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New changes introduced to the Commercial Register

On 29th April new changes to the Commercial register proceedings were introduced. Most of them are good and fix some of the misunderstandings in the law. The most major amendments include:

Reducing the state fees by 50% if the applications are submitted online

The previous text of the law required 75% of the state fee if documents are submitted online. The new amendment is reducing the fee even more. This will encourage the people and lawyers to submit application online and will reduce the queues in the offices of the Registry Agency. At last some 21st-century-strategy by the Ministry of Justice.

Obligations for removing personal data from the documents that should be published

There has been numerous complaints of personal data disclosure in the Commercial Register. Organizations have been protesting against visible personal details in the companies files. This  apparently had the sufficient public effect and the personal data nondisclosure article of the law is a fact.

Stopping the government supported ripoff

The previous text of the law allowed the employees of the Commercial Register to reject applications and keep the paid state fee for the government. This was considered by the Supreme Bar Council and many courts in the country as ripping off performed by the government. The state fee couldn’t be used  if corrected application was re-submitted. Now the amendment is solving this problem, by obliging the employees of the Registry Agency to give the applicant/lawyer 14 days deadline to correct the defaults of their applications.

Unfortunately the changes will be effective as from 1st January 2012. Apparently the government still want to fill in the state budget by one final ripoff.

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Best regards,

Milen Hristov-lawyer

MHLegal law office
phone: 00359 52 605 997
email: milen@mhlegal.eu
web: http://mhlegal.eu

Bulgaria, Varna 9000
78 Piskyuliev Str,
floor 2 office 6

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Wealthy companies “benefit” of speed in Commercial register

A recent journalist research showed that a major Bulgarian newspaper publisher has changed shares ownership. The new and the old shares owner are contradictory entities, but the most interesting thing about this shares transaction is the speed that the change was registered in the Commercial register. To be absolutely objective here is an excerpt from the Internal regulations of the Commercial register:

Art. 90, para 2 (Amended – SG. 111 of 2007, in force from 01.01.2008, am. – SG. 6 of 2009, in force since 23.01.2009) The distribution of applications, requests, acts of the court,public authority and private enforcement agents for consideration by officials in the registration is performed by the information system on random selection basis.

The above mentioned shares transactions was registered in the Commercial register in only 3 days after the application was submitted there. At the same time processing of the company applications was taking about 30 days as from the moment of submission. Now, this throws a shade over the above regulations. No doubt we are facing corruption, based on high level government influence. Meanwhile all lawyers need to explain how come a company registration takes 30 days in Bulgaria….

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Varna is not only property but also IT business destination

Varna is known among foreign investors as a cheap sea property destination. Since the property bubble has popped up, Varna is offering a sustainable business opportunities, supported by the local city council. The municipality has adopted a strategic plan for development of Varna area. You can read an excerpt from the strategy further below. As you can notice, one of the main locally supported industries is the IT business and business clustering. Normally the IT business is focused in Sofia, but Varna is also a good undeveloped IT investment destination since there is a Technical University - a reputable IT university. Many young programmers tend to search for a job in Sofia, but would like to stay in Varna if a job opportunity opens.

Varna IT sector consists mainly of web site and software development small companies. They work mainly with foreign customers and provide high quality web services. The local IT industry is yet to be expanded, backed up by the Varna Municipality initiatives and the entrepreneurship of the young local people.

See below the 2007-2013 Varna region strategy for business development:

STRATEGIC OBJECTIVES

  1. Achieving sustainable, rapid economic growth and stability by creating a favorable business environment to attract investment from the EU and creative initiatives based on life-competitive market, innovation and improved access to markets and services.
  2. Mobilizing and increasing the quality of human potential and achieving levels of employment, income and social inclusion, providing better quality of life of the EU average levels.
  3. Achieving successful integration of the main industry sectors of the  municipal economy in the European economic structures.

Specific objective 1: Promoting Entrepreneurship

  1. Support of retail and social entrepreneurship through support services to businesses and financial instruments targeted at job creation and start-ups.
  2. Encouraging activities through an entrepreneurial culture and attitude in society and higher education.
  3. Encouraging women’s entrepreneurship through targeted marketing, greater child care and detection of specific structures for business support, providing a suitable environment for women entrepreneurs.
  4. Support for creating groups of fishermen and fishing communities to carry out activities of collective interest.

