Lawsuit in Bulgaria – claim, costs, timeframe, court judgment and appeal by civil or commercial litigation lawyer

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The present article is an overview of the development of court cases (civil or commercial) in Bulgaria under the rules of the Civil Procedure Code – from the filing of an application in court (in person or through an authorized lawyer), through the collection of evidence and other actions, to the issuance of the judgment, its appeal, entry into force and the issuance of a writ of execution for the opening of an enforcement case before the bailiff.

Court proceedings before the competent Bulgarian court are initiated either by a statement of claim (in performance claims) or by an application (in non-contentious proceedings). The subject of this article are the lawsuits in which there are 2 parties (plaintiff and defendant) and one of them wins the case and the other loses it (unless the claim is partially granted or the case is terminated before a judgment is rendered). In protective proceedings, there is only 1 party (the petitioner) who asks the court to make a particular judgment. read more

Bulgarian citizenship by investment 2022 fast track options

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Bulgarian citizenship by investment

Buy Bulgarian citizenship by investing in Bulgarian companies or mutual funds

Fast track Bulgarian citizenship

Following the 2021 amendments to the Foreigners in the Republic of Bulgaria Act and the Bulgarian Citizenship Act, adopted by the National Assembly, Bulgaria offers new options for obtaining citizenship by investment. These amendments allow non-EU citizens to practically buy Bulgarian citizenship by investing in the economy of the country. Current legislation offers four different types of investment:

  1. Investment in shares of Bulgarian commercial companies traded on a regulated market or a multilateral trading system in the Republic of Bulgaria, at a market value of not less than BGN 2,000,000.
  2. Purchase of shares or stocks in collective investment schemes (mutual funds) originating in the Republic of Bulgaria, with a value of not less than BGN 1,000,000.
  3. Shares in alternative investment funds established in the Republic of Bulgaria with a value of not less than BGN 1,000,000.
  4. Contribution to the capital of a Bulgarian commercial company in the amount of not less than BGN 2,000,000 for a priority investment project in Bulgaria implemented by the company.

Any of the above investments grants directly Bulgarian residence permit to the investor and to their families (spouses and children under 18). A second investment at the same value during the second year from obtaining the residence permit grants citizenship. Thus, a non-EU citizen can get an EU permanent ID card for less than 6 months and an EU passport for two-three years. read more

Debt collection Bulgaria – debt recovery proceedings

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Bulgarian debt collection proceedings is the final step for effective collection of business and personal debts and in most cases they are preceded by successful court litigation proceedings. Without this final step the rights implemented in a court judgment or a writ of execution cannot be materialized.

Bulgarian debt collection proceedings are not completely codified which unfortunately leaves many loopholes and opportunities for various legal interpretations. Debt recovery proceedings in Bulgaria are officially conducted by bailiffs (public or private enforcement agents). Debt collection agencies in Bulgaria could also help but in the end the role of a debt recovery lawyer is frequently most important. The regulations in force, especially of the registration of real estates, has many imperfections which can be used to sabotage the entire debt collection process. An experienced Bulgarian debt collection lawyer can undertake an investigation and carry out a number of researches in many different institutions with the aim of discovering all assets of the debtor. If the assets are not enough, sold or burdened, the solicitor can undertake specific legal actions for the return of sold or donated property back to the ownership of the debtor and thus they can be used to cover all amounts on the creditor’s writ of execution. read more

Greek and Romanian companies move business to Bulgaria

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Bulgarian National Revenue Agency announced that the number of fully Greek-owned companies registered in Bulgaria increased significantly in 2011. 3781 companies with 100 % Greek capital paid taxes in Bulgaria last year compared with 2199 in 2010. This is an increase by more than 70 %. At first glimpse, the movement of capital to Bulgaria can be put down to the crisis that Greece has been ridden by for the last couple of years. Indeed, some small Greek entrepreneurs moved their investments to Bulgaria because it is safer but crisis is not the only reason for choosing Bulgaria for their investments. This is proved by the fact that the number of Romanian companies also increased by more than 50 % during last year. read more

