to advise you correctly.
Why Choose AM Law for Capital Reduction?
✅ Years of experience in corporate restructuring
✅ Detailed understanding of Lithuanian and EU corporate law
✅ Full-service legal team fluent in English and Lithuanian
✅ Personalized support from consultation to registration
✅ Transparent pricing and rapid turnaround
We’re not just legal service providers—we’re your partners in building a healthier, more agile business structure.
Contact AM Law Today
Thinking of reducing your company’s share capital in Lithuania? Whether you’re restructuring, optimizing finances, or repositioning your company for success, AM Law has the legal knowledge, experience, and precision to guide you.
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