Private placement rules and law in Bulgaria

1. 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  are provided for in the EU Prospectus Regulation and in the Bulgarian Public Offering of Securities Act. These exemptions, which may be seen as “private placements” under Bulgarian law, include any offering of securities:

1. addressed solely to professional investors;
2. addressed to less than 150 individuals or legal entities in Bulgaria and in any other EU State, which are not professional investors;
3. which may be acquired for at least EUR 100,000 per investor, per offer;
4. the nominal value per unit of which amounts to at least EUR 100,000;
5. with a total consideration within the territory of Bulgaria  of less than EUR 8,000,000, calculated over a period of 12 months. In this case, a public offering document must be prepared and filed with the Bulgarian regulator, which within 10 business days may request supplementation and/or revision of the information in the document,  

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. Under these rules:

1. 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 –accompanied by comprehensive information and documents.
2. A Bulgarian AIFM may, subject to the Bulgarian regulator’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 only in respect of shares issued by a national investment fund and on the basis of a prospectus.

1. Bulgarian AIFs and/ or EU AIFs, and/ or Non-EU AIFs will be able to do so only upon prior notification to the Bulgarian regulator of such marketing. If the Bulgarian regulator is satisfied by the information and documents attached to the notification, it will notify the regulator of the host Member State, confirming that the AIFM is duly licenced under Bulgarian law. 
2. A Bulgarian AIFM may, subject to the preceding paragraph, market shares in another EU Member State only to professional investors, unless the respective regulator of the host  Member State allows for marketing of AIFs to non-professional investors as well.

1. (a) Bulgarian AIFs and/ or EU AIFs (b) Non-EU AIFs provided that the Bulgarian regulator has received a notification from the home Member State of the AIFM confirming that the respective AIFM is duly licenced in its home Member State.
2. Marketing of the AIF in Bulgaria is performed in compliance with the requirements of Bulgarian law.
3. EU AIFMs may, subject to the Bulgarian regulator’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 on the basis of a prospectus.

1. 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, and the non-EU AIFM being licenced by the Bulgarian regulator.
2. The Bulgarian regulator 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 Bulgarian regulator. Failure to obtain 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. 

In Bulgaria, a professional investor means professional clients under MiFID.

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

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 approximately EUR 100,000.

Non-compliance with the Prospectus Regulation can result in a fine between EUR 500 and EUR 358,000, or the amount of the realized income or avoided loss (if the same can be determined).
In addition, the Bulgarian regulator may require the AIFM to abide by a specific line of conduct or may ban the AIFM from performing further activities in Bulgaria.

EU AIFM Law provides that the following non-funds are subject to private placement opportunities: 

1. investments offered by a holding company; 
2. Institutions for occupational retirement provision;
3. Supranational institutions, in the event that such institutions or organisations manage AIFs and in so far as those AIFs act in the public interest; 
4. National central banks; 
5. National, regional and local governments and bodies or other institutions, which manage funds supporting social security and pension systems; 
6. Employee participation schemes or employee savings schemes;
7. Securitisation special purpose entities;
8. AIFMs in so far as they manage AIFs whose only investors are the AIFMs themselves or their parent undertakings, their subsidiaries or other subsidiaries of their parent undertaking and where those investors are not themselves AIFs.  

The exemptions under the EU Prospectus Regulation should also be considered when seeking to market on a private placement basis. Some of the most important exemptions under the EU Prospectus Regulation and the Bulgarian securities law are listed above.