Court case against Bulgarian developer won by MHLegal

Our law office has initiated more than 10 similar cases against Bulgarian developers. The cases are at different stages and proceed with different speed, depending on the court workload.  However last week we got the first court resolution. The court awarded our British client with the amount of EUR 35,000 plus expenses, penalty and interest on the awarded amount.

Another client of ours also claimed his money back (almost 80,000 pounds) and we were at the middle of the court proceedings, when the defendant -developer- agreed to reimburse our client with a finished house at the Black Sea coast (act 16 included). The current market price of the house is estimated to be around  80,000-85,000 pounds)

In both cases above, the clients claimed their money back due to a huge delay in the construction of the purchased off-plan property. If you have similar case, we can help you get your money back. You can contact our law office at the following email address: milen@mhlegal.eu . Just outline your case and provide scanned copies of the relevant documentation.

If you want to know more  about the court case process, please read this article

Processing of company re-registration documents

As the deadline for re-registration approaches, the Commercial Register is likely to suffer by greater workload. Still thousands of companies haven't been re-registered. If they apply in the end of the year it's likely the clerks in the Register to delay the processing of the documents. Even more, now the company documents are processed for about a week. This is to show that more employees are needed in the Commercial Register administration.

Business clusters in Bulgaria

Business clusters have been developing in Bulgaria rapidly during the recent years. The main reason is that there are many small companies and sole traders who cannot stand the competition of the big companies. The small business in Bulgaria is not protected, as the government doesn't care about family, small and medium enterprises.  Although the Bulgarian Small and Medium Enterprises Promotion Agency exist just for the purpose to support the small companies, they virtually do nothing.

Therefore business clusters started to appear. Now there are some major clusters and many small ones. Having in mind that there is no legislative clusters regulation whatsoever, the clusters founders "wraped" the clusters in the existing company/NGO forms, allowed by the Bulgarian law.

The two major business cluster forms are:

  • non government organization (NGO)
  • consortium
NGO

NGO registration and activity is regulated by the Law on Non-Profit Legal Entities. A Business cluster can exist as an NGO. The major disadvantage, however, is that NGOs in Bulgaria cannot do business, they can not gain profit. So the main activity of an NGO cluster is to safeguard its members, to urge them, to act as an intermediary between its members and third parties. It also can be holder of intellectual property, it can organize conferences, organize learning courses for qualification and many more. NGOs have certain tax benefits, depending on their

CONSORTIUM

The consortium legal entity is regulated in the Bulgarian Commercial Act. The consortium can be either a Limited Liability Company (or JSC) or Partnership. The difference between the NGO and the consortium is that the consortium can directly trade i.e. it is like an ordinary company. However consortium is used to join economic and fund powers of two or more separate companies. The joining of business powers is the essence of the business clusters.

Registration specifics

Registration process of both the NGO and the Consortium depends on the particular needs of the business partners. Each partner can participate by making money or in-kind contributions (real estate, intellectual property etc.), the shares ratio also can vary. It is crucial that before making a business cluster, the partners know what they want to achieve - what the business cluster main goals will be. Having that figured out, the lawyer will be able to give proper consultation and draft the registration documents in the best way for all partners.

Deadline for filing annual tax accounts

Tomorrow, 31 March 2010, is the deadline for filing the annual tax declaration of all companies registered in Bulgaria. The tax declarations have to be filed in the local office of the National Revenue Agency, in the area where the company is registered. Dormant companies also have to file nil tax declarations.

There is second accountancy obligation of all Bulgarian companies. Pursuant Art. 40 para 1 point 1 of the Accountancy Act a summary of the company accounts must be announced in the Commercial Register with the Registry Agency.  A company which does not do that will be fined by the state.

Permanent residence in Bulgaria (EU member state)

The Bulgarian Immigration legislation allows foreigners who are not citizens of EU members states to obtain permanent residence directly. The ways to do that is by investing more than 1,000,000 Levs (About 500,000 Euros) or increasing the already made investment with that amount by acquiring:

  • shares in Bulgarian public listed companies;
  • financial instruments, issued by the state or the municipalities  having their  maturity date no less than 6 months;
  • ownership over a part of assets of Bulgarian company, having at least 50% state ownership, which has become such via the privatisation procedure;
  • shares, owned by the state or municipality in company, created pursuant the the Privatisation Act;
  • Bulgarian Intellectual property - items protected by Bulgarian patent, protected inventions, trade marks, industrial design etc.;
  • rights pursuant to concession agreements over the territory of the state

Another way of obtaining permanent residence in EU (Bulgaria) is to deposit at least 500,000 euros in Bulgarian credit institution(e.g. banks, pension funds etc.) on the grounds of fund management agreement with term no less than 5 years;

The last investment option to obtain permanent residence in Bulgaria (EU) is to invest in Bulgarian private company, at least 3,000,000 Euros.

