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Compulsory liquidations delay for unknown reasons

The Commercial Register Act was clear enough “all companies which don’t re-register by 01.01.2012 are subject to compulsory liquidation by the state”. 1st Jan has passed and there’s no sign of the Registry Agency to have initiated any liquidation. There is even no official statement, neither to the public, nor to all the liquidators who are listed with the Agency.

Naturally the Agency don’t respond their officially announced phone numbers (more than 10!), nor they reply to official emails. Now that’s what I call public service.  That comes with no surprise, having in mind the 6th Feb 2012 Interim Report from the European Commission where EU criticises the Judicial reform as lacking any progress. The Registry Agency is part of the Ministry of Justice so no wonder there is no sign of applying the law..

When initiated (hopefully sooner), the liquidation will create huge mess. The database web servers of the Agency are not prepared for the huge document traffic that will be generated. Resent statements by the Agency confirmed their IT power cannot handle huge network traffic and date processing. That was confirmed in practice yesterday, where the website of the Commercial register stopped functioning for one whole day. Whole business sector just seized to function for one day.

 

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Liquidation of Bulgarian limited company

The biggest issue with the compulsory liquidation of the Bulgarian limited companies is the communication with the state appointed liquidator. Since the Registry Agency appoints liquidators from their liquidators lists, no one considers whether the company owner is foreigner or does he speaks Bulgarian. Some liquidators are not diligent enough when they see that the company owner is not Bulgarian. Sometimes they will not make efforts to contact the latter. One a separate note, this is difficult because the company owner address is spelled in Cyrillic letters and it is very difficult to restore the right English spelling.

Normally the the newly appointed liquidator will try to contact the capital owner(s) and request all company documentation i.e. contracts, bank account balance, court papers (if any), past years accounting reports etc. These will be needed to find out if the company has any outstanding debts and to repay them. Only then the rest of the company assets will be cashed and distributed among the company capital owners. Upon request of the capital owners and if available, any property left can be transferred to the company owner(s) without being cashed.

The latter is an exemption rather than a normal procedure. Therefore the company owners need explicitly and formally to request this transfer from the liquidator. If this request is not made in a formal way, the liquidator will sell the property on public tender/auction. As solicitors, we ensure that the formal request is submitted to the liquidator on time and no foreigner loses their property just because a formal request hasn’t been made to the liquidator.

Having said the above, I strongly encourage all Britons and Irish who still haven’t re-registered their companies – you still can keep your properties! The only effort you need to make is contact us with details of your Bulgarian limited company. We will take care of the rest.

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If your company is subject to compulsory liquidation

  • 31.01.2012
    • , by 
  • by Milen Hristov
  •   5 Comments

The deadline for re-registration has passed. Now all companies that have failed to meet the deadline will be liquidated. Most Britons have registered companies as holdings of their property in Bulgaria. the compulsory liquidation will put their properties on tender and will sell them before the company is closed. So what they can do?

Make sure you have someone to check your company file on a regular basis. This way you can find who is appointed by the Commercial register as a company liquidator. Once you know his details, you can contact him and discuss with him the options to transfer the property to the company owner without actually putting it on tender. This is one of the options the Commercial Act gives to the company owners i.e. instead of cashing the company assets, the liquidator can distribute the assets to the shareholders after he has paid the liquidation expenses, taxes and liquidator’s remuneration. you need to be persistent on this, since not every liquidator will agree to do it. Therefore it is advised that you hire a solicitor to negotiate on your behalf.

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Changes in car registration regulations in Bulgaria

Bulgarian Ministry of Interior (MoI) in preparing changes in the regulation for vehicle registration in Bulgaria. When car owner is changed, it is mandatory the new owner to register the car in the Police department, where new owner’s permanent address is. In order to avoid taxes and government fees, many new owners just pay for the car and drive it with a simple notarized power of attorney. The car documents stay on the name of the previous owner. This is common practice in Northern Bulgaria, where may Romanians buy cars from Bulgarian border cities  such as Dobrich, Varna etc. According to official Romanian and Bulgarian government data more than 3500 cars with Bulgarian license plates are actively driven on the roads in Romania.

