Survey on the public trust in the Bulgarian Courts

A recent Survey of the Center For The Study of Democracy showed that less than 20% of the Bulgarian actually trust the Bulgarian court. This result is both curious and also shows how deep is the judicial crisis in the courts. The lack of reforms is causing the system to struggle and to go more sluggish each year. The corruption takes enormous scales and unfortunately nobody from the government is engaged with new reforms.

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.

-- 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

Understanding Bulgaria's Judges Thinking

Almost half of the legislation of Bulgaria is outdated. Most of the laws have been adopted in the 50s of the last century during a communist society organization regime. Almost none of them is compatible to the free market and economics of the current society. An exception from that are the new laws adopted under the pressure of the EU legislation conformity requirements (such as competition  and consumer protection legislation).

But the laws that concern regular property buyers in Bulgaria are still obsolete. I'm talking about the Ownership Act (created 1951) and the Obligations and Contracts Act (created 1950). These are the main laws that regulate the consequences when a person buys a property in Bulgaria. The worst case is the off-plan purchases. There is no regulation regarding off-plan purchases. Therefore the judges started to extract relevant regulations from two separate contracts: the contract for manufacture and preliminary contract for purchase/sale.

This causes controversial court practice and different court resolution in similar cases (e.g. default of the developer and failure for refund). The controversy in the practice is striking in the different parts of Bulgaria. Although all courts should mind the Supreme Court's interpretations, the judges are influence by other factors. The judges usually are afraid to think out-0f-the-box and rule rather conservative.  They are not involved in the "real world" themselves because they are living in a "closed system" - the judicial system is not reformed at all. This is one of the biggest criticisms of EU towards Bulgaria. The corruption is also one of the biggest issues in our judicial system. Even the United states ambassador Mr. James Warlick observed this negative  practice.

How's court decision taken in Bulgaria

We've just found a great article in The Economist about scientific research of what influences judges for taking a particular decision. It turns out that "Justice is what the judge had for breakfast" indeed. In our litigation practice we can confirm that this is indeed true. Moreover, we can add some additional factors pushing the course of the court resolution - this is:

  • judge's attitude towards the parties lawyers;
  • if the judge is overloaded with cases;
  • if the previous case parties have made him angry;
  • if the judge was sleeping well the last night etc.
It's all human factors which influence court decision in Bulgaria and which sometime breaks a party's life. Last but not least (even more significant than the previous ones) it's the corruption. The judicial system of Bulgaria is sill encapsulated and  if you're close friend to the judge you can get whatever court resolution you want - the judge will always find a legal way to justify their resolution.

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....

Varna is not only property but also IT business destination

IT sector VarnaVarna 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 favourable 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.

Winding up (liquidating) a Bulgarian company

Winding up Bulgarian company

[updated 06.07.2014]

Many liquidation have started and some of them even finished, but you need to check what we at MH Legal recommend to look when you have your company dissolved.

[updated 24.06.2013]

A recent changes to the NRA and NSSI internal ordinances, have affected the liquidation terms. The applications and the respective documents, needed for the liquidation and issued by those two government authorities practically increase the company liquidation with about two months! This is not in help to the solicitors and liquidators who have to explain the delays to the company owners.

The liquidation process

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.

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:

[list2]

  • 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

[/list2]

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. If you have a property to be transferred on personal shareholder's name, a further quote will be provided when we review the property documentation and status.

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.

Balchik Golf Heights - another struggling development?

Varna region is one of the last one standing against property developer's bankruptcy. However more and more of them are having financial difficulties and thus causing failure on development deadlines and breaching buyers contracts. Balchik Golf Heights seems to have been affected by the financial difficulties too.

Buyers have been purchasing and legally guided by a big Spanish law firm. Normally it doesn't make sense Spanish law firm to deal with Bulgarian laws. This has negative consequences to the buyer, namely preliminary purchase offplan agreements that have bad clauses for the buyers.  Buyers were not provided with proper information and regular update on the development. There is huge lack of communication between the parties.  Now the credit crunch have been suffocating the Balchik Golf Heights developers, buyers are thinking of fighting for their right fore refund. The deadline is way back the scheduled completion of the buildings.

Being based in Varna, our lawyers are helping buyers with legal problems  related to Balchik Golf Heights. More information can be obtained upon email request.

Investment property calculator

Following our intention to provide the best legal services to our clients in Varna region and the rest of the Bulgaria, MH Legal law office is happy to provide the visitors of our website a calculator for property purchase expenses in Bulgaria. You can find the calculator and instructions how to use it HERE. Comments and recommendation are welcomed.