EU Laws & Cryptocurrencies – Trading Rules & Legislation

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As of 2021, more and more European and world virtual currency traders choose Bulgaria for their headquarters of cryptocurrency business. There is still no law on virtual currencies based on blockchain technology, neither in Bulgaria, nor in the EU, nor in any other developed country, although cryptocurrency trading (Bitcoin, Ethereum, etc.) has been flourishing for years. Supervisory authorities in various EU countries issue sporadic guidelines, recommendations and warnings, but this has nothing to do with creating a legally regulated framework for crypto trading to adhere to, let alone uniform legal requirements. read more

Cross-border mergers & acquisitions – move an EU company to Bulgaria

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EU limited liability companies are free move from one Member State and establish themselves in another EU Member State and EU laws provide 3 legal options such cross-border merger – by registering a branch, by registering a subsidiary or by one of the forms of company transformation (merger, consolidation). The subject of this article is the merger (by acquisition or formation of a new company) between foreign and Bulgarian companies – reorganisation and the related transfer of an EU company’s seat and activities from one EU country to Bulgaria – which procedure is regulated by Bulgarian Commercial Act and by Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 on certain aspects of company law, which replaced the old Directive 2005/56/EC.

First of all, only mergers and consolidations can be used as forms of transformation. Next, at least one of the companies being merged or consolidated must have its registered office in a Member State of the European Union or another State party to the Agreement on the European Economic Area (EEA), and the Bulgarian company involved must necessarily be an equity company (LLC or JSC). There is also a restriction under Bulgarian Commercial Act for a company with its registered office in Bulgaria that is to merge into or consolidate with a company with its registered office in another Member State – it must not own land.

The first step in the transformation procedure is the preparation and announcement of a so-called General Transformation Plan (GTP). This is done at the earliest one month prior to the adoption of the resolution on the transformation by the acquiring (or newly formed) and the transforming companies. It must be in writing and signed by all the representatives of the transforming companies. This plan shall contain information on the manner in which the transformation will take place. The requisites concerning the general plan are contained in Bulgarian Commercial Act. The GTP must be accompanied by a report on the transformation drawn up by the management body of each of the transforming companies, a draft memorandum or articles of association of the newly established company (in the case of a merger) or amended or supplemented memorandum or articles of association of the receiving company (in the case of a consolidation), as well as the annual accounts, the balance sheet and a detailed list of the companies involved in the transformation, containing basic information about them and the rules for the protection of their creditors in their country. The reorganisation report shall contain the legal and economic justification for the overall plan as well as the impact that the reorganisation will have on the shareholders of the companies. The report shall also be made available to the employees of the companies being transformed.

The second step in the transformation procedure is the appointment, by decision of the management bodies of the transforming companies, of a so-called special auditor, who draws up a report following the audit of the transformation. This step could be omitted if there is a written agreement to that effect by all the partners or shareholders.

The most important point in the whole procedure is the adoption of the resolution to transform by the General Meeting of each of the transforming companies – i.e. we have several (two or more) separate resolutions. These resolutions also approve the overall plan of transformation. An interesting stage in the procedure for registration of the company transformation is the point at which a certificate of the legality of the transformation in respect of the foreign company (or companies) is requested from the Commercial Register (or its equivalent) in another Member State.

Where a Bulgarian company is merged into or consolidated with a foreign company, once the relevant foreign registry enters this fact and issues the relevant notification, the deletion of the relevant company in Bulgarian Commercial Register shall also take place. A characteristic feature of the transformations is that after the actual entry of the transformation in the relevant register, all rights and obligations of the transforming companies automatically pass to the newly established legal entity or the receiving company.

