Bulgaria’s 2023 Commerce Law Amendments: A Fresh Look at Insolvency Proceedings

In the dynamic landscape of 2023, Bulgaria underwent a remarkable metamorphosis in its insolvency proceedings due to game-changing amendments to the Commerce Law. These changes not only impact the bankruptcy processes for legal entities but also introduce an entirely new bankruptcy procedure for natural persons operating as entrepreneurs. This article unravels the thrilling twists in the legal framework, highlighting the ripple effects on both corporate and individual bankruptcy proceedings.

I. Changes in Bankruptcy Proceedings for Legal Entities

Jurisdiction of Claims

Among the noteworthy alterations is the jurisdiction of claims in bankruptcy proceedings. While the court of the debtor’s seat remains the primary jurisdiction, a new requirement mandates that the merchant’s registered office must not have changed within six months before filing the application. This aims to prevent the strategic relocation of a company’s registered office to influence the selection of the court for bankruptcy proceedings, ensuring a fair and transparent process.

Appeal of Decisions and Determinations

The amendments establish a clearer appellate process for decisions made by district courts in various stages of bankruptcy proceedings.

The introduction of a specific appeals mechanism and the possibility of cassation appeals before the Supreme Court of Cassation provide greater clarity and procedural consistency, a departure from the previous practices under the Civil Procedure Code.

Labor Relations of the Insolvent Debtor

In an unprecedented move, the latest regulations specifically tackle the prevailing employment contracts of a debtor facing insolvency and those of their employees. The stipulation mandates the debtor to conclude employment ties within one month of the bankruptcy declaration, simplifying the procedure while upholding obligations tied to workers’ rights, encompassing aspects like social security and assured claims of the workforce.

Amendment of the Concept of “Over-indebtedness”

A substantial change is made to the definition of “over-indebtedness” concerning legal entities. The revised scope now extends to cover all obligations of the debtor, going beyond just monetary ones. This expanded concept encompasses non-monetary commitments, such as those related to the production, sale, or processing of goods. The amendments aim to enhance the accuracy of identifying entities in financial distress, ensuring a more comprehensive assessment of their ability to meet all obligations.

II. Regulation of Bankruptcy Proceedings for Natural Persons – Entrepreneurs

The revisions bring forth a fresh bankruptcy protocol designed specifically for natural persons operating as entrepreneurs. This universal enforcement process aligns with general commercial bankruptcy rules while addressing the unique circumstances of individual entrepreneurs.

Definition of an Entrepreneur

Art. 760a of the Commerce Law defines an entrepreneur as a natural person engaging in business activities, trade, or a free profession, with the caveat that their enterprise does not require commercial conduct in terms of subject and volume. This definition distinguishes individuals engaged in entrepreneurial activities from other categories of natural persons.

Discharge of Obligations

In contrast to the procedures involved in corporate bankruptcy, the regulations overseeing the fulfilment of responsibilities in the bankruptcy of individual entrepreneurs bring about notable innovations.

Unpaid debts are repaid after the opening of proceedings based on specific criteria, including the cessation of commercial activity, repayment of bankruptcy costs, and meeting specific thresholds for repaying obligations. The provisions provide a structured framework for the resolution of individual entrepreneur bankruptcies.

In embracing these sweeping changes, Bulgaria strategically positions itself in harmony with EU standards. Beyond merely improving procedural efficiency, the amendments play a dual role in bolstering the nation’s economic landscape. The anticipation is that these reforms will not only streamline the journey for legal entities and individual entrepreneurs but also fortify Bulgaria’s standing on the European economic stage.

For further information, feel free to contact our office in Sofia at sofia@eurofast.eu 

Rossitza Koleva
Country Manager
Eurofast Sofia
sofia@eurofast.eu