We saw important amendments to the Bulgarian Commerce Act (the “Act”) come to life at the very end of 2016, most notably regarding:
Notary certifications – currently in effect
The Act introduces stricter requirements relating to the form in which certain documents must be executed. Agreements for transfers of going concern (floating pool of all assets and liabilities of a company) and for transfers of shares in limited liability companies will now require notary certification of the signatories’ signatures and of the contents of these agreements. Certification of the contents was not previously required.
The same certifications are also required for shareholders’ resolutions in limited liability companies regarding: (i) acceptance or expulsion of shareholders and consent for share transfers to new shareholders; (ii) capital increases and decreases; (iii) appointment of managers; and (iv) acquisition or sale of real estate and property rights.
The certification requirements for the shareholders’ resolutions can be dissaplied if the articles of association of the company.
Changes in the insolvency regime – currently in effect
The main changes introduced by the Act include:
- new rebuttable assumptions of insolvency for: o companies that failed to file annual financial statements for the last three years with the Commercial Register; and o companies whose creditors are left wholly or partly unsatisfied after six months of pending enforcement proceedings.
- new exceptions to the requirement to hold a first creditors’ meeting (which may effectively extend the period of appointment of any temporary receiver);
- affiliates of an insolvent company and persons who acquired claims from such affiliates in the three year period preceding the insolvency may not vote in the first creditors’ meeting;
- changes to the procedure for challenging acceptance or rejection of claims in the insolvency proceedings;
- changes regarding the sale of assets granted by the company as security for third party debt; and
- receivers’ ability to use assistant receivers.
Stabilisation procedure – effective 1 July 2017
The Act introduces an entirely new procedure for early stabilisation of businesses as a way to avoid insolvency.
A company is eligible for the stabilisation procedure if it meets all of the conditions below:
- the company is not yet insolvent but may become insolvent in the next six months;
- it has filed timely annual financial statements with the Commercial Register for the three years prior to the application for stabilisation;
- it has not been subject to a stabilisation procedure in the three years prior to the application;
- it is not subject to a pending application for the opening of insolvency proceedings; and
- its indebtedness to related parties and persons who have acquired indebtedness from related parties in the last three years does not exceed 1/5 of its overall indebtedness.
The stabilisation procedure is not available to banks, insurance companies or state companies created by special legislation or having a state monopoly.
If you would like to discuss how these changes could affect your business please contact Atanas Bangachev, Elitsa Ivanova or Liliya Ivanova.
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