Significant Changes to the Bulgarian Commerce Act
On 30 January 2016, several new amendments to the Bulgarian Commerce Act (the "Act") were adopted. They can be categorized as follows:
Requirements regarding the form of documents
One of the main goals of the new legislation is to limit abuses of entries, deletions and announcements made with the Commercial Register in respect of companies. In the following cases:
- transfer of enterprise;
- transfer of shares;
- acceptance and exclusion of shareholders;
- capital reduction/increase;
- appointment of manager(s);
- acquisition or sale of real estate,
the changes require a written contract with notary certification of both signatures and content, as opposed to the previous draft of the Act, which relied on notarized signatures only. The more complex form aims to protect against potential frauds. General Meeting's decisions adopted in violation of the new form requirement are null and void.
Additional presumptions for the state of insolvency
Changes were made in the "Insolvency" chapter of the Act as well. The new draft of the legislation introduces two more rebuttable assumptions for insolvency – an entity is presumed unable to fulfill its obligations if:
- it has not filed its annual financial statements for the last three years with the Commercial Register;
- a decision, based on enforcement proceedings initiated by the creditor, is left entirely or partially unsatisfied within six months after receiving an invitation for voluntary compliance.
New stabilization procedure
Another important difference is the new chapter titled "Proceedings for the stabilization of merchants", which is similar to the bankruptcy reorganisation schemes in the UK and the US. The aim of the reorganisation procedure is to allow companies to avoid insolvency, especially in cases of a risk for the company to repay its debts.
The amendments exhaustively list the scenarios when the reorganisation procedure is available and the types of entities that may make use of it. Of note, companies, which have provided shareholder loans unreasonably, will not have access to such reorganisation. Likewise, banks and insurance companies are also excluded, since there are special provisions for them in the recently adopted Recovery and Resolution of Credit Institutions and Investment Intermediaries Act and the new Insurance Code.