The registration of the transformation may be challenged by any shareholder or member of the companies involved in the transformation if certain material and expressly provided for breaches of the legislation have occurred, such as: there is no contract, draft contract or plan of transformation, or even if they are present they are invalid at the time of the transformation, or the resolution on transformation contravenes a mandatory legal provision or the articles of association of the transforming companies, etc. The challenge can only be made before the registration of the transformation.

After registration, a claim for invalidity of the newly established company may be filed under Article 70 of Bulgarian Commercial Act. Another option for shareholders or partners who feel aggrieved in some way is the claim for monetary compensation provided for in Article 263p, in the event that the exchange ratio adopted in the contract or plan of transformation is not equivalent. Where it cannot be defended also by way of an action, the shareholder aggrieved by the transformation shall have the right to leave the company and the right to be paid the monetary equivalent of the shares or company shares held by him before the date of transformation. The shareholder may do so within 3 months of the registration of the transformation by written notice to the company.

Registered address of Bulgarian companies – local business address of registration

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Any Bulgarian company should have its own registered address. This is a local postal address in Bulgaria which is used for business, fiscal and other purposes. The registered address of a newly formed or existing Bulgarian company is probably one of the most important legal questions in the process of Bulgarian company setup.

The very first thing to mention in this relation is that from legal point of view there is no such legal term as ‘business address’. The official legal term, according to Bulgarian Commerce Law, is ‘seat and registered address’ but practically registered, business, fiscal, postal, etc. address in practice means one and the same thing.

The above mentioned local postal address is actually the company’s official business address. But what is the purpose of this official address one may ask? The main and maybe most important role is that this is the local address in Bulgaria where all official company correspondence is delivered. This is of utmost importance due to the fact that it may lead to monetary losses or even business closure. And here is one simple example in this relation – if someone, actually this could be anyone, is suing the company – all court summons are delivered to the official postal address of the Bulgarian company. And if there is no such company found at the address, then, according to Bulgarian laws, all papers are considered delivered and accepted and the company is not sought for the civil or commercial proceedings anymore. Which of course means that this company would bot for example be able to appoint a lawyer to defend its rights and best interest – and this in most cases leads to a lost case. And if it’s a big case then the company would suffer enormous losses and could even go bankrupt.

Having in mind the above, a common question of foreign businessmen who are living abroad is: Can I use the address of someone else in Bulgaria? And the answer is positive. There are companies in Bulgaria that offer registered address or even virtual office services. The first thing means that you are officially registering your company at the address in Bulgaria of a trusted person (e.g. lawyers, etc.) and then all correspondence is duly accepted by the authorized persons and then forwarded to the company owner/s or shareholder/s – usually scanned copies of the documents via e-mail over the Internet. The fee for this service varies but is usually in a very low amount, typically around 100 Euros per annum. The virtual office service is more expensive.

Private security company incorporation in Bulgaria

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If you are considering opening a private security company in Bulgaria, you should know that this activity can be conducted only after obtaining a private security licence.

The definition of “private security activity”, the procedure for obtaining the licence and the necessary documents are specified in the Private Security Activity Act and the respective sub-legislation. Private security companies can provide any of the following services: physical security, security of individuals, protection of property, protection of events, protection of real estate, etc. It is important to note that if the company wants to provide more than one type of security services, it must have an explicit permit for each type of security activity separately. Security activities can be armed or unarmed. The company can be licenced to operate on the whole territory of Bulgaria or only within a specific area. Depending on the above listed options, the licensing fee is different. read more

Liquidation of a company in Bulgaria – winding up proceedings

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Winding up a Bulgarian company (i.e. liquidation) is an option related to the growing financial and economic crisis as a result of the worldwide spread of COVID-19 virus and the difficulties many companies are currently experiencing which brings to the fore the question of voluntary company liquidation procedures. In 2020, many companies will face the only opportunity to cease operations because they will not be able to fulfil their obligations. Bulgarian Commercial Law provides for several possibilities for termination of a sole proprietorship or a limited liability company, the most commonly used of which is the voluntary liquidation of a Bulgarian company. read more

