Bulgaria

Summary of private placement provisions for fund interests (if applicable)

The offering of securities which do not require the publication of a prospectus are not expressly named as “private placements” under Bulgarian law. The exemptions regarding the obligation to publish a prospectus when offering securities under Bulgarian law are aligned with those contained in the Prospectus Directive. These exemptions, which may be seen as “private placements” under Bulgarian law, include any offering of securities:

• addressed solely to professional investors;
•  addressed to less than 150 individuals or legal entities in Bulgaria and in any other EU State, which are not professional investors;
•  which may be acquired for at least EUR 100,000 per investor, per offer;
•  the nominal value per unit of which amounts to at least EUR 100,000;
• with a total consideration in the EU of less than EUR 100,000, calculated over a period of 12 months.

A fund would have been covered by the private placement rules provided that it met one or more of the criteria listed above.

At the end of 2013, Bulgaria implemented AIFMD imposing regulation for EU and Non-EU AIFs and for their managers. Most importantly, under the said rules:

1. AIFMs established in Bulgaria (Bulgarian AIFMs) who wish to market in Bulgaria:
   • AIFs established in Bulgaria (Bulgarian AIFs) or in another EU Member States (EU AIFs), and/ or AIFs established in a Non-EU Member State (Non-EU AIFs) will be able to do so only upon prior notification of such marketing to the Bulgarian regulator – the Bulgarian Financial Supervision Commission (“FSC”). The FSC is obliged to approve or disapprove the notified marketing within 20 business days of receipt of the notification. The FSC can disapprove of the proposed marketing if it considers that this will be in violation of the Bulgarian Collective Investment Schemes and Other Undertakings for Collective Investments Act (which implements the provisions of AIFMD). Where the FSC disapproves, the AIFM would not be allowed to complete the notified marketing.
   • A Bulgarian AIFM may, subject to the FSC’s prior approval, market shares in EU and Non-EU AIFs in the territory of Bulgaria only to ‘professional investors’. Should the Bulgarian AIFM wish to market shares to non-professional investors, it may do so on the basis of a prospectus.
2. Bulgarian AIFMs marketing in another EU Member State:
   • ulgarian AIFs and/ or EU AIFs, and/ or Non-EU AIFs will be able to do so only upon prior notification to the FSC of such marketing. Within 20 business days, the FSC will notify the respective EU Member State regulatory body where the AIF will be marketed confirming that the AIFM is duly licenced under Bulgarian law. The FSC may refuse to submit the notification and the attached information to the respective EU Member State in cases where the FSC is unable to confirm that the marketed AIF is being managed in compliance with the requirements of the applicable Bulgarian law (i.e. the Collective Investment Schemes and Other Undertakings for Collective Investments Act, among others) in terms of its administrative structure, financial standing etc.
   • A Bulgarian AIFM may, subject to the preceding paragraph, market shares in another EU Member State only to ‘professional investors’, unless the respective regulatory body of the accepting EU Member State allows for marketing of AIFs to ‘non-professional investors’ as well.
3. AIFMs established in another EU Member State (EU AIFMs) marketing in the territory of Bulgaria:
   • (a) Bulgarian AIFs and/ or EU AIFs (b) Non-EU AIFs provided that the FSC has received a notification from the competent regulatory body in the country of origin of the AIFM confirming that the respective AIFM is duly licenced in its country of origin.
   • Marketing of the AIF in Bulgaria is performed in compliance with the requirements of Bulgarian law.
   • EU AIFMs may, subject to the FSC’s notification, market shares in EU and Non-EU AIFs in the territory of Bulgaria only to ‘professional investors’. Should it wish to market shares in AIFs to ‘non-professional investors’, it may do so provided that a prospectus has been made and offered.
4. AIFMs established in a Non-EU member state (Non-EU AIFMs) marketing in the territory of Bulgaria:
   • AIFs which are not being offered in another EU member state provided that certain requirements are met, among others, existence of cooperation agreements between Bulgaria and the AIF’s and/ or AIFM’s country of origin, the non-EU AIFM has been licenced by the FSC, etc.
   • The FSC would issue permission for the proposed marketing.

In general, the implementation of AIFMD in Bulgaria has not required publishing a prospectus for the purpose of marketing shares in AIFs when such shares are marketed to ‘professional investors’. Rather, in such cases the respective AIFM is required to notify and obtain approval from the FSC. Failure to obtain FSC approval results in the AIFM being unable to market the proposed AIF. However, the legislation requires preparing a prospectus where marketing of shares in AIFs is directed at ‘non-professional investors’. Hence, the regime of private placement of funds has become stricter.

