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Liquidation of the unreregistered companies – what’s the hurry?

Once again, the Ministry of Justice proves to be existing in some other legal realm. So are the Bulgarian Courts. As you probably already know, the companies which have not re-registered by 31 Dec 2011 are subject to compulsory liquidation. The proceedings of this liquidation have been “patched” to the Trade Register Act just before the deadline was in effect. Naturally, as everything done in the last minute, this seems to be an unfinished work.

Paragraph 5, point 4 of the Supplementary provisions of the Trade Register Act:

(4) The co-operations and trader’s last registration court prepares and sends by 1st October 2012 to the Agency a list of unreregistered sole traders and foreign companies branches, for which no re-registration has been requested in the term of  § 4, point 1 as well as a list of all companies and co-operations for which a re-registration have not been requested in the same term. The list contains the number of the company file, the trade name and business address, the legal representative and Bulstat code, provided to the court, by the Agency.

So far so good. The text says “by 1st Oct 2012″, which means that the courts should be ready even before that date. After all they have 10 months to prepare a list. How difficult that could be? Thanks to the state owned company Information Services PLC they have already this data digitised. Even more, some courts use it for issuing Certificates for Good Standing of the companies. Again, how difficult that can be?

Having spoken to a couple of judges, chiefs of Commercial Departments in two different courts, I was notified that the courts don’t know what to do, as there is no internal regulation of this procedure. Apparently, “prepare a list” is not enough for them. Where is the self-regulation of the court if they cannot create a simple internal procedure to prepare a single list? Obviously they are waiting for the Ministry of Justice to do the work for them.

This affects ate a huge scale all companies that failed to re-register. Most of them want to initiate voluntary liquidation in order to avoid further costs. The only obstacle now is the list.  You may say that they’ve waited 3 years and can wait few more months and you may be right. However, think of the UK and Irish owners who have registered these companies as “holding” tools and didn’t know that such huge reform in the Commercial Register will happen. that’s why they’ve missed the deadline. Delaying of these lists will cause more ambiguity and concerns.

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Buying regulated land in Bulgaria 2012

  • 14.03.2012
    • , by 
  • by Milen Hristov
  •   1 Comments

Because of the speculations, I decided to write this small post. I will try to clear out whether an EU citizen can buy regulated land directly in Bulgaria as from January 2012.

A common misunderstanding is that foreigners cannot buy regulated land directly if they own primary home in their native country. This was valid until 2012, but not any more. The legal grounds are Art. 29a of the Ownership Act:

Entities in Art. 29 para 2, who do not reside permanently in Republic of Bulgaria, can acquire land for secondary home property after expiration of the term, set forth by the conditions of the Treaty for Accession of Bulgaria to the European Union

The above articles was introduced in 2007, the year when Bulgaria joined EU. As I have written last year the prohibition term was 5 years since Bulgaria’s accession. As from January 2012, the prohibition term has expired, so pursuant Art. 29a Ownership Act, foreigners can buy regulated land directly, no matter if it is primary or secondary home property.

The speculation still exists, but I think this is supported by property agents who lose business. Just imagine how many companies will be liquidated and how many annual accounts and tax declaration will not have to be submitted. Property agents need to move on and stop spreading disinformation.

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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

  • 03.02.2012
    • , by 
  • by Milen Hristov
  •   1 Comments

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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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 €400.

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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115 days until all unregistered companies will be liquidated!

Once again, all Brits that have companies and still are not re-registered, please do it by the end of the year. If you don’t do it, your company will be liquidated and they will lose all company’s assets.

The re-registration takes about couple of weeks, depending which is the registration court of the company.

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