AML contact person + new declaration for companies in Bulgaria (foreign-owned)

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Money laundering – through banks, real estate, nominees or other schemes – is a crime according to Bulgarian Criminal Code as it is all over the world.  In connection to this in 2018 Bulgaria launched a new Law on Measures Against Money Laundering which totally repealed the previous one in force. The new law fully complies with European standards and in particular with Directive (EC) 2015/849 on the Prevention of the Use of the Financial System for Money Laundering or Terrorist Financing. The changes are mainly related to the imposition of new obligations to those who are defined as “obliged entities” – these are all natural and legal persons, who are committed to the observance and implementation of the anti-money laundering and anti-terrorist financing measures referred to in the same law.

One of the main obligations under the new Bulgarian Anti-Money Laundering Act is related to all companies, including branches of foreign commercial companies registered in Bulgaria. When entering into business relations with their clients / contractors obliged entities must apply measures for comprehensive check of their client, including identification of the beneficial owner of their clients – legal entities. By virtue of this law “a client” is any natural or legal person or other legal entity that enters into business relations or performs a random business transaction with an obliged person. In case a client appears not personally, but through a nominee, in order to be able to perform this identification, the obliged person must consult the relevant Bulgarian register (Trade Register, BULSTAT register) as well as to obtain an official document (contract, certificate or other) showing who the beneficial owner is.

The new Anti-Money Laundering Act requires that legal entities  submit to the relevant public register (Commercial Register, BULSTAT Register) a specific declaration about their beneficial  owner. The declaration is required to be presented by the legal representative / the manager of the company. It is this particular declaration and its submission that is a subject of the most discussions. At first glance, it appears that all companies must submit a declaration to the relevant registry, regardless of the form of their company. But as you read the law, you can see that this declaration is not necessarily needed for natural persons. This means that  a Ltd. company, which has a natural person registered as the sole owner of the capital, is not obliged to declare and prove again that this person is the real owner of the respective commercial company. This is not the case, however,  if the owner of the company is not a physical person, but another legal entity, whether Bulgarian or foreign. In this case the respective national public register does not show directly who the primary beneficial owner is and therefor the submission of a declaration in this case is mandatory.

When it comes to a Limited Liability Partnership, the obligation for declaration of the actual owner is more logical as there are at least two partners (natural or legal persons). For a company in which we have, for example, two associate natural persons holding 50% of the capital each there isn’t a obligation for declaration of a beneficial owner as the names of both are disclosed and are visible in the register. When there are more partners – physical persons in the association, some of which hold less than 25% of the capital, the latter shall not be declared as beneficial owners. If the minority partners with shareholding less 25 % are legal entities, however, their beneficial owners should be declared regardless of the fact that their share is minoritary.

Along with the declaration of a beneficial owner, the new law introduces another obligation for all Bulgarian companies. Every company shall declare a contact person (sort of AML officer) for communication with tax and state authorities which person must be permanently residing in Bulgaria. This is a practical problem for all Bulgarian companies founded by foreign shareholders.  Additional difficulty to foreign company owners will be the fact that the contact person must express his consent by a special notary certified statement. Upon giving such statement, a number of obligations will arise for the contact person, such as an obligation to receive, dispose of and provide appropriate and accurate information and data about the beneficial owners. The contact person  can be fined  between BGN 100 to BGN 1,000 for non-fulfillment of this obligation, and in case of a repeated violation – the fine shall be from BGN 200 to BGN 2,000.

According to the new law, the deadline for filing the declaration of the beneficial owner and contact person of the legal entity is February 1, 2019. However, information appeared in the media that this period may be extended as the Regulation on Application of Anti-Money Laundering Measures is not ready yet and some of the forms have not been published. For the moment, however, there is no clear and accurate information whether this will happen.