Company registration process takes longer than expected

The new Commercial register started its work as from 1st January 2008 . Yet the registration process takes at least 15 working days. Although the maximum prescribed period is 2 days, the registration clerks can not catch up with the application submission flow.

The first Registry Agency's strategy was to simultaneously accept and digitize (scan) the application and the enclosed documents. This strategy have raised enormous public dispute, because of the huge queue which grew in front of the Registry Agency's office.  The second (current) strategy of the Agency is to accept the registration applications and the enclosed documents, but not to give an entry number. This have reduced the queue but not the registration process period. The application are stored in piles and later digitized (in submission date order) and later reviewed by the clerks. This, by the way, did not reduce the registration term, which remains at least 15 working days.

The Minister of Justice describes that the cause for the failure of the Commercial Register is that not all companies are being registered through the website of the Commercial register. This is not quite true, because the latter website is not working properly. Not all digital signatures are compatible with the website and if they are, the website cannot bear the connection load. If it happens that the website accepts the application, the process for reviewing the application remains at least 15 days.

Apparently a reform of the reform is needed as soon as possible.

А shorter term for company re-registration

The three years re-registration period set by the Commercial Register Act seems to be in collision with the provisions of the Accountancy Act. The latter obliges each company, registered in Bulgaria, to announce its annual accountancy report in the Commercial Register. The announcing deadline is 30 June 2008. The problem is that your company cannot announce its accountancy report without re-registering. Consequently the re-registering deadline happens to be 30 June 2008.

A debate about the above said legal "misunderstanding" took place last week in the Bulgarian Parliament. Unfortunately no particular measures were suggested. The Minister of Justice, kindly avoided to give a straight answer about what shall be done to solve the re-registration issue.

So the shorter term is mandatory for the managers of the companies, until the Government and the Ministry of Justice in particular, find a solution for this "legislative mistake".

Freelancing in Bulgaria

If you are a freelancer (writer, programmer etc.) Bulgaria is an attractive place to do your job. Pursuant to the Employment Encouragement Act, being a "freelancer" means that you both:

  1. don't work for an employer and
  2. you are working in your capacity of a person (not through your company).
Then what type of agreement you are obliged to have signed? Easy, the type of agreement which is required you to have signed is the assignment agreement. The Bulgarian legislation sets a distinction between the employment contract and the assignment agreement. Sure, both of them entitles you to receive certain amount of money for the work, but if you have an employment contract : (inexhaustible)
  • the employer is obliged to register the contract within the National Social Security Institute
  • the employer is obliged to pay part of your social security installments
  • there are certain restrictions and conditions in case of firing an employee
  • there is a mandatory annual full-pay leave etc.

In summary, the Labour Code sets a whole different set of contract conditions in the employer-employee relations. The freelancer is freed of this restrictions, but the work is regulated by the common civil legislation: The Obligations and Agreements Act.

Sufficient funds: Pursuant to the Regulations for the appliance of the Foreigners in the Republic of Bulgaria Act, a foreigner to be able to stay in Bulgaria if he/she possesses the minimum required 50 Euro per day of stay. This means that if you are a freelancer, you should prove that you have (or will have) at least 1,500 Euro per month.

The promissory note: securing your money

The promissory note is a common legal security tool in Bulgaria. Usually it is used by the banks, when providing loans to companies and persons. This way they increase the money payback, because both the loan agreement and the promissory note are used as securities of the debt.

The advantages of the promissory note are:

  1. You can obtain a court order for execution within 20 days. This way you will skip the long and cumbersome civil litigation process.

  2. No need to summon the defaulting party to court. It has the surprise element, and the debtor won't be able to dispose of its property.

  3. No notary certification needed. A simple signature by the debtor is enough.

Of course the promissory note is a formal deed. There are certain rules that should be followed when drafting one. Contact a solicitor to draft a promissory note for you.

Application of the promissory note:

  • Preliminary agreement when purchasing property
  • Construction works (both reconstruction and finishing works)
  • Loan agreements etc.

Choose an independent solicitor

Usually when buying a property you have to trust the Agent's own solicitor. A notorious practice in Bulgaria is just one solicitor to represent both parties when a purchase deal takes place. Almost 50% (unofficial data) of the property agents take advantage of the foreign buyer by increasing the legal services fees up to five times!! If you are a buyer, you can save yourself further troubles by hiring an independent  English-speaking solicitor.