Specific Objective 2: Development of research, technology, innovation

  1. Setting up a scientific-industrial council to organize the creation of a local innovation system that provides predominantly increased services with higher added value, research and innovative companies in the municipality.
  2. Encouraging the production of structures in industry sectors of internationally recognized research centers and attracting new sponsors for research, new business and new knowledge.
  3. Encouraging the use of research and technology by businesses to increase knowledge transfer to business. Encourage cooperation in research, skills development, finding technical assistance and new markets.
  4. Qualification and retraining of pedagogical staff
  5. Encouraging of creation and development of innovation culture through participation in business structures and increase the number of employed people with education, especially in technology.
  6. Setting up of municipal fund to stimulate innovation and technology start-ups and SMEs operating in the municipality.
  7. Setting up a community center to foster innovation and new technology start-ups and SMEs.
  8. Support for investment in priority social and economic areas in the municipality.
  9. Innovation in energy efficiency and renewable energy sources and environmental protection.

Specific objective 3: Establishment of business networks and regional clusters

  1. Optimizing of the links between business, sectoral and professional bodies and local administration to ensure efficient use of labour and financial resources and know-how.
  2. Encouraging of inter-company cooperation and public-private partnership in the transfer of new technologies and best practices from the EU.
  3. Development of programs to identify, establish and support the development of cluster structure in the local economy with priority given to tourism, the marine industry, crafts and more.
  4. Setting up centers for cluster transfer and cluster management in industry sectors in the municipal economy.
  5. Development the specialized infrastructure serving clusters.

Specific objective 4: Promote the development of information society

  1. Creation of local infrastructure of the information society.
  2. Creation of municipal school information network and local school information networks.
  3. Improving access to and development of online public and business services.
  4. Support businesses to adopt and effectively use information and communication technologies.
  5. Development of ICT in all levels of education.
  6. Creation of municipal public portal with opportunities to access all public information from various walks of life.

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Winding up (liquidating) a Bulgarian company

Many foreigners have been setting up limited companies in order to own land in Bulgaria. Now as the year 2012 is approaching, the restriction will be removed and there will be no need of the limited company for this purpose. Many people will prefer to have the property on their own name. So how you can do that? The legal way is to wind up your company and transfer the property on your name.

The liquidation process

If the limited company has been set up only for the purpose of owing a land we assume that the company is a dormant one. The easiest way to find that is to ask your accountant if they have filed nil annual accounts. So, if the company is dormant the liquidation should be a straightforward process.  The biggest disadvantage of the liquidation is the time frame. The minimum legal term is 6 months. Basically the liquidation process can be divided in the following milestones:

  • appointing a liquidator and sorting all outstanding taxes (both state and municipal ones)
  • drafting the initial accounting balance report
  • announcing the liquidation in the online Commercial register and submitting an invitation to all potential creditors of the company to present their claims
  • transferring the property to the capital owners (company owners)
  • drafting the final accounting balance report
  • de-registering the company from the Commercial register

The longest stage is the waiting period after announcing the invitation to the creditors. The minimum legal waiting period is 6 months. This is why the liquidation lasts that long.

Liquidation costs

The liquidation process will involve accounting and liquidator costs, state fees and fees for transferring the property to the company owner(s). The final costs depend on the status of the company- are there any problems with it or its assets, how well the company papers were done during the years etc. A quote  for liquidation costs (without property transfer fees) for well maintained dormant company would be about ?500.

Transferring the property on company owners’ name

This could be done in several ways, but the most common are either by simulating a sale (company sells to the company owner) or by transfer as a liquidation share from the company to the company owner. In both cases the property transfer needs to be recorded in the Land Registry.

MH Legal law office provides professional company winding up (liquidation) services. Mr. Milen Hristov, besides being a solicitor, is also a state certified liquidator with the Bulgarian Registry Agency. We provide company liquidation services in Varna region, but also all over Bulgaria.

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Investment profile of Varna, Dobrich and Constanta region

  • 09.01.2011
    • , by 
  • by Milen Hristov
  •   1 Comments

Having Bulgaria and Romania as members of EU opened new opportunities of business cooperation between the two countries. EU funding stimulated a lot of small and medium enterprises to for trans-border business ventures . The companies are mainly from Varna, Dobrich (Bulgaria) and Constanta (Romania).

Investment climate

Bulgaria attracts investors with its low tax regime (10% flat rate fro corporate tax) – one of the lowest in EU. Furthermore a lot of Romanian companies benefit from Bulgaria’s low tax and they register limited companies in the border Bulgarian cities (such as Dobrich and Varna), but their business operates entirely in Romania. Furthermore, foreign investors can benefit both the Bulgarial low tax regime and simultaneously can benefit from both Bulgaria’s and Romania’s infrastructure, industry facilities, local services. The beauty of EU is that it allows free movement of people and goods. This enables investors to take advantage of both Romania and Bulgaria labour force, tax regime and infrastructure connections.