In light of the above, it should be noted that under Bulgarian law ‘professional investors’ are:

• entities for which granting of authorisation is required for conduct of business on the financial markets or whose activity is regulated otherwise by the national law of an EU Member State, as well as persons which are granted authorisation for conduct of said business or regulated otherwise by the national law of a third country, as follows: (i) credit institutions; (ii) investment intermediaries; (iii) other institutions subject to authorisation or regulation; (iv) insurance companies; (v) collective investment schemes and their management companies; (vi) pension funds and pension insurance companies; (vii) commodity dealers; (viii) legal entities which provide investment services or perform investment activities consisting exclusively in dealing on own account in markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets or which deal for the accounts of other members of those markets or make prices for them and which are guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such entities is assumed by clearing members of the same markets; (ix) other institutional investors.
• companies which meet at least two of the following conditions: (i) total assets amount to at least EUR 20m; (ii) net turnover is at least EUR 40m; (iii) own fund amounts of at least EUR 2m.
• national and regional government bodies, public bodies charged with or intervening in the management of the public debt, central banks, international and supranational institutions such as the World Bank, the International Monetary Fund, the European Central Bank, the European Investment Bank and other similar international organisations.
• other institutional investors whose primary business is investment in financial instruments, inter alia persons dealing in securitisation of assets or other financial transactions.
• clients which are considered professional clients at their request should meet at least two of the following criteria: (i) in the last year the person has concluded on average ten large-scale transactions per quarter on a relevant market; (ii) the value of the investment portfolio of the person, which consists of financial instruments and cash deposits, exceeds EUR 500,000; (iii) the person works or has worked in the financial sector for at least one year in a position which requires knowledge of the relevant transactions or services.

Other forms of possible placement options for fund interests outside fund regulations

In Bulgaria there are no other placement options which are not covered by fund regulations.

Consequences of non-compliance with placement regimes for fund interests

Non-compliance with placement regimes for fund interests under Bulgarian law is punishable by a fine, the amount of which depends on whether the non-complying person is an individual or a legal entity as well as whether the non-compliance has occurred repeatedly. The maximum fine for individuals is circa EUR 50,000, unless the violation is a criminal offence. The maximum fine for violation of the placement regimes by legal entities is circa EUR 100,000.

In addition, the FSC may require the AIFM to abide by a specific line of conduct or may ban the AIFM from performing further activities in Bulgaria.

Private placement rules for non-fund investments available

Under Bulgarian law, in respect of non-fund investments, private placement covers:

• offerings only addressed to professional investors;
• offerings only addressed to 150 legal or natural persons other than professional investors per EU Member State;
• offerings requiring a counterparty of a minimum of EUR 100,000 per investor and per offer;
• offerings which nominal value is of a minimum of EUR 100,000;
• offerings where the total amount is of a maximum of EUR 100,000.

Bulgarian law does not require publication of a prospectus with respect to offers to the public of the following types of securities:

• shares issued in substitution for shares of the same class already issued, if the issuance of such new shares does not involve any increase in the issued capital;
• securities offered in connection with a takeover by means of an exchange offer;
• securities offered or to be allotted in connection with a merger, demerger, or spin-off;
• dividends paid out in the form of shares of the same class as the shares in respect of which such dividends are paid;
• securities offered, allotted or to be allotted to existing and / or former members of the management and supervisory bodies and/ or employees by their employer or by an affiliated undertaking provided that the company has its registered office or seat in the EU;
• securities offered, allotted or to be allotted to existing and / or former members of the management and supervisory bodies and/ or employees by their employer, provided that the company is established outside the EU and whose securities are admitted to trading either on a regulated market or on a third-country market recognised as equivalent to a regulated market by the European Commission upon the request of the Member State competent authority.

No prospectus is required to be published for admission to trading on a regulated market of the following types of securities:

• shares representing less than 10% of the number of shares of the same class already admitted to trading on the same regulated market over a period of 12 months;
• shares issued in substitution for shares of the same class already admitted to trading on the same regulated market, if the issuing of such shares does not involve any capital increase;
• securities offered in connection with a takeover by means of an exchange offer;
• shares offered, allotted or to be allotted in relation to merger, demerger, or spin-off;
• shares offered, allotted or to be allotted free of charge to existing shareholders, and dividends paid out in the form of shares of the same class as the shares in respect of which such dividends are paid;
• securities offered, allotted or to be allotted to existing and/ or former members of the management and supervisory bodies and / or employees by their employer or by an affiliated undertaking provided that the securities are of the same class as the ones already admitted for trading at the same regulated market, the company has its registered office or seat in the EU;
• shares which are a result of their converting or replacement with other securities;
• securities admitted for trading at a regulated market provided such securities meet certain requirements.

Other exemptions include those under Article 2(3) of AIFMD, such as holding companies, institutions for occupational retirement provision, supranational institutions, such as the European Central Bank, the European Investment Bank, the European Investment Fund, national central banks, governmental institutions, etc.

Non-funds which are subject to the private placement provisions include:

• Professional investors;
• Natural or legal persons when the offer is addressed to less than 150 persons other than professional investors, and this per EU Member State;
• Investments for more than EUR 100,000 per investor and per distinct offer;
• Investments where the unit value of the security is more than EUR 100,000;
• Investments where the total investment is less than EUR 100,000.

The professional investors in scope of private placement exemptions are those listed in the summary of private placement (above).

Bulgarian law does not provide for a definition of “private placement” either in respect of funds or non-funds. The exceptions from the obligation to publish a prospectus have been discussed in the summary of private placement provisions.