Notary fees in Bulgaria

Dear friends, I suppose each of you  had been to a Bulgarian notary's office: a property purchase took place, a certification of a power of attorney etc. You should be aware that as from the 2007 notary services are charged additionally with VAT (20%). This have increased the expenses, especially when buying property (the notary fees are calculated on the grounds of the property value).

Although there are regulations for the application of notary fees (the Tariff of notary fees in Bulgaria and an Ordinance of Ministry of Justice, which interprets the notary fees application), not all notaries treat the same cases in the same way.

Before you pay the requested notary fee (especially when it's high), consult an independent solicitor. This may save you possible future troubles. If you think that the notary is cheating you, go to another one.

Failing to re-register your company

Many non-Bulgarians buy property in the country by registering a company. If this is your case and you fail to re-register your company under the new Commercial Register Act in three years' term, your property may be jeopardized.

If you fail to re-register your company within the said period, the court will initiate a liquidation procedure. A shareholder will be appointed as a liquidator. If none of the shareholders could be found, the court will appoint a liquidator at its discretion.

During the liquidation the company will be assessed and all properties shall be put out to a public tender. After the tender procedure is over, the company will be closed.

To avoid the latter, don't forget to get an English speaking lawyer who will explain the whole procedure to you and will do the re-registration for you.

Web outsourcing to Bulgaria

Although Bulgaria is already an EU member state,  you can still find here fairly low-wage and yet well educated employees. Many western companies outsource their software routines to Bulgaria: development of stand alone application, web applications (php, .NET , java, ajax etc.), ERP. Usually the software companies choose to establish a separate business in Bulgaria. This means that the subsidiary company will be independent in its relations to any business partner, but yet subordinate via its capital owner - the mother company.

But not only big software companies make investment in Bulgaria. Outsourcing of software development involves freelancers too. Usually only a project manager is needed whose duty will be the distribution of the work among the freelance developers.

Because of the complicated employment/assignment relations, it is highly recommended that the outsourcing company consider registering a local company which will take care of the administrative work, regarding the development of the project, including taxes management, social security, office premises, business relations etc.

New to Bulgarian rural life: ask the mayor

If you are a newcomer to Bulgaria and a proud owner of a rural house deep in the country, soon you will face the differences between the Bulgarian and the western type of life.

The most important thing to keep in mind is the structure of the Bulgarian local governance. Each settlement which has population over 500 people has the right to elect its own mayor. In settlements with population less than 500 people: a deputy-mayor is appointed by the Municipal Council.

An old Bulgarian saying says: "The most important persons in the village are the mayor, the priest and the teacher". Nowadays, what's left of it is the authority of the mayor.

The village mayor is the most informed person of what's happening in the village. So if you need a do-it-yourself (DIY) man who will help you with your reconstruction matters - the mayor of the village is the one to ask. Whether a paint job is required or you just want to get rid of the garbage, you just have to ask for an unemployed person who will do this for you.

Usually a DIY man will charge you on a daily basis: about 20-30 Levs per day. But be careful, do not hire people who look suspicious. Always listen to the advice of the mayor: he/she can tell you who has the most appropriate skill that you require.

Married to a Bulgarian: a residence paradox

The Bulgarian Migration Directorate misapplies the Directive 2004/38/EC of the European Parliament. The Directive regulates the regime of free movement of EU citizens and members of their families.

The particular rule that has been misapplied is that the citizens of EU member states are under the same regime as the members of their family in other EU host country. The only difference is that, in some EU member states, the family members may be required to apply for entrance visa. NO other requirements are set in the directive.

If you are married to a Bulgarian (already a EU citizen), you can apply for long term residence, on the ground that your spouse is a Bulgarian. The Migration Directorate will issue a long term certificate for you, but it will require you to pay 500 Levs per year.

Usually, the latter fee is required by the common foreigner regime. The fee is not required for family members of EU citizens. But Bulgarians are EU citizens, aren't they?

A paradox! You are eligible to receive residence certificate on the ground of EU Directive, but you have to pay a fee which is required by the common regime. In fact this fee should be illegal.