Big investors also can benefit of the special Bulgarian Investment Promotion Act. Companies/Individuals who invest in hign unemployment regions (there are few in Dobrich/Varna disctrict) the corporate tax for such investors will drop to 0%. Yes, such opportunity exists and several companies in Bulgaria took advantage of it. If you are interested in this opportunity you can contact our law office for further details. No one else can offer you 0% corporate tax in EU. Bulgaria can, especially Varna and Dobrich regions.

The Bulgarian ministry of Economy Energy and Tourism havs provided date of the best industry sectors in the region (information based on 2010 data):

  • Agriculture
  • Mining
  • Manufacturing High-technology
  • Manufacturing Medium-high-technology
  • Manufacturing Medium-low-technology
  • Manufacturing Low-technology
  • Knowledge-intensive market services
  • High-tech knowledge-intensive services
  • Knowledge-intensive financial services
  • Other knowledge-intensive services
  • Less knowledge-intensive market services
  • Other less knowledge-intensive services
  • Electricity, water, sewerage, recycling
  • Construction

So why should a foreign investor consider an investment in Varna/Dobrich/Constanta region? There is no straightforward answer to that question. However you should look to the information below and see how good is th investment climate and what are the benefits of the Varna/Dobrich/Constanta region.

Logistics – Black sea ports

The first and most obvious advantage of the region is the major ports of the Black sea (Varna and Constanta). This boosts the import/export services as well as inland logistics from the region. Black sea ports are strategic for the trade between EU, Russia and Middle east. Varna and Constanta are the logistic water gateways of the European Union for Russia and Middle east. Recently there were couple of projects for building of enormous ligistics facilities (warehouses) which will serve the increased  trade/transportation between Bulgaria (Varna) and the non-EU countries.

You can get more information on Varna port and Constanta port on their websites.

Logistics – International airports

The region develops not only water logistics but also air logistics. Varna Airport is the biggest cargo and passenger airport in the North-East Bulgaria.  Constanta Airport is also main air gateway in the region. The businesses will have direct flight connection to major European cities from those airports. Further connections are available through the states’ capitals.

Shipyards – building and ship repair services

Varna is considered as the Black sea capital of Bulgaria. One of the main industries in the city is ship building and repair services. The city has long history and tradition in that services. There are few companies who offer such ship repair and building services. You can find more information HERE. Romanians shipyard services are competitive well enough. Constanta also offers ship building and repair services on the Constanta shipyard.  Along with logistics (ports) the region has a lot to offer in terms of full logistics/repair services to the international trade and logistics companies.

Legal services

Our lawyers can offer comprehensive overview of your investment plan. We can advise you on the details and also can introduce you to the local business, so you are aware of some specific Varna/Dobrich/Constanta local business details. We can also assist you with the projects and EU funding for your business venture. As a member of EU Bulgaria is entitled to participate in up to 90% funding for business projects (mainly production industries), which means  that your investment in the region will be with the quickest possible return in EU.  In short, zero percent corporate tax ,  up to 90% EU funding, free trade zone (EU) could boost your business expansion in EU to enormous scale.

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Re-registration deadline extended to 31 December 2011

Yesterday the official amendment of the law was promulgated and subsequently entered in force. Now the new deadline for re-registration of companies in Bulgaria is 31 December 2011. This amendment came by surprise preceding the actual bill of amendment of the Commercial register Act.

This extension is actually done by amending the Trade Act, rather than amending the Commercial Register Act itself. This is rather unusual way of the parliament to do it as it confuses the people who expect the actual law which regulated the re-registration process to be amended. In the end, this amendment will cause the actual bill for amendment of Commercial Register Act to be amended to match the new re-registration term. Once again we can see the legal ignorance of the ruling party’s members.

It was quite interesting to observe, at least in Varna, how the Registry Agency was trying to convince people of the deadline extension, when the actual promulgation of the extension was not done. This was quite risky as there was a chance the new deadline not to be adopted as an amendment to the law. Lawyers know that a law enters in force after it has been adopted by the parliament AND promulgated in the State Gazette. Sometimes people forget that the president has a right to “veto” the bill. Hopefully this didn’t happen with the re-registration deadline extension.

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Re-registration of companies deadline extended to 30.06.2011

  • 01.12.2010
    • , by 
  • by Milen Hristov
  •   2 Comments

The Bulgarian parliament has extended the deadline for company re-registration. The new deadline is 30 June 2011. The bill for extension is not yet voted on the second hearing and not yet promulgated in State Gazette . However it is a matter of time this to be done.

This is good news to all companies that hasn’t been re-registered yet. However it is not a good idea for company owners to wait to the end of the new deadline.  Ask your lawyers to prepare all necessary documents and re-register your companies. In our practice we face various obstacles for re-registration like missing documents, deceased shareholders, shareholders’ disputes etc. So generally it is a good idea to start the re-registration as soon as possible, because you never know if the process will go as smooth as you thought.

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