Changes to the Bulgarian Special Pledges Act – More Protection for Creditors

The Bulgarian Council of Ministers has recently proposed a draft bill (the "Bill") amending the Special Pledges Act (the "Act"). The Act applies to pledges, which are not physically handed over to the pledgee and are widely used by credit institutions in Bulgaria. The Bill substantially reviews the Act and is intended to increase protection and guarantees for all parties involved.

The most important changes proposed in the Bill include:

• the explicit consent of the pledgee(s), registered with the respective register, would be required prior to a pledgor's disposal of pledged assets (which are outside its regular business activity);
• the explicit consent of the existing pledgee(s) would be required prior to establishing a pledge over an already pledged property (this would be in addition to the general prohibition against disposal or making of subsequent pledges involving already pledged property, without the consent of the pledgee);
• pledges involving real estate would include all improvements and additions, unless otherwise specified;
• in cases involving multiple pledgees, subsequently ranking pledgees could commence enforcement of a pledged property only after obtaining the consent of the higher ranking pledgees;
• the Central Register of Special Pledges (the "CRSP") would be transformed into a publically available online database;
• specified and much more detailed information must be registered with the CRSP;
• pledges could be registered in the CRSP by submitting either hard copies of documents or electronic copies online;
• clarification of the processes for enforcement of a pledge by the pledgee as well as the relationship between different proceedings – in the event of simultaneous procedures, priority would be given to the proceedings that commenced first;
• depositors in enforcement proceedings shall be either attorneys-at-law or registered auditors.