So why the Bulgarian Ministry of Interior considers this as wrong? A spokesperson of MoI says it’s because of the cheaper insurances and annual vehicle taxes. They consider this as draining of the national Insurance Guarantee Fund e.g. if an accident happens with such car the damages will be covered by the aforesaid Fund, instead of the insurer of the car. This is because there is no new insurer, since the new owner is not the actual legal owner of the car.

MoI will stop this “bad practice” by amending the regulation for registration of vehicles. The new owner has to register the car in his state. If doesn’t do that within two weeks period, the old registration will become invalid and driving the car will be illegal.

How how Romanians can keep their cars and low vehicle taxes and insurances?

The answer is to register a local limited company and later transfer the car to it. the company will be dormant and will act only as a holder of the car, so the car owner can benefit the low insurance and state taxes. This will be a relatively low one time investment, but this way they can keep the Bulgarian car license plates.

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Check your contractor’s diligence

A new service is offered by the Bulgarian Chamber Of Private Enforcement Agents. The Chamber maintains a register of debtors in Bulgaria. It contains names of all companies and persons who have been sued successfully and enforcement proceedings has been initiated against them. In short there is a public register of people and companies who don’t pay their debts.

Access to the register has every law enforcement agent. They can provide information on particular company/person if you provide company number for companies and personal number for Bulgarian citizens. In order to check a foreign person, you need to provide just a name. The fee for this service is EUR 5  per person/company. More information can be found  here (in Bulgarian only)

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Buying land in Bulgaria without registration of limited company

The Bulgarian legislation have set a restriction for buying land by foreigners directly. This was changed when Bulgaria was accepted as EU member state in 2007. However, the accession treaty allowed Bulgaria and Romania to extend the restriction for few more years. Naturally both states took advantage of this option.

The right for extending the restriction is set in Annex 6, part 3 (movement of capital), point 1 to the Treaty for Accession of Bulgaria and  Romania to the EU.  The annex to the treaty for accession provides the right to Bulgaria to keep up to 5 years the restriction for the right of foreigners to directly own land in Bulgaria:

Notwithstanding the obligations under the Treaties on which the European Union is founded, Bulgaria may maintain in force for five years from the date of accession the restrictions laid down in its legislation existing at the time of signature of this Protocol on the acquisition of ownership over land for secondary residences by nationals of the Member States or the States which are a party to the European Economic Area Agreement (EEAA) non-resident in Bulgaria and by legal persons formed in accordance with the laws of another Member State or of an EEAA State

Even longer -  7 years – term is set for owing agricultural land and forests:

Notwithstanding the obligations under the Treaties on which the European Union is founded, Bulgaria may maintain in force for seven years from the date of accession the restrictions laid down in its legislation existing at the time of signature of this Protocol on the acquisition of agricultural land, forests and forestry land by nationals of another Member State, by nationals of the States which are a party to the European Economic Area Agreement and by legal persons formed in accordance with the laws of another Member State or an EEAA State. In no instance may a national of a Member State be treated less favourably in respect of the acquisition of agricultural land, forests and forestry land than at the date of signature of the Accession Treaty or be treated in a more restrictive way than a national of a third country.

Luckily the 5 years period expires next year -01.01.2012, so the restriction should be removed. You can read the full text of the annex VI for further details.

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Commercial Register failed!

For the past couple of days, the Commercial Register of Bulgaria is not working. According to an official government announcement, the computer cluster, serving the register system failed to take the huge load of connections from users/government employees. Today the Registry Agency in Varna was not working due to the system failure. This is also a huge embarrassment for the Ministry of Justice, part of which is the Registry Agency.

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