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New requirements for company sale and insolvency

Background
As in the past, in the case of company sales, the seller has repeatedly neither paid salaries due nor paid social security contributions due for employees, the Bulgarian Commercial Code was amended accordingly by three successive amendments in December 2017, February and March 2018. The aim of the new regulations is to protect the interests of employees. A side effect is the guarantee of timely receipt of social security contributions by the recipient government agency.

Requirements for company acquisition and the purchase of shares
In future, a company acquisition or transfer of shares in a limited liability company can only take place if all wages have been paid and all social security contributions have been duly paid. This also applies to all receivables of this type in connection with employment relationships that were terminated within three years before the company acquisition or share purchase.

The seller must prove that there are no such outstanding claims. This must be done by a written declaration of the seller within the scope of the company acquisition and, in the case of a share transfer, by a joint declaration together with the Managing Director of the company. The declaration must be submitted to the Commercial Register. The Registry shall subsequently notify the Main Labour Inspectorate, which shall verify the accuracy of the information contained in the declaration. If an incorrect or incomplete statement has been made, the case will be referred to the Public Prosecutor’s Office.

New reorganisation procedure
From mid-February 2018, a restructuring plan must also be agreed with employees who still have claims against the company that arose prior to the opening of the restructuring proceedings. This includes both receivables from employees still employed by the company and receivables from former employees.

Requirements applicable to all types of companies
In addition, the Anti-Money Laundering Measures Act, adopted in implementation of the Fourth EU Directive on the prevention of the use of the financial system and terrorist financing (2015/849), introduces innovations. Accordingly, from the end of March 2018, each company is obliged to provide current and significant information about the individuals who are the beneficial owners of the company. This also includes detailed information on the rights acquired by these people.

The company is also obliged to disclose this data in cases specified by law. The identity data of beneficial owners and legal entities or other legal entities through which control is exercised, as required by the Bulgarian Money Laundering Act, are subject to registration in the Commercial Register. A separate definition of the beneficial owner is laid down in the Money Laundering Act.

Author: Cornelia Draganova