Internet Gambling License

The Bulgarian legislation currently does not allow issuing of Internet gambling licenses. However, an amendment to the Gambling Act is submitted to the Bulgaria Parliament. The new clauses of the Gambling Act will allow Bulgarian and foreign companies to obtain Internet gambling license. Some of the new license requirements will be:

  • all servers and electronic equipment has to be located physically in Bulgaria
  • at least one of the servers which receives the traffic  data over the Internet, has to possess domain in .bg area.
  • the gambling software needs to collect records of the users, as well as to have the ability to provide data to the Gambling Commission upon request
  • each game, included in the Internet gambling license, has to match the requirements for the regular gambling, as described in details in the Gambling Act.
The status of the bill can be reviewed in the website of the Bulgarian Parliament

The process of obtaining a regular Gambling license consists of providing the necessary documents and applying with the Gambling Commission. Foreigners can also apply for gambling license. You can apply as a company, registered in EU or as a Bulgarian company (subsidiary of your original company). If your company is  registered neither in EU member country nor in Bulgaria, you need to match certain investment requirements before you obtain the gambling license. Depending on what games you want to develop, there are different options for gambling license: casino games, lotto games, bingo and keno, lottery, sport betting etc.

The tax on the gambling profit is flat 15%. The gambling tax excludes paying the corporate tax i.e. the gambling companies pay ONLY 15% gambling tax. Additionally you may want to get the dividend from the company profit, which will add 5% tax to the money you get from your gambling company.

Bulgaria Buy To Let (Bulgaria BTL)

This is yet another developer which throws shade on all foreign investments in Bulgaria. The company Bulgaria BTL is a developer company which was supposed to build a nice closed house complex at the foot of mountain Vitosha, Sofia. The houses were sold off plan. The company started attracting buyers, by asking them for small initial  installment of ? 5000. The latter amount was supposed to be for opening a company in Bulgaria, and later that company was supposed to buy the land and the house.

However, the company just took the ? 5000 and seized the construction. This leads all investors to a dead end. The company website is now closed and the buyers consider themselves as a victims of fraud.

However not everything is lost. Our lawyers have performed a legal due diligence of Bulgaria BTL. Here is what we found:

Company name: Bulgaria Buy To Let LLC,

Company file No 131436790

Registered addres: Sofia, 36 Dragan Tzankov Blvd, Entr. B, floor 5, office 501

Manager: Simon Cristofer James Also

Shareholders: 1.Ingrid Grace Also and

2.Anil Kohli

Registered capital of the company: 5000 levs (about EUR 2500)

Since 2008 there are no activities in the commercial register company file, initiated by the manager. This should be a sign that the company is left. The Commercial register shows that Anil Kohli's shares has been seized by the court. This seizure is initiated by a Bulgarian citizen. Our legal interpretation is that most probably Anil Kohli owes the Bulgarian person certain amount of money ( EUR 94600, to be specific) and therefore the court has issued a seizure order against Anil Kohli, consequently seizing his shares in the company.

The legal due diligence showed also that the company owes a factory for producing wooden materials for house construction. So far there are no liens over that property, so the quicker creditors get their claims filed in court, the better chance they have to get their ? 5000 back. The factory can be seized so, it will stay there for the plaintiffs, no matter how long the case lasts in court. After getting the positive court resolution, the creditors could put the factory on a public tender, sell it and get their money back. The latter should be done via law enforcement agent.

Old companies have to re-register by the end of this year

Those of you who have companies registered before 1 Jan 2008 and haven't done the re-registration, need to hurry. The Commercial Register Act regulates the deadline for re-registration is 31 Dec 2010.

If you fail to re-register on time, your company will be liquidated by the court and official state liquidator will be appointed. The consequence of this will be that your company's assets will be sold on public tender and the liquidator's salary will be paid out of that assets.

Don't miss the deadline!  You can loose your property and you will bear liability for all expenses made in court for your company liquidation.

Happy New Year!

Happy new year to all readers of this blog. I will do my best to inform you of the latest trends and legal changes in the Bulgarian legislation. As a lawyer, I will try to give you best advice for your particular case.

Changing the property management company

If you are not satisfied with your current property management company, there is a way you can replace it with another, diligent one. The process is regulated by the newly adopted Condominium Ownership Management Act. First you need to know that if you are owner in closed apartment complex, the only valid form of the management agreement is written notarized agreement. Agreement which are simply signed are not legally valid. This agreement shall also be registered with the Land Registry. This is stipulated in Art. 2 of the act:

Article 2. (1) The management of common areas of buildings under condominium ownership arrangements in closed-type residential complexes shall be agreed by written contract with notarially certified signatures, concluded between the investor and the owners of individual units.
Pursuant to the new Condominium Act the condominium is managed by a body called General Assembly of the owners or association of owners. Basically it has the powers of a General Meeting in a company. One of the most important powers the General Assembly of the owners is stipulated in Art.11, para 1 point 11 :
Article 11. (1) The General Assembly: .......... 11. may adopt a decision to assign maintenance works on the common areas of the building to a legal entity or natural person in return for remuneration, also establishing the specific powers of the Managing Council (Manager), which can be assigned for implementation by these persons;

This means that the General Assembly can vote to replace the current property management company with  another one when certain requirements are not met or there is another important reason for that.

You can read the full Condominium Ownership Management Act HERE