Source: https://wlt.lt/en/insights/intentional-bankruptcy.html
Language: en

Insolvency law

# Intentional bankruptcy: what circumstances are assessed?

Recognition of intentional bankruptcy is not merely an assessment of an unsuccessful business outcome; the court considers specific decisions, conduct and their consequences.

Updated 4 November 2026

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Published by Wise Law. Updated: 4 November 2026.

Consultations in this area: [Edenas Leleiva](https://wlt.lt/en/team/edenas-leleiva.html)

## Business failure is not automatically intentional bankruptcy

A company’s bankruptcy does not by itself establish unlawful management. Intentional bankruptcy requires analysis of deliberately poor management, transactions prejudicing creditors and their relationship with insolvency. Examine the relevant period, decision-making circumstances and information available at the time rather than judging conduct solely by the eventual adverse outcome. [[1]](https://wlt.lt/en/insights/intentional-bankruptcy.html#source-janu)

## Reconstruct the financial chronology

Compare balance sheets, overdue obligations, cash flows, creditor claims and significant asset disposals. Identify the financing available, when payment capacity deteriorated and the terms of any related-party transactions. Documented answers are more useful than assumptions. A related-party transaction must be examined on its actual terms and economic substance, not merely by the identity of the parties.

## Explain accounting deficiencies precisely

Missing documents or unclear entries can obstruct an assessment of the company’s position. Identify responsibility, when records were lost and whether information can be reconstructed. Bank records, accounting backups, inventories and correspondence with accountants can assist. Document the transfer of records to the insolvency administrator. [[1]](https://wlt.lt/en/insights/intentional-bankruptcy.html#source-janu)

## Distinguish insolvency findings from criminal liability

Intentional bankruptcy in insolvency proceedings and criminal bankruptcy are separate legal categories. A finding in one process does not automatically determine the other. The elements required for criminal liability must be established in criminal proceedings, while damages claims and an individual’s civil liability require their own analysis. [[1]](https://wlt.lt/en/insights/intentional-bankruptcy.html#source-janu) [[2]](https://wlt.lt/en/insights/intentional-bankruptcy.html#source-bk)

## Preparation for creditors and managers

Creditors should connect alleged conduct with identifiable asset depletion or impaired recovery. Managers should preserve business reasons for decisions, meeting minutes, financing efforts and records of attempts to maintain viable operations. Both sides benefit from a clear chronology distinguishing established facts, assumptions and missing evidence.

### Related competence area

[Insolvency law](https://wlt.lt/en/services/bankruptcy-restructuring.html)

## Official sources

1. [Law on Insolvency of Legal Entities](https://www.e-tar.lt/portal/lt/legalAct/68f2cad098b711e9ae2e9d61b1f977b3/asr)

2. [Criminal Code of Lithuania](https://e-seimas.lrs.lt/portal/legalAct/lt/TAD/TAIS.111555/asr)

This is general information about Lithuanian law, not an assessment of a specific case. The applicable law, procedural route and deadlines depend on the facts and the relevant date. For an individual assessment, contact the lawyers listed above.

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